Off Kilter.

Volume 172: Valuation Narratives, Part Two.

Apriul 19th, 2024

Valuation Narratives, Part Two.

tl;dr: Influencing corporate valuations.

Last week, I talked about how, if we oversimplify and overgeneralize, business valuation is based on some combination of two things: A track record of business performance combined with a story of future potential. Summarized as performance and potential.

Young companies with little or no track record (e.g., early-stage startups) are primarily valued based on the scale of their potential. Older businesses with a long track record (e.g., blue chip stocks) are primarily valued based on their consistency of performance.

To understand how we might influence how investors value a company, the easiest baseline is to consider that investors are a stakeholder audience in much the same way that customers represent an audience. And, much like a customer audience, we can view investors in aggregate or through specific segments. In general terms, we can segment an investor audience through the lens of private capital (private equity, VC) versus public (listed on the stock market) scale, which runs from individual retail investors (you and I) right up to massive institutional investors (Fidelity, Calpers, etc.), risk tolerance, which runs from investors who are quite risk averse (retirement focused asset managers) to investors willing to take big risks (venture capital, angel investors, day traders), and time-horizon, which can run from high-frequency algorithmic traders buying and selling many times per second to long-term holders, that operate along multi-year time horizons.

As a result, just as customers have differing needs and priorities, investors do too. And just as heavily hyped products can move customers, investors can often be swayed by heavily hyped companies.

If anyone uses the platform formerly known as Twitter, this is why your timeline is now filled with Tesla boosterism, especially for its recent self-driving update. Almost certainly, the algorithms have been tweaked to boost Tesla posts in an effort to maintain Tesla’s market capitalization by appealing to its large retail investor base of Elon-stans.

All of this is to say that while much scientific and quantitative analysis goes into finding the ‘fair value’ of a corporation, there’s also a large element of subjectivity, emotion, and greed, commonly referred to as ‘animal spirits.’ This means that in much the same way we might think about positioning a brand for a customer audience in a competitive marketplace, we can use the same skills to position a company within the competitive marketplace for ownership.

In terms of influencing valuation, I want to focus on two things:

1. Brand as moat

2. The reframing of potential

Brand as moat
Economic moats have become a subject of much discussion among investors of all types. In simple terms, a moat represents a source of sustainable advantage that directly drives increased revenue, profitability, and growth. As a result, corporations that are perceived to have sustainable moats tend to achieve significantly higher valuations than competitors in ostensibly the same market or industry. For example, the ‘big 7’ that dominate public valuations are all perceived to have strong, sustainable, monopolistic moats. What’s interesting about this is that brand effects often mimic monopoly effects.

Over the years, I’ve realized that the problem we have in defining what a brand is is that we try to use singular definitions based on the customer when, in truth, it’s conceptual and audience-dependent. I’ll write more on this in a future edition, but I think it’s better to define brands cyclically. For the internal audience, the brand is what you stand for, which dictates your behavior and the experience you offer. For the customer audience, this translates into a desirable consistency of promise you should expect. And for the investor this translates into a competitive moat. This is a direct reason Apple can charge $1200 for an iPhone, while a similarly specced commodity Android might cost a few hundred.

As has been widely reported, one of the defining factors of the post-pandemic period is that corporations have used supply chain issues to raise prices beyond the increase in their costs, leading to record corporate profits while also contributing to increased inflation. While personally, I’m concerned about the cost of living crises high inflation creates, from a professional point of view, it has brought brand and marketing to the forefront of investor interest for the first time in a long time. Suddenly, investors see a direct link between brand strength, price premiums, and demand inelasticity. In other words, the stronger the brand, the higher the premium that can be charged, and the lower the volume loss to cheaper rivals. This can be further simplified as strong brand = higher profits = more valuable company. As a result, this is why major corporations like Coca-Cola are now having very serious conversations with investors about a renewed marketing model moving forward.

The investor context that matters most here is that brand effects mimic monopoly power in categories where you don’t have a monopolistic position. Since we know there’s strong investor appetite for rewarding monopolists with higher valuation multiples, there’s a direct narrative throughline toward brand strength driving a higher valuation. While I think unregulated monopolists should be broken up to reduce or eliminate abuses of market power (congratulations! You won capitalism, now let's break you up and rerun the game), building brand strength over time to achieve a similar effect is an entirely acceptable competitive dynamic. After all, being willing to pay more for one brand over another is voluntary on the part of the customer because they view it as a fair exchange of value (or else they wouldn’t buy), whereas, with a monopolist, you must use them no matter the cost because you have no other choice.

Thus, brands present an opportunity to influence the valuation narrative in one of two ways directly: 1/ Demonstrating the moat effects of the brand you’ve already built and how brand investments accelerate the performance of the underlying business, or 2/ Demonstrating how you are building your brand to create that performance accelerating moat, which informs your story of potential.

The Reframing of Potential
There are two types of stories of potential: the startup story that’s built new from whole cloth and the transformative story that seeks to reshape perceptions of an existing business. Rather than the whole-cloth startup narrative, I’m instead focusing here on how transformative stories of potential can reframe the valuation of existing businesses.

I’d further divide the reframing of potential for an existing business into three types: 1/ The inflection point narrative, typically connected to new and disruptive technology; 2/ The value transformation narrative, typically aligned to demonstrated investor priorities; 3/ The efficiency narrative focused on lowering costs to increase profits.

For each of these narratives, the goal is to position the corporation's potential in the minds of investors (and analysts) to influence their behavior in much the same way that we might consider positioning a brand with a customer to influence their behavior.

For examples of each of these in action:

Microsoft - Inflection point driven by disruptive technology
Microsoft has masterfully reframed its story of potential through generative AI as a disruptive technology. Positioning itself as the de facto leader in enterprise AI has led directly to it doubling market value from $2trn to $3trn.

Apple - Value transformation
In the value transformation camp, Apple historically doubled its market value by adding a layer of recurring subscription revenue via services. What’s notable here is that there isn’t a one-to-one relationship. Recurring services revenue makes up just 19% of Apple’s total revenue, but it drove a doubling of market capitalization. Why? Very simply because investors value the consistency of recurring revenues much more highly than the volatility of transactional revenues. As an aside, this is also why every automotive company wants cars to become subscription platforms. No consumer on earth wants to pay a monthly subscription for a warm butt in their $85k SUV, but it’s being forced upon them because the companies believe it will spike their value with investors.

Meta - Efficiency
In the efficiency camp, look no further than Meta. Here, Mark Zuckerberg first attempted to drive a disruptive technology narrative centered around dominating the nascent ‘metaverse.’ However, investors balked at the $30bn invested without any sense of there being a real business there. As the stock price tanked, Meta quickly pivoted to a much-heralded ‘year of efficiency,’ which was a 180-degree shift toward refocusing on increased profitability within the core business, which investors rewarded by buying the stock and significantly lifting Meta’s total market capitalization.

The challenge with the efficiency narrative is that its short-term, non-strategic, and beyond a certain point slips into diminishing returns as you mortgage your future on the alter of short-term gain before ultimately compromising product and service quality. As an egregious example of such cost-driven management in action, we have Boeing. For over twenty years, its leaders drove cost efficiency as its narrative, leading it to compromise safety before, ultimately, aircraft began crashing and falling apart in the sky. The irony is that an approach focused solely on short-term shareholder returns has destroyed long-term shareholder capital in direct conflict with the fiduciary responsibilities of the board and leadership team. (As an aside, the issue I have with the ‘profits are moral’ dogma crowd isn’t that corporations shouldn’t make profits. Of course they should. It’s that they believe the corporation has no other responsibilities, which, as Boeing demonstrates, is utterly nonsensical).

Now, if, like me, you’ve spent the bulk of your career helping corporations figure out better ways to create value for customers, it can be a shock to witness corporations engage in what appears to be obviously anti-customer behavior. However, if you understand the nature of ownership and what owners value, we can seek to overlay it with customer opportunity. Ideally, our job is to find the balance where value creation exists for both customers and investors, creating a virtuous cycle and positive forward momentum.

To give a quick generalization of how different ownership can drive differing strategic priorities and, thus, valuation narratives: In general terms, a VC-backed startup will be driven to grow as fast and as aggressively as possible, a private equity-owned company will be driven to reduce costs as far as possible to maximize profits, a public company will be driven to deliver consistent performance every quarter, and a privately held family company will take things slow and steady.

On the subject of private equity (PE), the pay-to-play tabloid trade rags have been heavily publicizing a recent spike in PE firms’ newfound focus on brand, marketing, and design as levers of value creation. The reason for this is simple: they paid more for the businesses in their portfolio during the ZIRP years than many are now worth. It’s impossible to cut costs far enough to make them worth more than they paid, and the way a PE business model works is to try and grow the value and then sell the business at a profit within a circa 5-year timeframe. Unfortunately for them, such exit opportunities have become harder as interest rates have risen. As a result, they’re being forced to focus on innovation and not just cost-cutting to lift performance value and craft more compelling and credible narratives of the business's future potential. In other words, everything I wrote about about brands as moats and narratives of potential, certain PE companies are now focused on in ways they haven’t in the past.

Anyway, thank you for bearing with me for the past two editions. I know that most people reading this aren’t focused on investor narratives at all, yet investors are critically important stakeholders who directly or indirectly influence everything we do. And in a feat of symmetry, can also be influenced by us by using many of the same techniques we use to influence customers.

Volume 171: Valuation Narratives, Part One.

Apriul 11th, 2024

Valuation Narratives, Part One.

tl;dr: It’s getting a bit wonky in here.

My apologies for there being no Off Kilter last week. I struggled with this edition and decided to hold off until I got it closer to right.

After a couple of false starts, including one that ended up being little more than a long-winded history of shareholder capitalism. Did you know colonialism was a major driving force behind the invention of the publicly traded corporation? Yup, the world’s first IPO was The Dutch East India Company way back in 1602.

After a while, I realized the only way to touch this subject is to massively oversimplify, overgeneralize, and break it into two editions. Sorry for doing that, but there’s literally no other way. So, here goes. Oh, and don’t worry—I’m not about to dive into a Finance 101 class.

Over the years, much has been written on corporate valuation and its ramifications, from animal spirits to market efficiency, quantitative trading, stock buybacks, day trading, passive investing, wealth distribution, and more. Today, I want to talk about valuation narratives and how we, as branding professionals, have a role to play. The examples I will use are all publicly traded corporations since there’s greater transparency and liquidity here, but the principles are also applicable to privately held businesses.

If we massively oversimplify, the easiest way to think of the value of any corporation is that it’s based on some combination of two things: historical business performance, which provides insight into likely near-term future performance, and a story of the future, which provides insight into longer-term potential. From now on, I’ll refer to these as “performance” and “potential.” Nested within these are the value of the assets owned by the corporation, including intangible assets such as patents or brands.

Different corporations in different sectors generally see either performance or potential dominate their valuation narrative. For example, a large, slow-growing, mature business with valuable assets like P&G will see its value based primarily on the consistency of past performance and the contribution of its hard-to-replicate assets (brands, in this case) toward maintaining this consistency in the future. Such corporations are viewed as mature and stable, so their market capitalization tends to live within fairly narrow bounds. Here, investors aren’t typically looking for significant capital gains (stock price rising and business valuation increasing as a result) because growth opportunities are limited. Instead, they’re more likely to look at the consistency of dividends as the corporation distributes profits back to shareholders. As a result, the stability and predictability of such firms tend to attract a more (small c) conservative investor profile, which in turn rewards the management team for delivering safe, conservative leadership that avoids big risks in the pursuit of growth. (I’ll talk more next week on how capital dictates leadership).

At the opposite end of the spectrum, smaller, fast-growing corporations, which have less of a track record and where past performance doesn’t reflect the future, tend to be overwhelmingly valued based on their story of future potential. Such investments tend to be riskier (because the growth story might not pan out). Here, as a reward for accepting greater investment risk, investors are explicitly looking for large capital gains from a growing stock price and associated rise in company value. As a result, they’re more likely to reward aggressive leadership teams that are bolder and more open to taking risks.

During the pandemic, we heard a lot about ‘story stocks,’ which is simply a term for a corporation where the story of future potential is the dominant factor in its valuation. We also heard of ‘meme stocks.’ The easiest way to think of a meme stock is that it skipped the story phase entirely and went straight to…vibes. While a story stock must have a plausible enough story to attract investors, meme stocks don’t even have that. As a result, meme stocks should be viewed as vehicles of speculation without material underlying value. (AKA: Invest at your own risk).

To maintain and grow the value of a story stock, realized performance and the story of potential must align over time. Should they diverge materially, valuations tend to follow. This is why DTC darlings Allbirds and Warby Parker have fallen so hard upon entering the public markets. As performance figures became publicly available, investors saw a big divergence between reality and story and reacted accordingly. In other words, they sold the stock, which dropped the value of the business more in line with its realized performance than its claimed potential.

One of the most significant story stocks of the past decade is Tesla. In 2021, it achieved a company valuation of $1.3trn, while today, it’s worth approximately $540bn. Why the huge drop? Well, there are plenty of factors, but a big one is that realized performance is increasingly diverging from the story of potential: Sales are down, competition is up, unit profitability is down, and investors are increasingly seeing a business that isn’t hitting the milestones it needs to in order to live up to such a stratospheric valuation.

This drop in value is a direct reason Elon Musk announced the unveiling of the ‘Robotaxi” on August 8th, rather than the affordable Tesla we all expected. If a fully self-driving robotaxi can be realized, it will significantly shift the Tesla story of potential. Instead of being valued based on how many electric vehicles it can put on the roads, it will now be valued based on the potential of a new recurring revenue business that could put Uber, Lyft, and others out of business. However, if Musk stays true to form, the robotaxi that’s unveiled will be little more than a proof of concept and not a production vehicle, with a date for actual production way off in the never-never. So, why make such an announcement now? Well, put very simply, the realized performance of Tesla today cannot support its current valuation, let alone $1trn, so unless he can juice the story of potential, the stock price will continue to slide. To put this in perspective, the world’s largest automotive company, Toyota, sells 10X more vehicles than Tesla yet is valued at around $400bn. As a result, should investors decide Tesla and Toyota are in fact equal in terms of both performance and potential, its actual value might be closer to $50bn than $500bn. An outcome Musk will do pretty much anything to avoid.

Of course, stories of potential aren’t solely limited to new corporations without track record. Even large, mature companies can have what Andy Grove of Intel referred to as a ‘strategic inflection point,’ where a significant shift in strategy, often driven by disruptive technology, can add a new story of potential that, in turn, raises its valuation. Microsoft is an excellent contemporary example. Its core business is massive, consistent, and stable in terms of historic performance. This enabled it to achieve the heady heights of a $2trn market capitalization. However, the disruptive potential of generative AI and how Microsoft has woven this narrative into its core strategy is why it now tops $3trn. As a result, one way to look at Copilot isn’t as a product per se but as an investor-facing branding vehicle that just added $1trn to the company's valuation by positioning Microsoft as The GenAI company. (Contrast this to the utter shitshow surrounding Google Bard/Gemini, but that’s a different story I’ll save for another day).

The other tools in the armory of corporations that can significantly change both performance and potential are mergers and acquisitions (M&A) and demergers/divestments. I’m not going to spend much time on M&A right now (It really deserves its own edition), but divestments are interesting because we’ve recently seen GE, Johnson&Johnson, and 3M all divest significant parts of their businesses. Typically, divestments happen when a leadership team and board believe the market to be undervaluing their business, normally because there’s a part of it with significant growth potential that’s being undervalued because it’s attached to another part of the business with low potential. This is why J&J spun out the abysmally branded Kenvue, its slow-growing, low-margin consumer business, leaving J&J as a faster-growing, higher-margin, B2B business. The intent being that this will accelerate stock price growth, increasing the overall value of J&J.

There are so many other things we could talk about, but the final thing I want to point out is that external context is something that has a huge role to play. This is too complex to cover in detail, but one contemporary factor worth mentioning is the impact of interest rates. Put simply, the higher interest rates go, the more likely investors will park capital in a safe vehicle, earning a steady stream of interest. The lower they go, the more likely investors will shift capital toward riskier investments because they earn nothing by leaving money in the bank. This is a big reason why profitless corporations with big stories of future potential were supported by investors when interest rates were at zero. And why that support then evaporated when interest rates went up. In essence, investors decided that a riskless return right now beats a risky return that might or might not pan out in the distant future.

OK. So, now that we’ve set the stage, what is our role in all of this?

Hopefully, my description above will help us realize that company value is far from an exact science. Instead, it’s more of a fuzzy interplay, where financial narratives of current and past performance combine with stories of future potential to sway investor audiences in much the same way that narratives can sway other audiences.

As a result, we can impact both the performance and potential ends of the valuation narrative. This will be the focus of next week’s edition, but to whet your appetite:

1. At the performance end: Brands are moats.
   For an investor audience, defining a brand as, for example, a promise is utterly irrelevant. What they need to know is that brands are moats. They are moats because brand strength mimics the effects of monopoly in situations where you don’t have monopoly power. Specifically, it provides both sustainable pricing effects (lifts you beyond commodity pricing) and sustainable volume effects (attracts more demand). As an aside, this is why the Interbrand “best brands” list is really the “biggest monopolists” list. It’s extremely hard to separate brand effects and monopoly effects. But this goes both ways: building a stronger brand will mimic the desirable-to-investors effects of monopoly.

2. At the potential end: Positioning the corporation’s story.
   In a similar fashion to how we position brands to appeal to customer audiences, we can also work to position the corporation for investors, specifically helping shape its story of potential. Now, this isn’t a magic wand you wave to double the value of the corporation, but it doesn’t need to. Even shifting a valuation multiple by a small amount, say from 8 to 9, represents a material impact and a potentially significant amount of money.

Next week, I’ll expand on the above with a bit more practical advice. I’ll also touch on why this is the real reason private equity (PE) companies are finally dabbling with branding in a meaningful way, how capital priorities dictate leadership, and why differing investor priorities can drive very different corporate strategies.

Watch this space. More to come.

Volume 170: Lies, Damned Lies & Abstractions.

March 14th, 2024

Lies, Damned Lies & Abstractions.

tl;dr: Reality and the abstraction of reality isn’t the same thing.

When I did my MBA many moons ago, one of my classmates was a brilliant writer with an uncanny ability to take dense, technically challenging material and re-frame it into simple, easy-to-read English.

I later found out that he’d previously worked at the Economist Intelligence Unit (the guns-for-hire side of The Economist), where such ability with narrative had been drummed, nay beaten, into him for years.

Although I’d had a passing relationship with The Economist before, my jealousy of his abilities cemented a long-term love affair with the publication. I still get the magazine every week and read as much of it as I have the time to. You should, too.

So color me surprised when I recently saw a chart from The Economist in support of an article on the political polarization of young adults that was, how should we say it…misleading at best and borderline untruthful at worst:

At a glance, you’d be forgiven for thinking there’s a gaping and worsening political divide between the sexes. However, look at the compression of the Y axis and there’s a different story going on. That’s right; they’re showing a difference of roughly 0.8-0.9 on a ten-point scale as if it’s a gulf when clearly it isn’t; well, not yet anyway. In other words, by abstracting the data into a chart where they’ve cherry-picked the axes for maximum effect, they’re hoping you won’t notice that the data supporting the case is somewhat ambiguous. In fact, without knowing the underlying methodology, it’s entirely possible that these results are within the error percentage of being exactly the same. (In other words, there’s the potential for a statistically significant overlap in the standard deviations between the two groups).

Now, this Off Kilter has nothing to do with politics or The Economist; I’m simply using it as an example because when I saw it, it reminded me of why we must be careful with abstractions.

In business, abstractions are all around us all the time and are only growing in importance as we gather more data at an ever-greater scale and increasingly require complex tools such as AI to make sense of it. As shown in the above chart, data visualization is one such abstraction, but so are many of the tools we use daily, including those used in strategy formulation (frameworks) and marketing execution (playbooks). Let’s focus on these two for a second.

One of the huge errors young strategists make is the belief that knowing frameworks equates to strategic excellence when nothing could be further from the truth. I’ve seen exceptional strategies articulated in a few bullets and abysmal strategies articulated via a buttload of frameworks. In fact, I once had to suffer through several hours of an ex-Interbrand strategist walking us through an uninspired and mediocre strategy that he expressed via what felt like three and a half thousand frameworks when, in reality, it was about twenty, which is still about 19 too many if you ask me.

For young strategists, the most important thing is to realize that frameworks exist solely for one of three reasons:

1. Because they help you think better.

2. Because they help you communicate better.

3. Because your company tells you to use them.

You’ll notice something missing from the above: Frameworks aren’t the strategy. They might help you to improve your thinking and then better communicate it, and their use might keep your boss happy, but be careful never to confuse a filled-in framework for the answer.

Additionally, something rarely discussed is that frameworks tend to be commonly understood. This means it’s safe to assume that everyone has access to the same or similar frameworks that you do, which means that an overreliance on such tools does only one thing—it commodifies your outputs and risks you doing exactly what the competition expects you to do when you’d rather be catching them off-guard instead.

Now, if you’re interested in going a bit deeper here, I’ve written previously about the five hallmarks of strategy and when strategies aren’t, which you may find useful.

When it comes to execution, marketers are particularly enamored of playbooks. If you can name it, there’s a playbook for it—probably more than one.

The challenge is that we rarely consider playbooks an abstraction of reality: Somebody somewhere did something once. It worked, so they did it again, and it worked some more. So, they codified what they did into a playbook. This playbook now represents an abstraction of what was done previously, which worked previously…but might not work anymore.

Similarly to the above comment on frameworks, execution playbooks are widely copied, either because someone has shared them or because you’ve reverse-engineered them. What we know about competition theory is that advantages tend to be competed away over time—in other words, any ‘winning’ playbook is likely to face increasingly diminished returns as competitors reverse engineer, copy, and find other ways to mitigate it.

Typically, as a playbook becomes more popular and more follow it, and management consultancies like McKinsey tout its statistical advantages, it then tends to lose effectiveness because everyone is doing it, costs rise, and diminishing returns kick in.

For example, the typical B2B content marketing playbook looks increasingly played out because of content fatigue. (OK, broad overgeneralization, I know, since this covers much ground) Response rates sag while the costs of creating and promoting content increase, and the likelihood of anyone finding it organically dives (due to the sheer volume and velocity combined with unethical ‘growth hackers’ gaming the Google algorithm). This creates a conundrum. Do you move away from a playbook you’ve no doubt optimized yourselves to deliver that is increasingly undifferentiating and ineffective, or do you try and find a way to make it cheaper so you can run it more often to make up for declining response rates? You would be entirely correct if you think many businesses are pursuing the cheaper avenue by using AI to create and promote content. However, at a macro-level, the net result is likely to be an acceleration of diminishing returns as AI increases the velocity and volume of mediocrity people have largely learned to ignore.

My point isn’t that we shouldn’t use playbooks, or AI for that matter. It’s that while playbooks purport to tell us what to do to achieve certain outcomes, we should be aware that they’re abstractions of something someone else did in the past to achieve an outcome and, as a result, may not work for us. Either because they aren’t transferable or particularly scalable or because the sheer volume of competitors running the same playbook means returns have become heavily diminished.

Which leads me neatly to my core point. While abstractions in business are an incredibly useful necessity, and we deal with them all the time, we must also be careful to retain the capacity to interrogate them critically:

1. If we don’t understand the underlying mechanisms of an abstraction, for example, a marketing playbook, we also lack the ability to innovate, tailor, tweak, or transform it when diminishing returns kick in. Here, I’d use the analogy of a car. Everyone knows how to drive a car, but only a subset of people know how a car works and, as a result, what to do when it has problems. In other words, even if you’re not tweaking a playbook on a daily basis, knowing how to because you understand how the underlying mechanism works will give you an advantage over those who only know how to run it.

2. The purveyors of abstractions will use the complexity of reality and their black-box simplification of it to present a solution that improves their margins rather than yours. Take last-click attribution. This is an abstraction of the extremely messy reality of what drives purchase decisions, positing that the last click in a purchase journey is the most valuable. While over a decade’s worth of research has largely proven this to be untrue, the idea that the last click is the most valuable has driven excess margin to Google’s search ads business for a very long time.

3. When we abstract human beings into data streams, we very quickly lose sight of them as living, breathing, emotional people, creating huge potential blindspots. I once had a deeply troubled client with a terrible customer experience use the term “Revenue Generating Unit’ (RGU) as shorthand for their customers. The danger of abstracting people in this way is that we can easily slip into fundamentally anti-human business decisions, some of which can haunt us for years. Customer service is a very good example. It may be the primary reason why a customer is working with you, while at the same time, a CFO looking only at its financial abstraction on a spreadsheet may consider service nothing more than a cost to be reduced or eliminated entirely.

As AI evolves, data flows increase in complexity, and automation matures, an implication is a likelihood that we will become increasingly reliant on such abstractions without understanding their underlying mechanisms. In other words, there’s a non-zero chance that we’ll become really good at using tools without understanding the mechanisms underpinning how they work and the underlying assumptions they’re built on.

And, while much of this will be black-box, proprietary, and somewhat unknowable, I’d encourage everyone, no matter their field of endeavor, to at least attempt to understand the underlying mechanisms that relate to their own markets because it will give you an advantage over those who don’t.

On that note, I’d like to leave you with a story. Many moons ago, I had a boss who’d formerly been a country manager for Unilever. One day, I was bored with no work to do, so I asked him if he needed anything. His response was to tell me to go to the supermarket and observe. Look at the products, how they were displayed, how people engaged with them, what they were doing, how they navigated the store, what they were buying.

It was an invaluable lesson and the reason why, to this day, I always want to talk to my client's customers if I can, no matter how good my client’s data and research might be.

Because no matter how much data you might have, how good your models might be, or how good your interpretation, nothing beats talking to people, observing them, and placing a human face atop a data point. And while it will change much, AI won’t change that.

Volume 169: Branding vs Marketing.

March 14th, 2024

1. Branding vs Marketing.

tl;dr: How to be flat wrong and totally right at the exact same time.

There’s a trope doing the rounds; it’s been doing so for quite some time, you know the one. Yeah, that one. Where someone on LinkedIn makes the pronouncement that branding is not marketing and then goes on to show a cherry-picked list of the things they label ‘brand’ and things they label ‘marketing,’ and it all looks like a load of old horseshit because they’ve arbitrarily chosen to put the strategically valuable stuff under ‘brand’ and the tactically less valuable stuff under ‘marketing.’ (Note: I’m not picking on the version I linked to in particular; there are loads of variants. This is just the first I found via search)

Then, lo and behold, when you look at what they do for a living, they’re branding people of some stripe or another. Hmmm. Not at all biased, then.

Now, I could be deeply cutting and proclaim that even though I’ve spent a 20+year career in branding, setting up a face-off between brand and marketing is possibly the most nonsensically asinine thing I’ve ever seen, but I shall refrain because there’s a point to this madness. Instead, I’ll explain where it’s coming from and why the folks saying this are both flat wrong and absolutely right at the exact same time.

The root problem is pretty straightforward. It’s the confusion between marketing as a function and marketing as a department. Let me explain.

Marketing as a function is critical to the success of every business, no matter what it might be called and no matter how it might be organized. To borrow from marketing academia, the boundaries of the marketing function are explained by the 4Ps of the marketing mix (I know there have been many variations of the 4Ps over the years, yet the original remains useful). In more detail, this means the Product P, the Place P, the Price P, and the Promotional P. In other words, what you buy, where you buy it, how you know to buy it, and how much it costs you to buy. Marketing as a function is the art and social science of defining and then interlinking these factors with each other in interesting and innovative ways to create something compelling in the market that wins customers and beats the competition.

However, marketing departments rarely have responsibility for the entirety of the marketing mix these days (if they ever did). In oversimplified terms, the trendline over the past couple of decades has been for marketing departments to become heavily focused on the promotional P, while responsibility for the other aspects of the marketing mix are spread elsewhere in the organization. (I know lines are blurrier than this in reality, but please bear with me because it’s easier to explain what’s going on if we assume a neat bifurcation).

As an aside, this is why, when asked about the state of marketing, I often respond by saying the marketing function appears to be in fairly rude health—products getting better, customer experiences getting better, companies getting better at pricing, novel distribution stuff happening, etc. Meanwhile, the marketing department isn’t looking so hot as marketers fight for access to something as basic as MVB (minimal viable budget).

Anyway, when we deconstructed the marketing mix and spread responsibility for the 4Ps around different parts of the organization, we introduced the problem of silo risk. In other words, the marketing mix no longer operates as an interlinked whole, instead being carved into a series of siloed activities that don’t necessarily connect. For example, it’s not uncommon to have a Chief Product Officer in charge of the product, a Chief Financial Officer in charge of pricing, a Chief Marketing Officer in charge of promotion, and an array of different titles in charge of place/distribution depending on the nature of the business you’re in. Not to mention the engineers and the lawyers, who, Dunning Kruger aside, think they’re in charge of everything…

Phew. That’s a lot. And, scarily, it creates the potential for extremely damaging and value-destructive chaos.

Enter the ‘B’ word.

When we deconstruct the marketing mix, it’s hard to use the term marketing to describe it anymore because these folks don’t want to be lumped under ‘marketing,’ especially if marketing in that organization is synonymous with the kind of high-volume, short-term tactics we typically label ‘performance’ or ‘growth marketing.’

So, instead, we tackle the marketing mix through the lens of the brand: how it is positioned, what it stands for, what its vision is, what its experiences are supposed to be like, the capabilities necessary to deliver, etc.

In other words, to avoid the chaos created by deconstructing the marketing mix and to ensure there’s at least some common guidance in managing it, we use the term ‘brand’ as shorthand instead. And that’s just fine.

This brings me to why some branding people are so quick to create an oppositional relationship between branding and marketing. Put simply, those working in the branding field tend to spend their time working with clients in a cross-functional fashion, engaging product people, salespeople, finance people, senior business leaders, engineers, lawyers, and, yes, marketers around the brand. So, how are they likely to think?

Yup, that’s right. They’ll think the brand isn’t marketing; it’s bigger than marketing because their baseline understanding isn’t marketing as a business function but marketing as a comms-focused department.

Are they wrong? Yes, indisputably. But they’re also right because of how we’ve systematically changed what marketing means over the years.

Now, bringing this back to the introductory observation around LinkedIn, we can see why the response to such posts tends to bifurcate into one group screaming about how wrong it is and another screaming that it’s right on point. Depending on your philosophical standpoint, each can be equally right or equally wrong.

My starting point has always been marketing as a business function, where how you frame the brand largely represents an integrated view of the marketing mix. However, such splitting of hairs doesn’t really matter all that much in practical terms because we can easily see what’s going on and navigate accordingly.

At its heart, the navigation that matters is getting everyone onto the same page on whether we have an expansionist view—meaning we use the term ‘brand’ as shorthand for the entirety of the marketing mix—or whether we have a reductionist view—meaning we use brand as a shorthand term for marcomms, messaging, and distinctive assets.

It’s not that one is necessarily right or wrong under any given circumstance. It’s more that you can’t have one group of people working under one definition and another group working under another and hope to have anything approaching success.

2. The Subversive ‘90s.

tl;dr: Nostalgia is a drug.

Like every member of Gen X, I view myself as a child of the ‘90s. I was 16 in 1990 and 26 by the turn of the decade. Although you don’t realize it at the time, these are some of your most critical formative years. You’re single and fancy-free, you explore the vitality of the world around you, your tastes form and begin to harden, and you inevitably conclude that ‘your’ decade was the best decade for music ever. (Except, maybe that doesn’t happen anymore. With the advent of Spotify, my 16-year-old is more likely to listen to Nirvana than any of the ‘crap’ (his words) that’s produced today.)

So, screw the swinging 60s; the music of the ’90s has yet to be beat…

Anyway, because it might interest folks younger than me, I wanted to share this piece on the subversive and nihilistic nature of 1990s advertising.

It brought back many memories. And while I think the author is entirely correct in lamenting the loss of attitude and subversive grit in modern advertising, I can’t help but think of Liquid Death.

I hadn’t thought about it before, but as a brand, Liquid Death is very much a child of the ‘90s, living the subversive dream completely out of its time.

And since nostalgia is such a drug, I wish a few more children of the ‘90s might emerge, or at least that we might cleanse our collective palates after the saccharin sweetness of the purpose years with a lot more edge, attitude, and subversiveness.

3. Impossibly Good.

tl;dr: JKR take a bow.

Ok, I rarely talk about rebrands anymore these days, mainly because it’s pretty rare to see a good one, and as much fun as it is to lambast a terrible rebrand, it also gets boring pretty fast.

So, with great glee, I now get to point you toward something I think is really good for really simple reasons.

Namely, the recent work done by JKR for Impossible Foods. It isn’t good because it’s deep; it’s good because it’s gloriously shallow.

Impossible makes vegetarian meat alternatives in various forms, most notably burgers. It competes with Beyond and an increasingly long list of meat replacement products.

The challenge is that only 5-8% of Americans are vegetarian, which means the market size math simply doesn’t work if, like Impossible, you’ve taken circa $2bn in VC financing, and the expectations are that you’ll deliver exponential supercharged growth.

Instead, the only way to achieve the required scale your investors require is to sell a meat alternative to people who also like to eat meat. This rebrand sets out to do exactly that, and I suspect will do it well.

As I say, it isn’t deep but doesn’t need to be. In fact, it does a great job of being dead-nuts obvious. Presenting Impossible as a whole category offering that moves it past the formulaic and boring minimalism-in-green so common among meat-alternatives-for-vegetarians and instead shifts the whole thing toward a bold, red, and deliberately meaty palate.

And yeah. I’m sure the designers out there will nitpick at it, but this is a really good move in terms of being fit for purpose and directly addressing its biggest commercial challenge.

Of course, it doesn’t mean Impossible will be successful. There’s a long road ahead; meat alternative sales have slowed as competition intensifies, and meat prices have begun falling back toward sanity. At some point, the business will need to stand on its own two feet. And while I’m normally highly skeptical of 'Hail Mary’ rebrands, this one has some obvious logic to it.

So, yeah. Well done JKR. You’re rapidly turning into a powerhouse of CPG branding, and oh goodness me, did somebody need to take on that mantle.

Volume 168: The Intrinsic vs Extrinsic Promise.

March 14th, 2024

The Intrinsic vs. Extrinsic Promise.

tl;dr: Two different brand approaches that are rarely explained.

Of all the myriad definitions of the word ‘brand,’ I consistently find myself returning to the very simple idea that the brand is a promise…and that this promise must be delivered consistently for the brand to ‘work.’ In other words, the primary job of the brand is to create a set of consistent expectations among your stakeholders that your offerings then live up to, which reinforces the promise you made, which makes people more likely to believe and remember it, which makes them more likely to buy again and to recommend to others…all in a self-reinforcing loop.

However, a question arises when we start positioning or perhaps repositioning a brand because we must very quickly consider the nature of the promise for this particular brand and how deeply embedded it should (or should not be) in the heart of the corporation, which brings me to an area of very real confusion I’ve seen play out many times over the years, yet rarely gets mentioned, namely, whether we should philosophically consider the promise we make through an intrinsic or an extrinsic lens.

What I mean by this is whether the promise is intrinsic to the business—helping direct, guide, and shape internal decision-making as a part of the ‘cultural OS,’ if you will—or whether this promise is extrinsic to the business—meaning it acts primarily as a layer of externally focused artifice presented primarily through marketing communications.

Why it’s important to differentiate between the two isn’t that one is right and the other wrong, because years of evidence prove that both can work and work well under the right circumstances. Rather, it’s because when you don’t specifically articulate which path you intend to pursue or you apply the wrong approach in a circumstance that demands the opposite, it introduces a significant risk of confusion and frustration, not to mention very real cognitive dissonance relative to the kinds of partners you may choose to work with.

In broad terms, the extrinsic promise is most common in low-engagement consumer categories, primarily CPG/FMCG, where the brand represents a layer of meaning built atop a commoditized product. (Think Evian, which is water in a plastic bottle) The intrinsic promise, by contrast, tends to be more closely aligned to what is commonly labeled corporate branding (I prefer the term organizational since it’s the brand for the organization and not all organizations are corporations). Here, the brand represents the entirety of the organization's offerings and its employees’ intellectual output. (Think Microsoft, with 220,000 employees, multiple disparate offerings, and constant ongoing innovation).

The majority of the literature on branding you may have read tends to stem from the extrinsic side of the ledger. An approach that was notably scaled across the economy by CPG/FMCG brands starting in the mid-20th century, driven by the confluence of post-WWII demographics, a rapidly growing middle class, and the advent of television as a mass advertising medium. It’s because of this that soap opera exists as a term, and it’s why television-centric creative agencies became so influential by the end of the 20th century before fading under the rapidly fragmenting shift to digital.

Today, the most notable exponents of this extrinsic branding philosophy are in the marketing science community, which seeks to establish evidence-based theory from quantitatively derived extrinsic evidence. This is likely why many of today’s CPG/FMCG marketers are finding success using marketing-science-derived concepts and why it appears to be becoming the baseline marketing theory within such categories.

However, we need to understand that in the modern economy, not all category dynamics mirror CPG/FMCG, where decision-making is low-involvement, where we literally take milliseconds to decide, and, crucially, where we don’t need to worry about whether the people working alongside us in the organization believe in and know how to deliver on our promise.

By contrast, while it ultimately encompasses extrinsic factors, the intrinsic approach tends to differ markedly in initial focus, process, outputs, and desired business outcomes. Compared to an extrinsic approach that adds a layer of meaning atop a low-involvement commodity, intrinsic branding tends to be more effective in categories that are high involvement, where there are varied offerings under the same brand, price points tend to be higher, the pace of disruption faster, the buying decision process is longer and vastly more complex, and vastly more complex, and where the risk of making a bad choice is potentially disastrous.

This is why we often see an intrinsic approach to branding in the B2B space, where there’s typically more complexity in both the offerings and the purchase journey and where purchase decisions are often being made based on decidedly intangible factors – for example, having already decided that three potential vendors have a good enough product before you even talk to them, B2B buyers are often left making decisions based on things like “who will be there for me when it all goes wrong at 3 am?” Or “Which vendor's product vision and future roadmap most closely align with our own?” Or “Which vendor is most likely to treat us as a business partner?” or “Which vendor will my boss be OK with us buying?” or, or, or.

While the extrinsic approach largely starts and finishes as an exercise in messaging, visual signaling, and marketing communications, the intrinsic approach seeks to first embed the brand more deeply within the decision-making of the organization and, as a result, places more emphasis on acting as a guiding hand relative to internal actions and innovations before worrying about the subsequent extrinsic effects. In other words, the promise doesn’t just live in how the brand is communicated; it first lives in how business decisions get made.

Because of this, the process of defining the brand intrinsically tends to be more involved and more strategic in terms of its connection to the business. As a result, it tends to directly include the organization's most senior leadership, including the C-Suite, the board, and the owners (especially in family or PE-owned corporations).

Multiple second and third-order effects stem from this difference in approach, some of which can be quite profound. Three important differences that typically distinguish the intrinsic approach from the extrinsic are as follows:

1. The ‘intrinsic’ brand acts as the translation layer for the business strategy.
   In most corporations, understanding of the business strategy declines rapidly as one moves down from the C-suite. Sometimes, this is because the strategy is poorly articulated, too complicated, or too vague, and sometimes, it’s because there isn’t a clear strategy to begin with.
   
   Under such circumstances, it’s very common for an intrinsically defined brand to become the translation layer between the business strategy - where the company is going and how it’s getting there - and the customer experience - what the customer gets. Because the brand connects the inside (supply side) with the outside (demand side) through the lens of the promise you choose to make, it affords us an almost unique opportunity to connect the storytelling dots and very simply articulate the business strategy through the lens of how and what we expect people to activate to deliver the promise we want our customer to experience.

2. The ‘intrinsic’ brand drives change.
   While change at an organizational level tends to be minimal when pursuing the extrinsic approach to branding: “new package, same great taste,” it tends to play a major role in the intrinsic approach. For example, a whopping 45% of CEOs are concerned their business model will be obsolete in the future unless they make major changes, while similar concerns are almost unheard of among CPG/FMCG brand managers.
   
   As a result, pretty much every corporate/organizational branding project will have a significant transformational element underpinning it. While the brand is rarely the initiator of this transformation, it commonly acts as a major carrier and driver of the change message—right from the visioning workshops that might be held with senior executives near the beginning of the project to the guidance and expectations that are then provided to people throughout the organization as any refreshed promise gets rolled out.

3. The ‘intrinsic’ brand creates cultural glue across disparate activities.
   One of the defining factors of the past twenty or so years of business has been the flattening of hierarchies and the shift of control from centralized decision-making toward decentralized, agile teams.
   
   And while flattened hierarchies encourage greater speed of action, a common challenge is what might be labeled ‘corporate chaos.’
   
   Relative to the risk of chaos, one of the largely unheralded roles of a corporate-level promise is how it acts as cultural ‘glue’ across such decentralized decision-making, especially when pursuing ongoing innovation and where there’s a strong risk of cross-silo incoherence without it.
   
   Here, the ‘cultural OS’ analogy becomes most powerful, especially when it encompasses a shared promise connecting to the kinds of systems, tools, policies, and principles individual teams then work off of to deliver it.

Of course, one risk when different stakeholders have different philosophical start points is that it can be easy to muddle things up unless you’re clear from the get-go. For example, I’ve seen extrinsically focused clients struggle to follow an intrinsic process and intrinsically focused clients frustrated at what they perceive to be an exercise in ‘lipsticking the pig.’ To make things even more challenging, it’s not uncommon for external partners to be muddled, too.

Take brand purpose as one apropos example. To be effective, any purpose pursued by any organization should be highly intrinsic to its internal belief systems and competencies. Yet the purpose approach went horribly wrong when peddled by extrinsically focused advertising and PR agencies because rather than an OS-level change, it led to little more than ineffective virtue signaling that rarely lived anywhere beyond an ad.

While this is a broad overgeneralization, my experience is that the following tends to hold true:

Advertising agencies, PR agencies, digital agencies, and CPG/FMCG-oriented design-first branding shops all tend to be extrinsic in their perspective. Their focus tends to be very much on the external presentation of your brand, with a fairly anemic connection to the corporation's intrinsic belief systems, differences, and unique competencies.

Corporate brand consultancies, by contrast, tend to be fairly universally intrinsic, although their approaches to the task may vary greatly. However, they’ll all place greater emphasis on connecting the dots between the intrinsic and the extrinsic.

Between these poles are a range of innovation, culture, organizational design, and management consultancies that rarely use such terms but dance between the lines of the intrinsic and the extrinsic.

Of course, there’s a point to all of this: which is that when thinking about your brand and your promise to stakeholders, you must also consider whether you intend to pursue an extrinsic or an intrinsic approach to the task. While, in principle, this tends to be decided for you based on the nature of the category you compete within and whether you’re branding a product or the organization itself, that doesn’t necessarily point you toward the right kinds of partners (or employees if hiring internally).

While I’ve personally spent my entire career working with clients on developing brands from an intrinsic perspective, I’m not so naive as to believe this is a one-size-fits-all solution for all clients.

No, it’s more of a category-level concern. If your category dynamics look more like CPG/FMCG, then an extrinsic approach will likely be the most fruitful option. However, if your category dynamics are different and you’re defining a brand for an organization, especially one undergoing a transformation of some form or another, then the intrinsic promise will be your better bet, even if it does tend to be a more involved and more senior-level process.

Volume 167: The Fallacy of Certainty.

March 7th, 2024

The Fallacy of Certainty.

tl;dr Marketing is not, and will never be a hard science.

When Off Kilter started in 2019, we were firmly in the throes of a nonsensically ZIRP-fueled time. Brand purpose was touted as the “one true way” (it wasn’t). The goal of brand strategy was to “find your why” (nope again), and the idle musings of Gary Vee were heralded as profundity rather than the utter bollocks it mostly turned out to be.

As a result, the marketing science community's empirically researched and robustly evidence-based perspective came as an incredible relief. A moat of sanity surrounding a castle full of crazy, if you will.

In the years since I’ve often quoted How Brands Grow by Prof. Byron Sharp and additional marketing science-driven insights from the Ehrenberg Bass Institute and the LinkedIn B2B Institute. I’d even go so far as to say that the seemingly sudden emergence of marketing science-derived concepts into the mainstream of the marketing conversation (a mere fourteen years after HBG was first published) is one of the healthiest aspects of the current marketing discourse.

However, as marketing scientists and their disciples increasingly spread their gospel across social media and the trade press, it’s important that we take a critical look at the aspect of marketing science that I find most troubling - the presentation of a set of social science theories as if they’re hard science laws, which risks two inter-related problems - dogma and the fallacy of certainty.

In overly simplistic terms (hey, I’m not an academic), the difference between hard sciences and social sciences is twofold. First, hard sciences tend to represent closed systems where we can isolate variables and quantitatively measure them in a repeatable fashion (Newtonian physics, for example). Second, repeated experimentation tends to be very repeatably precise, leading to theories, quite rightly, being presented as laws. For example, we very precisely know what Earth’s gravity is; we know how much it changes from the poles to the equator, and we know this will be true every single time. Meanwhile, social sciences exist within complex, dynamic systems where it’s impossible to isolate every variable and where the underlying context often changes over time, which means repeated experimentation tends to provide fuzzy and somewhat differing results rather than precision. As a result, we shouldn’t use terms like laws to describe what is happening; instead, we should use terms like theories, rules of thumb, principles, and hypotheses.

This is important because when you present a rule of thumb as a law, it provides a flawed impression of the precision and certainty of the outcome and how repeatably it will occur under any and all circumstances.

Don’t get me wrong, I understand why marketing scientists present things the way they do. It’s a marketing technique in its own right. If the problem within marketing is an array of disparate and disconnected theories, anecdotal stories, survivor bias, and straight-up bullshit, then the way to cut through to a skeptical and quantitatively minded audience is to present your approach as empirical, repeatable, certain, and precise to the level of laws. In other words, wrapping marketing science in the cloak of the hard sciences is a carefully considered and deliberate exercise in brand positioning and differentiation. An observation marked particularly amusing by marketing scientists like Prof. Sharp, claim that positioning and differentiation are irrelevant. (My response is that if it’s so irrelevent, why are you so clearly doing such a good job of it?)

And there’s the rub. While the concepts marketing scientists present offer an excellent set of principles, rules of thumb, and hypotheses that we can use as a fuzzy starting point alongside an array of non-marketing science-derived marketing concepts, we must also be fearless in questioning what’s being presented as a hard fact when clearly it is not.

Take distinctive assets, which just turned Lyle’s Golden Syrup into a most unlikely topic of armchair discourse, largely among those who don’t appear to have much of a clue as to what they’re talking about but are, nevertheless, fervent converts to the church of Marketing Science.

Anyway, the idea that if a brand has unique, memorable elements to it, we’ll be more likely to remember them and thus connect the brand to a future purchase decision (if presented appropriately) makes perfect sense logically. And we have enough empirical evidence to support this supposition fuzzily enough compared to the alternative, which is non-memorable commodification, to place some considerable faith in it, in principle...

However, dive into the details, and we find ourselves in distinctly murkier waters. In research, marketing scientists will tell you that characters and mascots represent the most distinctive of distinctive assets. However, in practice, very few brands have these. So, is it the case that characters and mascots are always “most distinctive,” or is it simply that we notice and remember them because there are so few of them? Is it a law that a character will always outperform every other asset, or would this advantage decline rapidly if every brand piled in and followed the mascot playbook?

Equally, if you ask a marketing scientist when a rebrand is appropriate, their most likely response will be “never” because you’ll lose the meaning and memory imbued into your distinctive assets, resulting in nothing but a negative impact on your business. Yet, rebrands happen all the time, and I don’t see broad swathes of businesses suddenly declining and failing because of it. Yes, there is almost always a short-term drop in awareness and salience that occurs that sometimes has a negative impact on sales and profits, yet this tends to be a short-term rather than a long-term effect, especially for more sophisticated organizations that know what to expect and take steps to manage the change in order mitigate negative impacts. So, again, it begs the question of methodology. Is the marketing science position of “never” based on a true multi-year accounting of the impact of change across a broad swathe of rebrands, or is it based on short-term evidence, or is it largely evidence-free, and treated as an obvious extension of the distinctive assets theory. (eg. If distinctive assets are inherently valuable, then ergo, the effect of changing them must be negative). The truth is, we just don’t know. And, sadly, neither do most of the supplicants to marketing science who are so quick to pontificate on the subject.

I mentioned above that marketing science sees little or no value in either positioning or differentiation; however, as far as I can tell, this looks to be more the fruit of a flawed research methodology than the profound insight it’s presented as. Handily, however, it provides a great soundbite for differentiating marketing science from conventional marketing orthodoxy. Just take the Ehrenberg Bass Institute, which, as someone recently pointed out to me, “has expertly positioned itself as the only marketing institute on Earth doing ‘real marketing.’” Oops, they did it again. Damn, they’re good at this totally valueless positioning stuff!

So, while there is much to learn from and admire within the world of marketing science and much anecdotal nonsense that its debunked, what concerns me the most are its blindspots, and it seems to have a few. Largely, I think, because the underpinnings of marketing science appear deeply rooted in the dynamics of CPG/FMCG categories and how already large brands in such categories (with big budgets to spend on marketing science institutes, cough, cough) can leverage their brand strength to eke out marginal growth gains relative to competitors. As a result, if we’re not in the CPG/FMCG business and we are not already large, we must navigate the following blindspots:

1. It’s unclear that the “laws” of marketing science hold up 1:1 in non-CPG/FMCG categories. This feels most notable when we consider corporate brands that sit across multiple product types, services brands where so much of the experience is intangible, luxury brands where social signaling and emotional resonance matter so much, and technology brands where product innovation is so fast-paced.

2. It ignores qualitative information completely, relying solely on quantitative analysis, leading to some very real weirdness, such as discounting pretty much everything to do with the customer experience. This is one of the reasons I feel the dismissal of positioning and differentiation is more about a methodological blindspot than fact.

3. It does little or nothing to reflect how organizations utilize brand strategy, positioning, etc, to guide internal decisions around marketing communications, product innovation, customer experience, etc. The glib statement that “your positioning is whatever your last ad says it is” is useless if the net result is chaos.

4. It fails to differentiate between how a very small company with extremely limited resources might grow its business relative to how a large company with vast resources can incrementally leverage its brand for growth.

5. It largely dismisses the bottom-of-funnel tactics we commonly label “performance marketing” completely. While I agree that these tactics tend to be much less valuable than typically presented, it would be equally incorrect to view them as being valueless under all circumstances.

Now, this is simply my opinion. I’m a magpie for ideas and principles and love rules of thumb as starting points. I have no problem at all living with conceptual ambiguity, see little or no reason to quantify everything, and am quite happy to admit that non-quantifiable qualitative data is often the most valuable. I also think plenty of marketing theories that precede marketing science remain important.

So, I apologize to any marketing scientists out there who might think I’ve mischaracterized your field through my ignorance. I’m fundamentally not anti-marketing science; however, I am fervently anti-dogma and deeply cautious about the dangers of false promises of certainty.

What matters is to think critically about what you’re doing, run your own experiments, gather your own evidence, and use the thinking of others as principles, rules of thumb, and start points. But don’t be afraid to find your own way after that, make up your own mind, and discover your own evidence for what works in your situation, category, and company. And, especially, to track how that changes over time as the impact of competition forces diminishing returns to kick in.

Because that’s what really matters at the end of the day.

Volume 166: So, I Did A Podcast.

February 22nd, 2024

So, I Did A Podcast.

tl;dr: Ever wonder what I look and sound like?

Apologies; this Off Kilter is short and vastly more self-promotional than usual. If you’re a new subscriber and this is your first, don’t worry. It’ll be back to its usual verbose prognosticisms before you know it.

Mostly, I wanted you to know that I’m featured in the latest episode of the “CMO Confidential” podcast, hosted by the irrepressible Mike Linton. The focus is on B2B marketing. So, if you feel so inclined, please take a look, take a listen, and let me know your thoughts.

Unlike many, I’m not a natural self-promoter. I put it down to my Scottishness, so I apologize if I appear at all nervous. I literally hadn’t slept the night before and was so nervous to begin that my hands were shaking! I won’t be listening to it since I can’t handle listening or watching myself, so all feedback is now in your hands.

But, before leaving you to your listening pleasure, I would like to share a thought that’s been percolating for a while that I didn’t have time to cover with Mike, which is that perhaps it’s time we more fundamentally changed the way we execute marketing activities.

As tech marches on, data becomes even newer gold, and AI promises to automate a significant swathe of marketing execution, considerable questions must now be asked not just about what we’re doing but how we organize ourselves to do it.

So, in the interests of transparency, here’s a completely made up by yours truly and utterly data-free opinion for the sake of discussion, if nothing else.

In the B2B landscape, the relationship between sales and marketing is often broken. Sales tend to rule, and, as a result, marketing activities often end up mirroring sales priorities and timeframes. The net result is an incredible focus on short-term tactical sales enablement and not a whole lot else.

You can spot these companies because they tend to lack customer-centricity and a well-differentiated product offering, they tend to lag the category leaders, and the sum-total of their brand-building efforts tends to be a product demo signup form masquerading as a homepage. They tend to suffer from the symptoms of brand weakness, which then creates bad blood, as sales blames marketing for some combo of top-of-funnel weakness, poor lead quality, and a competitor ‘sucking all the oxygen out of the room.’ Only it isn’t really the marketer’s fault, as they’re doing their best with the extremely limited resources and time-bound sales priorities they’ve been given.

So why not hand all of these short-term tactical activities over to sales to manage themselves? Frankly, these are a lot more like sales activities anyway, and this way, you can ensure both complete alignment and no bad blood excuses along the lines of “it’s marketing’s fault.”

So, what do we do with the rest of marketing?

Well, we merge it with strategy as recommended by Roger Martin, of course. Re-shaping marketing as a true 4Ps activity that’s future-focused and strategically valuable to the organization and that, ideally, has board-level reporting responsibility.

This has the side benefit of turning strategy into a demand-centric and customer-driven area of focus rather than a supply-centric, product-driven activity, as is often the case.

Then, we place longer-timeline brand-building under the newly combined strategy/marketing group.

Anyway, I have no idea if it would work. But all the change in the air has got me thinking. And it’s becoming completely apparent that most B2B marketing orgs are pretty fundamentally emasculated by their very, very junior relationship to sales.

And, no. I don’t think sales leaders should be in charge of marketing. Even among the excellent sales leaders I’ve met, vanishingly few are great marketers too. They’re different areas of domain expertise, and the timeframes and resource requirements of each are quite different. No, the marriage of marketing and strategy makes way more sense than the marriage of sales and marketing.

Volume 165: A Disney Masterclass.

February 15th, 2024

Offensive, Defensive, Opportunistic: Disney’s Strategy Masterclass.

tl;dr: Disney makes big plays for the future.

Disney is a fascinating company right now. A 100-year-old entertainment behemoth, it finds itself with some major post-pandemic structural issues. Specifically, it faces three negative realities:

1. Cord-cutting continued through the pandemic, significantly weakening Disney’s broadcast revenue, primarily at television properties ABC and ESPN. This is a bit of a double whammy since fewer cable subscribers means revenue from subscription fees (paid by the cable operators) and advertising both decline.

2. Its forays into streaming are yet to be profitable, as the costs for original content and subscriber growth eat heavily into potential profits, while subscription fees and digital advertising are yet to take up the slack.

3. Movie-going appears to be in structural decline as audiences are yet to return to cinemas at pre-pandemic levels and may never do so, significantly crimping the earnings potential of the Disney studio business.

The net result of these issues, plus strategic missteps in responding to them during the brief tenure of former CEO Bob Chapek, has been a significant slide in the stock price at the same time the broader market has rallied, leading hedge fund billionaires to enter the fray in an attempt to control of the future of the company.

As a result, Disney now faces a three-way proxy battle for board control, where shareholders will be asked to vote for the board slate put up by Disney itself, or an alternative proposed by Trian Partners, and another alternative proposed by Blackwells Capital.

So, last week, and true to form for a corporation seeking to stave off activist investors, Disney delivered a healthy increase in profits and announced a dividend increase of 50% (the fruit of cost-cutting measures). In addition, it unveiled some major strategic shifts in an attempt to persuade investors that they’re on the right track and have no need for activism on the board.

Specifically, it made the following announcements:

1. It will partner its ESPN business with FOX and Warner Bros. Discovery to pool broadcast rights into a new streaming sports service that will cover pretty much every major US sport and league - NFL, MLB, NBA, NCAA, golf, soccer, hockey, car racing; you name it.

2. It’s making a $1.5bn investment in Epic Games, and Epic will build a persistent “games and entertainment universe” for Disney that’s interoperable with Fortnite, which boasts 236m active monthly players.

3. It signed an agreement to exclusively stream the Taylor Swift ‘Era’s Tour’ concert film on Disney+.

What I love about this is that each represents a big strategic move and is quite different in context. Let’s walk through them in turn.

First, partnering with FOX and WBD on sports represents an absolutely seismic shift. Even a few short years ago, the idea of competing entertainment networks pooling their sporting properties would have been a complete anathema. However, this move demonstrates the sheer scale of the existential threat of big tech. Live sports has been one of the few bright lights for broadcast television and cable, but it has only slowed the pace of cord-cutting, and in the meantime, tech has been getting much more aggressive in landing sporting rights. Netflix recently signed a multi-year deal with the WWE, Apple signed a multi-year deal with the MLS, and Amazon, which already had the rights to Thursday Night Football, is now adding exclusive rights to a playoff game next year.

The writing is clearly on the wall. Major tech-owned streaming services are reaching maturity on the subscriber front and are increasingly looking to advertising as a revenue source, so sports represents one of the last untapped pools of future profits (new subscriber fees plus more advertising). For different reasons, I can see both Amazon and Apple becoming more expansive in seeking sporting rights. Amazon because sports sits perfectly within its ad-supported Prime streaming, retail media, and retail store flywheel. And Apple because it likely wants to tie up immersive sports as a way to boost sales of cheaper, next-generation versions of the Vision Pro. (Although I suspect this new sporting venture will have a Vision Pro app of its own).

As a result, this new distribution partnership is fundamentally defensive in nature. It’s less about finding new space to play and more about Disney, Fox, and Warner Bros. Discovery protecting what they’ve already got. In some ways, it mirrors the creation of Hulu, which was also a joint venture formed by previously competing networks. And, just like Hulu, which suffered from owner infighting for years until Disney bought a controlling stake, this new venture's biggest risk may well come from the inside rather than the outside. So we’ll have to wait and see whether Disney, Fox, and WBD execs can get along well enough to deliver clear strategic direction or whether they just fight instead.

While defensive in nature, it’s also an essential move for these businesses to proactively decouple sports from a declining broadcast business model, and doing it together is smart, as there’s real value in not going it alone here. The timing may also be surprisingly good. For example, the rights to the Super Bowl aren’t up for re-negotiation until 2033, and Disney-owned ESPN just locked up the college football playoffs in a massive $7.8 billion deal that runs until 2031. So, even though it’ll be a tough road to climb and the price to the consumer will likely be steep, they’ve given themselves runway to achieve scale. And, if it is successful, the as-yet-unnamed new venture will likely be significantly value-additive, especially if it can become the dominant streaming gateway for live sports.

Second, the most exciting announcement was the Epic Games investment.

Where the new streaming sports service is fundamentally defensive in nature, investing in Epic and having it develop an immersive gaming and entertainment experience that’s interoperable with Fortnite is a huge, offensive move.

For context, video games are a massive component of the entertainment sector. While definitive stats seem to vary, it’s either the most valuable or second most valuable entertainment category after television, with total revenues somewhere around $282bn, depending on which data source you pick, with very healthy revenue per user and around 9% CAGR (Compound Annual Growth Rate) projected through the middle of the next decade.

It’s literally a business Disney cannot afford not to be in, so doing this via strategic investment and partnership is very smart. Historically, Disney has failed to find success in developing its own video games, more recently relying on a licensing model. However, that model would be far from ideal in developing, launching, managing, and continuously innovating a persistent gaming universe.

What I love is that Fortnite is arguably the video game Disney should have made for itself already anyway, which the success of Lego Fortnite only reinforces.

We hear a lot these days about “flywheel business models,” but few realize that Disney had a flywheel long before the term was popularized. At its core, the Disney business is a flywheel that sits atop its creative IP (think everything from Mickey to Star Wars to the Marvel universe). Its success as a business then comes from how well it monetizes this IP across a broad range of product types that all reinforce each other - movies, television shows, toys, merchandise, theme parks, cruises…and now persistent gaming.

I’m not going to make any predictions as this looks like a long-game play, but if it’s successful, look out for Disney potentially shifting from an equity investor to a buyer of Epic. (Also, its $1.5bn investment looks to be well timed since, at a $20bn valuation, Epic is now valued at half what it was during the pandemic).

This deal also appears to have a lot of strategic range to it. At a minimum, it instantly turns Disney into a major player in persistent online gaming, and in a best-case scenario, it positions Disney to take advantage of the Metaverse should it ever really take off.

Finally, and last but not least, Disney+ will be the streaming home for Taylor Swift’s Eras tour. This is neither offensive nor defensive but opportunistic. Taylor Swift is unequivocally the biggest pop star on earth; her Eras tour has already grossed in excess of $1bn globally, and the concert film that’s been playing exclusively in theaters just crossed the $260m mark.

It looks like Netflix and Universal were also in the mix, and I'd be surprised if Apple and Amazon weren’t also in the bidding. However, it’s equally clear that relative to its family-friendly brand, fan/customer overlap, and need for a big positive news story amid a proxy battle, Disney almost certainly needed this the most.

I’d be lying if I said I could put a value on having Taylor Swift on Disney+, but what I can say pretty definitively is that it is an important mechanism for keeping Disney+ in the game, keeping it in the news cycle, and keeping Disney culturally relevant as it seeks to get stumbling franchises like Marvel and Star Wars back on track.

So, there you have it. I’m not going to pretend that Disney is in a great place because it has a big hill ahead of it. It remains reliant on a cable TV business model that’s in rapid secular decline; it’s suffering soft movie attendance that’s at least partly its own fault as tentpole superhero blockbusters plumb the depths quality-wise, and big tech remains a fearsomely well-capitalized opponent.

Yet, Bob Iger has proven to be one of the most savvy CEOs in media history, Disney owns the best creative IP portfolio on earth, has a sprawling commercialization empire, a great family-friendly brand, and these recently announced strategic moves have the potential to materially position it for its next act.

So, yeah. What a lovely opportunity. It’s not often you see a major corporation making what look like really smart defensive, offensive, and opportunistic moves. All at the same time.

Now, the question is whether investors will buy it, and if they do, how good a job Disney can do at executing.

But, as a strategy lesson for you and me? Bravo, Disney. Bravo.

Note: I own three shares in Disney that I’m currently taking a bath on. You should never, ever, under any circumstance, even remotely consider anything I say as investment advice. I am about as good at picking stocks as I am at keeping plants alive. And my cactus just died.

Volume 164: What Cost Cybertruck?

January 25th, 2024

1. What Cost, Cybertruck?

tl;dr: Will cost Tesla more than anyone realizes.

If you’ve ever studied economics, you’ll be familiar with the term “opportunity cost,” which references the cost of an opportunity forgone when you choose an alternative. For example, let’s imagine you have $100, and you can invest it in either Apple or Microsoft stock for 12 months. Let’s say you choose Apple, and at the end of the 12-month period, your stock is worth $105. Congratulations, you made a 5% return. However, in this same fictional universe, a hundred dollars invested into Microsoft returned $125. This means the opportunity cost of choosing Apple over Microsoft was $20 ($125-$105=$20), or 4X your Apple profits.

If you work in the realm of strategy, whether you realize it or not, you’re dealing with opportunity costs all the time. Whenever you decide to move in a specific direction, any other activity you could have done with those same resources represents an opportunity cost.

One of the reasons this matters as a concept is that it affords us a powerful tool to analyze and critique a strategy as it unfolds.

Whatever anyone may think about Elon Musk (good/bad/whatever), Tesla has historically had a knack for making optimal strategic choices, where the returns from activities undertaken seem to have consistently exceeded the cost of opportunities foregone.

For example, the choice to forgo a dealer network and place showrooms in high-end malls, the choice to enter the market at the luxury end and then work down, the choice to market on the basis of performance rather than environmentalism, the choice to look like a regular car instead of pursuing sci-fi aesthetics, the choice to rely on a carnival barker CEO instead of advertising, the choice to build the worlds most comprehensive charging infrastructure…the list goes on.

Indeed, one of the reasons Tesla has grown to such gargantuan market capitalization is that it’s consistently made smart, somewhat contrarian to the received wisdom, strategic choices, even when it was far from clear in advance that they’d be the right choices.

And then there’s Cybertruck, which may have ended the run and may cause real pain for the company moving forward.

Let’s walk through why this might be the case.

Tesla announced Cybertruck in November 2019. At the time, Tesla was a $60bn market capitalization company (today, it’s worth just under $600bn, down from a pandemic peak of $1.2 trillion). This means it was a different time and a different company. Musk had yet to unleash his inner Space Karen or shift his attention to Twitter and was instead focused on activating the giant pay package he’d been granted in 2018 (The exact same package a judge in the Delaware Chancellory Court just negated). Anyway, the net net is that at the time, Tesla was still seeking to maximize consumer attention and stock price growth through splashy, Musk-fueled product launches.

The timing looked to be perfect: trucks represent the most popular US automotive segment and are more profitable than cars, and at the time of the announcement, there were zero EV trucks in the market.

All Tesla needed to do was release a decently functional truck in a timely fashion to exploit whatever latent demand was there. However, the sheer ambition of the vehicle led to a 5-year wait as the company tried to figure out how to realize a production model from such a radical concept, during which time the price increased by 50%, and annual production will always be highly constrained due to the complexity of manufacture.

And, of course, this being a Tesla, it’s already dealing with its fair share of issues. Terrible build quality for an up-to $100k vehicle, edges so sharp you could easily lose a finger, terrible visibility (get used to looking at a video window in the center console screen), and aero wheel covers that are shredding tires to ribbons, for starters.

In the meantime, much changed in the market for EVs. Ford launched its EV truck, the F150 Lightning, almost two years before Cybertruck, Rivian entered the market as a new entrant, and trucks from RAM and GM are imminent, creating a radically more competitive environment.

More broadly, Tesla has faced increased competition and slowing EV demand in the US as the category shifts from early to mainstream adoption, and people start asking harder questions about cost, range, charging infrastructure, and, increasingly, the unbelievably steep repair costs of an EV (Replacement battery costing more than a new vehicle, anyone?). Meanwhile, outside of the US, Tesla has faced rapidly intensifying cost competition, primarily from aggressive manufacturers in China.

As a result of intensifying competition and slowing demand, Tesla responded with price cuts across the board. I suspect it did this because of the opportunity cost of Cybertruck, which left the company with few other options. Let me explain.

By allocating so much of its engineering and R&D resources to figuring out how to build a vehicle as radical as Cybertruck, Tesla appears to have missed two critical innovation cycles:

1. It failed to update the existing model range in any truly meaningful way. Although known as an innovator, Tesla has an older product portfolio than any major automotive manufacturer, and its models are now extremely long in the tooth compared to competitor EVs coming on stream. (For example, its most popular model, the Model 3, was introduced seven years ago, and even its most recent facelift was entirely minimal)

2. It failed to develop the new, small, cheap, high-volume vehicle it needs if it’s to maintain market share leadership. The unveiling has been promised for this year, so if history is any guide, it won’t hit production until 2027-ish, by which point competition will be at buzz-saw levels.

A seemingly capricious approach to pricing in any given month has also created further headaches for the company. Analysts have, quite rightly, noted that discounting has been a short-term game to boost sales of an aging portfolio, which has caused a hit to both profitability and market capitalization, while fleet customers are increasingly refusing to buy Tesla because the random-ness of its pricing directly impacts the value of what they’ve bought, and consumers who’ve bought Tesla’s are becoming increasingly angry at how much value their purchases have now lost.

In other words, I’m positing that the long-run impact of Cybertruck is likely to be value destructive to Tesla rather than value additive. Too few will be made to make any meaningful impact on the value of the company, while the opportunity cost of expending precious R&D resources on it rather than other models has directly led to a huge hit to profitability today (via discounting) and the very real risk of a too-late, uncompetitive product portfolio tomorrow.

2. Careful What You Wish For.

tl;dr: Professionalizing marketing is a bad idea.

Two weeks ago, I wrote a piece on B2B branding. In it, I co-opted the term “demand creation” because it’s in common parlance in marketing circles, and I was building on someone else’s work where they used the term.

Anyway, on LinkedIn it was pointed out that “demand creation” is a misleading term because it suggests that you can use marketing communications to magic demand out of thin air when you can’t.

And this is true. As the unicorns turned unicorpses are finding out, it’s almost impossible for mar-comms alone to raise aggregate demand in any category. What it can do is divert more of the existing demand to you, which gives the impression that you’ve created demand for yourself.

The discussion then shifted to the trope that marketing should be professionalized like finance or law to encourage higher standards and prevent such confusion in the future. Largely because we’d all have a common understanding of the field, a common set of definitions, and presumably, an overarching body, like the bar that sets the rules and dictates terms.

What an absolutely terrible idea. For three big reasons:

1. Marketing is a source of competitive advantage.

2. Marketing is dynamic.

3. Who gets to decide? (hint, it would be Google)

First, marketing isn’t a profession to be standardized, commoditized, and defined by an outside body; it’s a dynamic source of competitive advantage.

In business, we often compete on the basis of information asymmetry, which is a fancy way of saying that one party has better information than another. Google Search is a great example of information asymmetry in action. Because more people use Google Search than any competitor, Google has more information about what people are searching for, which it then uses to tune its algorithms to provide better results, which in turn means people are more likely to come back and use Google again in the future.

In other words, because more people use Google Search, Google has information competitors do not have, which it then exploits to make the product perform to a higher standard, making it more popular…Rinse/repeat.

Marketing is also an example of information asymmetry. If the overall understanding of marketing in your category is weak, then relative to your competition, the more knowledge you have about how it works, how to do it well, how to structure and resource it, and how to connect it to your overall business priorities, the bigger the information asymmetry will be, and the more likely you’ll be able to exploit it competitively to your own advantage.

This neatly brings me back to the point about “demand creation” being inaccurate. Initially, I beat myself up because I’d been caught dead to rights. It is inaccurate, and that inaccuracy does have the potential to be deceiving, and deceiving people is the literal opposite of the intent of this newsletter.

And then I stood back for a bit and thought, “Hang on a minute.” There’s a problem here. Knowing you can’t just magic demand out of thin air through marketing communications isn’t an esoteric concept. In fact, it’s a very basic concept. And if you’re in business and don’t understand basic concepts, maybe you deserve what you get.

I don’t mean this to sound harsh or to neatly excuse myself, but we can’t think about the “professionalization of marketing” in a vacuum. It exists within the capitalist systems that underpin our business environment. And in a capitalist system, it's a feature, not a bug, that the weak fail while the strong survive.

Professional groups abound in business - medicine, finance, law, civil engineering, and so on - but are rarely viewed in and of themselves as sources of competitive advantage. This is typically for two reasons:

1. It’s a field where standardization benefits everyone.
   Take accounting. This is the function that keeps score in business. Scorekeeping must be standardized because otherwise, shareholders and financiers wouldn’t know which corporations to invest in or lend to (as they wouldn’t know how to compare or trust the scores given to them). And if investors aren’t willing to invest, nor lenders lend, the entire economy would grind to a halt. Law is similar. If accounting is scorekeeping, then the law sets the rules of the game. And again, it’s important that everyone has a common understanding of the rules, lest they find themselves in legal jeopardy.

2. It’s a field where people might get hurt or die.
   We want doctors to have a common understanding of medicine because we might get hurt or die otherwise. We want civil engineers to have a common understanding lest our bridges collapse and kill us. In other words, in addition to arenas where standardization serves a common good, there are other areas where we’ve chosen to professionalize because if we didn’t, the negative impact on people and society might otherwise be too great.

Notice anything about the points above? Yeah, marketing doesn’t fit either of these criteria.

Second, marketing is dynamic. Now, for all that we beat ourselves up over definitions, imprecise terms, and the use of different words to describe the same thing, the flip side of this chaos is how gloriously dynamic marketing has proven to be.

Professionalization does the opposite. It aims to create a standardized understanding, which, by definition, means having the field operate in a small-c conservative fashion. This is not at all a criticism when we consider fields like law, accounting, or medicine, where we might want change to be glacial. However, this would be a bad idea in a field like marketing, which represents the pointy end of the competitive stick within the cut and thrust of capitalism.

Far from improving marketing, it’s more likely that professionalization would simply commoditize it, eliminate its dynamism and innovation, and, perhaps ironically, reduce its value to the business as it would no longer represent a competitive advantage to be exploited. In other words, marketing would look more like a compliance activity than a pathway to success.

And, finally, and very importantly, who gets to decide?

This is not a small concern. For example, had we professionalized marketing as recently as the turn of the century, we’d likely have professionalized around the 4Ps of the marketing mix and the segmentation, targeting, positioning (STP) theory of marketing. Had we done that, it’s likely that marketing science and organizations such as the Ehrenberg Bass Institute would never have existed because dynamism and innovation at the macro-level would’ve been chilled by the forces of standardization. And if you think this wouldn’t happen, just look at how often medical breakthroughs have been dismissed by the institutional conservatism of the professional bodies that oversee medicine.

This means the recent paper by Prof. Byron Sharp positing an alternative to the STP theory called the Market-Based Assets theory may never have happened at all. And even if it had happened, this critique suggests that it isn’t compelling enough to negate STP, which means everyone would just be arguing over terms again.

Of course, this doesn’t even begin to address the 800lb gorilla in the room, which is that, in many ways, we already have a standardized understanding of marketing, only it comes from the biggest players in the marketing landscape rather than any professional body and is wildly limited as a result. Were we to require all marketers to be qualified by a professional organization, there’s literally no way the biggest players in the space wouldn’t engage in a bout of regulatory capture to ensure their agenda leads. (If you don’t believe this would happen, just look at how Google and Meta already co-opted the major advertising bodies) While marketing isn’t professionalized in any formal sense, I’d argue that the AdTech/MarTech industrial complex has already gone a long way toward standardizing it in its own image and to everyone else’s detriment.

So, while I think the chances of marketing ever being professionalized are extremely slim (way too many competing agendas to find agreement), I’m also convinced that it would be a self-defeating act were we to do so. It would hardly represent progress were we to shift marketing from a potential source of competitive advantage to a compliance activity, were we to choke off its dynamism and innovation, and were we to allow the largest players in the space to engage in regulatory capture in order to continue their dominance.

No. I think it’s better to view marketing as a dynamic source of competitive advantage within the cut and thrust of capitalism.

And ultimately, we should let the market decide. If ignorance of marketing represents an exploitable source of competitive advantage, it won’t last forever. Over time, competitive advantages tend to be competed away as the strong thrive, the weak fall by the wayside, and others rush to replicate whatever it is that made the strong strong.  

Until then, if you’re a CEO, you should stop looking at your marketing function as a source of inefficiency and waste and instead view it as a source of exploitable competitive advantage. And if you’re a marketer, you should feed your brain constantly with well-reasoned and well-evidenced thinking so that you’re the one doing the exploiting and not the other way round.

Volume 163: The B2B Brand Imperative.

January 25th, 2024

The B2B Brand Imperative.

tl;dr: Yeah, brands matter.

I’ve done a lot of B2B work over the years, and I consistently see the symptoms of brand weakness - weak overall demand, a view that a competitor is sucking all the oxygen out of the room, a sales team working overtime to convert at a higher rate than they should have to, having to continually tell prospects who you are instead of what you can do for them and ongoing declines in response rates for your short-term tactical activities leading to anemic growth and a massive increase in pressure on the marketing department to move faster, become more agile, and perform.

Unfortunately, all too often, the diagnosis that the problem is moving too slowly and inefficiently is flat wrong.

When we weaponized waste and inefficiency as the biggest problems in marketing, we created a much bigger weakness in the form of chronic underfunding - particularly at the brand-building end of the spectrum, which constrains an organization's ability to grow to its potential.

Rather than view this as a message of doom, however, we must instead view it as an opportunity. If the underfunding of marketing has become an industrywide competitive weakness, then those who recognize it as such and respond accordingly will be able to realize outsize value.

The challenge is that having worked in this space for a long time, I can confidently state that marketing in general, and brand more specifically, remain poorly understood concepts in the B2B arena, even though we have well over a hundred years’ worth of data to work from.

Yet, as an ever greater percentage of corporate valuations are made up of intangible assets, the value of brands as a proportion of total enterprise value is considerable.

So, why are we so ignorant about such a significant source of enterprise value, and what can we do about it?

I think there are predominantly three reasons why brand remains a dirty word at the top of so many B2B corporations:

1. There is widespread misunderstanding and ignorance of how marketing, and thus brand, works.

2. The brand conversation needs to be a business value conversation rather than a ROI conversation.

3. The AdTech industrial complex moved in a different direction.

The primary reason brands don’t receive greater commitment within B2B organizations is a widespread misunderstanding and ignorance of how marketing works and, thus, the value brands create. This leads to common misunderstandings about what is necessary to be successful, how much it’s going to cost, and when the return should be seen.

In other words, when we do the right thing in isolation, like talking about the long-term nature of brand building, we also run the risk of accidentally reinforcing people’s ignorance. It’s not an irrational response to look at two proposals, one for “long-term brand building” and the other for “short-term performance marketing,” and decide to put all your eggs in the performance basket. After all, if you don’t know any better, the promise of cost today and revenue today beats the promise of cost today and revenue tomorrow.

Equally, when we say binary things like “brand campaigns don’t show or sell the product” (not at all true, btw, but a common trope), we accidentally reinforce a negative stereotype of underperformance within an audience that generally doesn’t think in terms of ads anyway, and when they do, intuitively thinks they should always showcase the product.

Shifting To Demand As The Frame Of Reference
So, here’s a different way to think about it.

First, if I borrow from and then build on the excellent work of Dr. Grace Kite and Tom Roach, then we might simplify and frame everything through different approaches to demand:

Demand harvesting
Demand capture
Demand creation

Any strategic approach to marketing needs to cover all three bases. Let’s walk through each in turn:

Demand Harvesting
This is where you harvest demand that’s already in market, where you’re either in the consideration set already or you have a chance to connect yourself to purchase intent. Activities designed to drive harvesting are things like Google AdWords that tend to be always on and work more like signage than advertising. The idea is to put yourself in the position to harvest demand that might be coming your way anyway and to make incremental gains relative to competition.

Demand harvesting may appear to have outsize value for very small corporations because their existing sales are small. However, it’s a tactic that tends to hit its mathematical limits pretty quickly, so be careful not to be overly optimistic in your projections to avoid over-investing in things like search that hit the limits of incremental growth quickly and then flatline.

Demand Capture
This is where you seek to capture demand from buyers who are actively in the market by attracting them to your offering. It builds atop demand harvesting but seeks to have greater incrementally. In other words, if demand harvesting is primarily focused on ensuring you make sales that were likely coming to you anyway, demand capture seeks to grow new sales. The tactics we label “performance marketing” and “growth marketing” tend to be demand-capture activities. While they may be more campaign-like in practice, such activities often have a more always-on cadence.

Because you’re seeking to attract buyers actively in the market, demand-capture activities tend to be driven by feature/functionality - proving that your product or solution delivers what the prospect needs. As a result, these tactics tend to add value while they are in the market, but they have little ongoing commercial impact in subsequent quarters because people forget such messaging.

Like demand harvesting, because demand capture is bounded by the number of customers actively in market at any given moment, such activities tend to stall out over time as you begin bumping up against your demand ceiling.

Demand Creation
Because they both seek to attract demand already in the market, demand harvesting and demand capture activities are reactive in nature. We’re reacting to market signals that someone is actively in the market for a product or service, and we’re then seeking to get our proposition in front of them before they can act on that purchase intent.

Demand creation, by contrast, is proactive in nature. It seeks to create future demand for our offering by either: A. Strongly associating our brand with a prospect's need so that they’re most likely to think of us first when they are in market or B. To stimulate the market, create new demand where it didn’t previously exist, and draw customers toward our offering.

Because we need to cut through in an environment where prospects aren’t actively looking to buy right away, we’d typically focus less on feature/functionality and more on being memorable (so they’ll remember us when they are in market) by creatively connecting what we offer to their need (so they don’t just remember us, they’ll actively consider us) and doing so consistently over time (so everything we do builds on what came before).

Demand creation tends to be most closely associated with what we consider “branding” or “brand-building” activities. However, rather than allow this to devolve into the trap of a brand = expensive, wishy-washy ad campaign that underperforms, I think it better to use the term “demand creation” and talk about this as being the ongoing activities we need that will lift the ceiling on our demand potential.

Using the lens of demand allows us to re-frame the sales funnel into something that feels less pejorative and loaded with false meaning. Rather than talking about the top, middle, and bottom of the funnel and things like “performance marketing” or “brand marketing,” now we’re talking about demand and the need to harvest and capture demand that already exists while also creating new demand that will lift our overall ceiling over time.

Now, let’s layer in some additional context around why we need to do this and how it all works together.

Why This Matters:
In any market, only around 5% of the audience is actively seeking to purchase at any given moment. This means 95% of potential buyers aren’t looking to make a purchase right now.

Accurately identifying and attracting active buyers is hard and can be expensive. Their time in market is fleeting, and we often lack good signals to demonstrate that they’re now active. (Judging the accuracy of such targeting data is difficult, but academic research suggests it’s vastly less accurate than data brokers would have you believe)

Approximately 90% of all purchases are from a brand you’ve already heard of. This puts those corporations that focus exclusively on demand harvesting and capture at a disadvantage (since they only pop up when you’re actively in market, chances are you won’t have heard of them before, and you’re less likely to buy from them if you’ve never heard of them).

Although estimates vary, we know that a significant proportion of the B2B buyer decision is made before they ever speak to your sales organization. In other words, marketing now plays an outsize role in influencing perceptions compared to the past.

As the costs of entry fall, many B2B categories are becoming increasingly competitive. To use a single example, SaaS has grown from a $31bn category in 2015 to $197bn by the end of this year, marking a considerable lift not just in category revenue but competitive intensity.

So, here’s why we need to pay attention to all three forms of demand:

1. B2B categories are becoming more competitive rather than less, which means it’s becoming harder and more expensive to cut through successfully.

2. A huge chunk of the B2B purchase decision is made before the buyer engages with a salesperson, meaning marketing plays an outsized role in shaping perceptions.

3. Only 5% of buyers are in market at any given moment, meaning 95% of potential buyers are not seeking to make a purchase right now.

4. 90%+ of the purchases we make are from brands we’ve already heard of, meaning we’re at a disadvantage if we aren’t making sure they’ve heard of us before they’re ready to buy.

5. Empirical research shows that focusing on all three forms of demand is more effective than solely focusing on one or another.

In other words, B2B success is becoming more difficult as it becomes more competitive. To succeed, we need to stop engaging in asinine “brand versus performance” arguments that only exist due to the chronic underfunding of the marketing function and instead cover all forms of demand while also understanding that different forms of demand work differently and must be optimized differently as a result.

Now, here’s where it gets really interesting.

Brand Strength Is An Outcome, Not An Input.
If we are successful in managing growth by effectively harvesting, capturing, and creating demand, then increased brand strength becomes an inevitable outcome. (In other words, great brands primarily manifest as the outcome of doing other things well, including product, experience, and, yes…fairly far down the list, advertising).

Businesses with stronger brands tend to outperform those that do not for the following reasons:

1. Brand effects mimic monopoly effects in categories where there may be no monopoly potential. More specifically, brand strength tends to correlate with positive effects on both volume and margin

2. Brand strength tends to accelerate the performance of both demand harvesting and demand capture activities because it increases the chances that people will already have heard of you and think positively about you. In other words, demand-creation should increase the effectiveness of your brand harvesting and capture activities.

3. Brand strength future-proofs the organization. In businesses undergoing a significant transformation of business models and/or product propositions, brand strength eases the transition by creating trust that de-risks the new offerings.

Of course, we must also recognize that different tactics work across different timeframes. Because demand harvesting and demand capture seek to attract demand already in the market, their performance can be measured in very short-term increments. Because demand creation, however, is focused primarily on the 95% who are not in the market, its performance should be judged across longer timeframes.

Short + Long Term Cashflows
The best way I’ve heard this view of demand put into business terms is as follows: (My apologies for not crediting this to anyone; I forget where I saw it first):

Demand harvesting and demand capture seek to optimize and lift short-term cashflows by exploiting demand already in the market. Demand creation seeks to lift our long-term baseline cashflows by creating demand for us that lifts our demand ceiling. Do both well at the same time, and we achieve optimal growth with a stronger brand a desirable side benefit.

So, that’s my take.

Even though the LinkedIn B2B Institute has done some great work, marketing, and thus brand, remains a widely misunderstood concept in the B2B arena. Mostly, I think, for two reasons. First, we haven’t done a good enough job of framing the different ways in which marketing tackles different kinds of demand. Second, chronically underfunded B2B marketers are being forced to pit short vs. long-term activities against each other rather than figuring out how to optimally manage both.

To rethink this, it may be better to frame marketing in the context of demand and demonstrate how brand-building is complementary and value-additive to other approaches rather than setting it up as a binary either/or.

I’m not sure that I can put a number on the opportunity potential here, but it must be considerable. Truly, there’s no good reason for there to be such a paltry number of genuinely strong B2B brands, and there’s a very good reason why it shouldn’t last for much longer.

Volume 162: Solo Stoves CEO Goes Solo.

January 18th, 2024

1. Solo CEO Goes Solo.

tl;dr: Some headlines just write themselves.

Just in case anyone has been living under a rock for the past week or doesn’t live in the US, here’s what just went down:

At some point in the past year, Solo Stoves, a leading US brand for smokeless firepits, hired Snoop Dogg to front a new ad campaign focused on his “going smokeless,” pun completely intended. It rolled out just in time to -hopefully- boost Q4 sales. Unfortunately, it didn’t, because the company missed its sales targets. Unfortunately X2, it also saw a decline in profitability, reportedly due to the cost of the campaign itself. (Snoop ain’t cheap + media).

So, the board asked the CEO to go solo (boom, boom) before replacing him.

Of course, the talking heads immediately crawled out of the woodwork to deliver hot takes reinforcing their pre-existing biases. Here’s a summary:

The performance marketing dogmatists have been crowing: “Brand ads are such a waste of time that they take out CEOs.” Obviously, the company should’ve focused on bottom-of-funnel demand harvesting instead.

The marketing science crowd has been equally active. Clearly, the campaign didn’t show enough of the product/wasn’t well branded enough/ suffered because Snoop was more famous than the brand/didn’t have enough overlap between Snoop fans and firepit buyers/didn’t have easy physical availability, etc. Plus, it probably did build mental awareness; it just won’t hit until later quarters.

To build on that, the brand-builders have been at it too, saying, “Wait a minute, wait a minute,” this is about long-term brand-building; the creative was great, it got attention and awareness, and Google searches are up. The effect on sales just hasn’t been felt yet.

And, finally, there have been a few thoughtful souls pointing out that we may never know why they didn’t achieve what they intended. Perhaps multiple aspects of the above are true, and perhaps other marketing mix elements were the real problem; we just don’t know.

I’ll be honest. I have my pre-existing biases. My gut is that growth had stalled because they’d hit the mathematical limits of demand harvesting for a niche lifestyle product, so were throwing a Hail Mary pass to try and hit unrealistic 2023 targets (especially if these targets were based on pandemic-era growth, where so much home improvement demand was pulled forward), but in reality, none of us except the company itself has remotely enough data to comment on what might or might not be correct.

What I can say with complete confidence is the following:

1. It’s bad for marketers of all stripes that there’s a “CEO got fired for a campaign decision” narrative out there. CEOs do not like to get fired, so this episode likely chilled the chances of many marketers getting a high-profile brand-focused campaign approved this year. Especially in the DTC space, where Solo started out.

2. It’s almost certain the CEO wasn’t fired because of an advertising campaign. However, it served as a neat and easy narrative. It’s vastly more likely that a combination of additional events/decisions/relationships/results are what precipitated his removal.

3. The company royally screwed up when it publicly predicted an instant uplift in both sales and profits off the back of the introduction of a new campaign in the most crowded quarter for consumer spending.

4. The new CEO is in a great position. If the campaign really does increase mental availability and salience that grows sales in subsequent quarters, he gets to claim all the credit. If it doesn’t, he gets to point to the former CEO and say it was all his fault for making a huge marketing error. Heads, tails, he wins either way.

I truly don’t have enough information to definitively state what went wrong or even to identify if anything, in fact, did go wrong. However, I can state that it’s an excellent example of what happens when you set expectations you’re then unable to fulfill.

Of all the elements of this tale, the expectation setting is the thing that stands out a mile as being the oddest. It made me wonder if perhaps the team putting the business case together wasn’t working backward from the market opportunity but instead worked out from the cost of running the campaign. In other words, they started with the campaign cost and then worked out the return necessary to justify it. It certainly wouldn’t be the first time anyone did that, cough, cough.

Second, did nobody at Solo Stoves consider the -by now well-understood- notion that perhaps not all advertising works solely in the period in which it’s running and that perhaps spreading the projected sales impact across further quarters may have been a smarter option in terms of the optics of risk?

Thinking about it, I do have a possible explanation for that second point. If Solo Stoves is anything like some other startup-like clients I’ve worked with in the past, they’ll have built the entirety of their marketing stack around a measurement and attribution model focused on return in the period in which the ads are running. This is because when they built it, they were focused on activation-focused demand harvesting to be cost-justified in real time and managed for maximum efficiency. In other words, it isn’t necessarily that they didn’t understand the idea that broader reach demand creation tends to impact subsequent quarters; it’s that they simply didn’t have the capacity to measure commercial impact outside of the period in which the ads were running, so they measured Snoop just like they measure Google AdWords.

Ultimately, however, I have no clue if anything even close to the above happened. And, in truth, neither do any of the other talking heads you’ve seen on LinkedIn and Twitter.

And that’s the real learning here. To wait and see what happens next rather than focus on barely informed hot-takes by talking heads that reinforce their pre-existing biases. Especially the one you’re reading right now.

If the new CEO sticks with Snoop and turns this into an ongoing campaign, then the campaign was never the problem. He’s not going to run a campaign that reportedly got his predecessor fired unless it’s working and working well. This will mean the company, in fact, chose the correct path to grow demand. Where it screwed up was in setting unrealistic expectations of short-term impact.

However, if the Snoop work dies on the vine and we see little or no new efforts to grow demand, rather than simply harvesting it, and Solo continues growing, then the campaign was indeed ill-advised. There was more demand to be harvested, and demand creation wasn’t necessary, at least not yet.

And, finally, if the Snoop work dies on the vine, nothing replaces it, and growth stalls or goes backward, then we’ll know that demand had stalled, that the former CEO was hurling a Hail Mary pass that failed, and that no one has figured out another way to crack the growth nut because it’s hard...

To finish, if there’s any learning from this story, it’s the following:

1. Be careful not to set unrealistic expectations you subsequently cannot justify because they were impossible to achieve in the first place.

2. Don’t rush to rash judgment based on the hot takes of talking heads with pre-existing biases they’re hell-bent on reinforcing. Instead, wait and see what happens next before coming to a conclusion.

2. The Marketing Of Modern Marketing Is Mostly Bullshit.

tl;dr: McKinsey, again.

The title of this piece comes from a LinkedIn post I wrote about five years ago. Borne of frustration, it was based on the observation that so much of the promises of the Adtech/Martech industrial complex, the marketing bros, and the digital transformation gang appeared to land on a four-box matrix with the following axes:

Although little has changed materially, I had mostly forgotten about that post until I read this piece from McKinsey on the six capabilities necessary for modern marketing success.

And what can I say? I know which quadrant I’d put the below in.

If you’re tempted to read it, it’s probably not worth your while. I did, and can save you the trouble for the following reasons:

1. It mistakes marketing for advertising. The article doesn’t describe marketing capabilities and doesn’t at all reflect the 4Ps. Charitably, it describes the subset of analytical capabilities necessary to run highly personalized and micro-segmented digital ads, which means it represents a subset of the promotional P. I don’t know about you, but that sounds way too narrow to me.

2. It completely misses creativity, design, production, media, experience, and marketing strategy. I mean maybe all of that lives in “full-funnel marketing” but…dunno, see point 3, below.

3. It’s riddled with vagaries. One of the rhetorical tricks used by management consultants is the use of vague terms to make themselves seem smarter and you dumber. This piece is riddled with them. Full Funnel Marketing and Customer centricity as capabilities? What does that mean? Where’s the specificity?

4. It fails to acknowledge that the needs of a large brand and organization often differ from those of small brands and organizations. Not recognizing that the needs of organizations at different stages of their evolution may differ kind of renders the whole thing moot…unless…vague terms alert. Maybe if we keep it vague enough, we can fudge to fit any organization.

5. Nowhere does it reference anything to do with competition, market dynamics, external forces, or market research of any kind. In other words, they appear to be advocating for a position where research, insight, competitive analysis, etc, are unnecessary capabilities, and flying the plane using only first and third-party behavioral data is just fine. Worse, the article actively poo-poos marketers for over-reliance on “focus groups and qualitative research” instead of stating the glaringly obvious: the smart marketer makes use of both research-based and behavioral-based insights, qualitative and quantitative.

6. The article is riddled with underlying issues. Its base focus is on efficiency rather than effectiveness, little number thinking rather than Big Number thinking, and it views the micro-segmentation and personalization of advertising as a prime goal at exactly the moment this conceit is under more empirical pressure for being ineffective than ever.

Beyond that, there’s the typical trope of survivor bias, highlighting two anecdotal stories to make their point without providing any meaningful empirical evidence in support of it.

Finally, the one insight in here that I do think is worthwhile somehow gets buried. When I did my MBA many moons ago, I was left with two conclusions. First, an MBA doesn’t make a terrible manager great; it weaponizes them. Second, an MBA isn’t a business degree; it’s a languages degree. Every part of the organization speaks a different language. The language of marketing is different from the language of finance. The language of finance is different from the language of operations and so on. The useful thing this article identifies is that as marketing delivery has become so complex, it’s also become multi-language. My takeaway is that if we’re not willing to simplify marketing delivery, then we’ll need to create pidgin that connects enough of the dots across these different languages to be effective.

What disappoints me the most about this article is that for all the travails of McKinsey, nobody ever accused it of being dumb. And this, my friends, is dumb. It should never have been allowed to ship.

There’s literally no excuse for putting dumb thought pieces into the world when you’re doing billions in revenue, have some of the world’s smartest people on your payroll, and work with the leaders of the world’s biggest and best marketing organizations.

It’s a travesty. Marketing is already in bad enough shape without yet another poor take from McKinsey. (Does anyone remember the hubris of “performance branding,” which advocated for treating brand marketing exactly like a performance marketing campaign?)

I wrote last week about my disappointment in Prof Byron Sharp presenting what I see as an incremental addition to the work of Kotler as if it’s a fundamental disruption of Kotlerian orthodoxy. But this is much worse.

Which neatly brings me to my final point. There’s a long and storied history of thought leadership in B2B settings, especially among firms that advise others, as McKinsey does. Until fairly recently, these were typically well-resourced and influential groups, often led by people with exceptional journalistic and editorial credentials. The goal was to present deep intellectual competence and understanding of issues that people inside the client organization would be drawn to work with and learn from.

Then, the shift to digital happened, and thought leadership was cut up, re-engineered, and re-branded as content marketing.

And then everything went to shit.

Why? Because thought leadership at its best is about quality. It’s low-volume, high-quality thinking. It’s well-resourced and excellently researched and provides a window into the intellectual leadership of the organization. While advisory brands have always used it as a sales tool, its value wasn’t primarily judged on the basis of how many specific individual leads it drove. It was more of a branding vehicle, where attribution was always more fuzzy math than actual math. And there’s the rub.

The promise of digitally enabled B2B content marketing was never to improve on thought leadership, build brand preference, reinforce premium pricing, or present you as the smartest people dealing with the toughest issues. Nope. B2B content marketing has always overtly represented the enshittification of thought leadership. It’s about chucking chum into the water and then bottom-feeding via a content factory mentality. It’s always been about quantity over quality, about clicks and downloads, and email addresses and sending crappy leads to your sales team from the fake email addresses people invariably use to gain access to the content you create, assuming they bother accessing it at all.

As a result, we’re in the midst of a period of ever-declining click-through rates as quality slides into irrelevance, and people learn to route around stuff that’s pretty much useless to them. What’s chilling is that rather than view declining click-through rates as a signal that something is fundamentally wrong, a common response is to spin the wheel faster. And now, with AI-driven design and writing, I can guarantee the hamster wheel of the utterly ignored masquerading as thought leadership is accelerating toward infinity.

So, yeah. If McKinsey really wanted to do something interesting in the marketing space, maybe it should start closer to home and fix its own approach to thought leadership. Ditch the bottom-feeding content marketing mentality and these dumb takes. Instead, bring back the intellectual heft it was once known for.

No matter how big an advisor like McKinsey might become, if it keeps presenting obviously dumb takes often enough and for long enough, then eventually, the premium glitz of being a luxury brand for the CEO will tarnish.

I’ll leave you with this thought. LVMH is the world’s largest owner of luxury consumer brands. It intrinsically understands that in order to maintain luxury pricing and demand, you must invest in creating and maintaining worlds of unique artifice that reflect pinnacles of quality in design, creativity, production, materials, distinctiveness, and more. Then, you use these elements to build emotional desire by treating your brands as shared social signals of individual success that you deliberately constrain access to by limiting supply.

Right now, McKinsey is doing the exact opposite: Acting like a bottom feeder while attempting to maintain its position as a luxury good for the CEO.

And if that doesn’t say everything you need to know about why McKinsey is becoming increasingly less credible as a voice in the marketing conversation, I don’t know what will.

I can’t help but feel that it’s living off past glories, and with its recent reputational travails combined with terrible takes like this…well, it’s hard to see that lasting forever.

Volume 161: Bad Boeing. Blame Jack.

January 11th, 2024

1. Bad Boeing? Blame Jack.

tl;dr: Boeing under spotlight again.

Rather than planes falling out of the sky, this time, it’s pieces of plane falling out of the sky, which begs the question of what exactly is going on over at Boeing.

I’ve written before about the perils of financialization (there are now more financial engineers on the Boeing board than there are actual engineers) and regulatory capture (To its great embarrassment, it appears the FAA was exceedingly trusting/lax/borderline corrupt in its 737 MAX certification).

However, if we look back at the recent history of Boeing, there’s something else we should probably pay attention to. The perils of the “Neutron Jack” Welch management philosophy.

As a quick refresher, Jack Welch was GE's much-feted celebrity CEO and Chairman from 1981 to 2001. At the time, he was viewed as nothing less than the savior of capitalism as he transformed the company from a sleepy industrial titan into the most valuable corporation on earth.

And, as happens with all successful corporations, GE executives then became much in demand as leaders of other companies, which served to spread the Welch gospel far and wide.

One of these executives was Harry Stonecipher, who, after leaving GE, became CEO of Boeing (via McDonnell Douglas) in 2003. In 2005, Jim McNerney, a former protege of Welch, replaced him. And current CEO and Chairman David Calhoun was also a Welch-era GE executive. (Dennis Muilenburg, a Boeing lifer, was sandwiched between McNerney and Calhoun).

This means Boeing has been led by CEOs who grew up under the Jack Welch philosophy for 17 of the past 21 years. As a reference, the first variant of the 737 MAX was introduced in 2011, so it is very much a product of the Welch philosophy within Boeing management.

Having consulted with GE after the retirement of Welch, I’d characterize his management philosophy in one sentence: Be ultra-aggressive, especially on costs, and grow the quarterly stock price no matter what.

The problem with this approach is that it drives business leaders to markedly increase the risk of long-term catastrophe in the interest of short-term results. For GE, this risk unfolded with almost corporation-ending ramifications during the 2008/9 financial crisis when it became apparent that the hundreds of sub-prime finance acquisitions made during the Welch era had materially changed the corporation's risk profile. (As an aside, when I worked with GE, financial services represented 50% of total revenue, and the model was simple: Buy a sub-prime lender with junk-rated credit borrowing at, say, 15% and lending at 30%, plug in the GE AAA-rated credit hose, and now you’re borrowing at 5 while still lending at 30, pocketing the difference as profit. Rinse/repeat).

Other corporations led by GE alums have also experienced the negative side of the Welch philosophy. Robert Nardelli, a longtime GE exec who’d hoped to become CEO upon Welch’s retirement, went to Home Depot, where his controversial tenure was characterized by shifting Home Depot from a focus on innovation to a focus on cost control, including the firing of the tradespeople who’d made Home Depot a customer service leader. Eventually, the higher performance of direct competitor Lowes, which had taken up the customer service slack left by Home Depot’s focus on costs, led the board to remove Nardelli. (He then had the dubious distinction of leading Chrysler into bankruptcy).

Anyway, back to Boeing for a second. It’s often quoted that the leadership battle Stonecipher won when made CEO in 2003 cemented the victory of former McDonnell Douglas accountants (Which Boeing had recently acquired) over Boeing engineers:

“McDonnell Douglas bought Boeing using Boeing’s own money”

And there’s clearly truth in this when we consider the shift from engineering excellence to financial engineering over the past twenty years. However, I think it’s overly simplistic to frame this simply as a takeover of the Boeing engineers by McDonnell Douglas accountants.

In reality, Boeing, like GE before it, is experiencing the long-term catastrophic cost of the Jack Welch philosophy of management.

While plenty of books focus on the problems within Boeing itself, if you’re interested in learning more about what’s happening, I also recommend reading about GE and Welch. Two worth checking out are “The Man Who Broke Capitalism” by David Gelles, which focuses singularly on Jack Welch, and “Power Failure” by William D. Cohan, which takes a broader view of the GE corporation.

2. New Year, New…Something.

tl;dr: What’s ahead.

Hello, Happy New Year, and welcome to the first Off Kilter of 2024. Since so many of you are new around here (subscribers grew by over 30% last year. Thank you so, so much), I figured I’d start by giving you a little more information on myself and this newsletter.

I started Off Kilter in November 2019. Initially, it was just to keep in touch with my network after I’d moved from NYC to Cambridge, MA, and was feeling a bit out of sight, out of mind. So I sent the first edition to 90 people I knew and, on a whim, put a signup box on the Invencion website.

And people signed up. A surprisingly large number of you, from all over the world, no less, which compelled me to continue.

In addition to keeping in touch with former clients, colleagues, and friends, I was also driven by a need to rebut the nonsensical drivel being peddled by so many talking heads out there that just made me mad.

I remember looking at such commentary and thinking to myself, “Wow, if you actually followed this advice, you probably wouldn’t be in business for very long,” and then there’d be a pit in my stomach as I looked at the comments and realized people were lapping it up.

From those early days, my goal has been to try and navigate the world of business through a brand, marketing, and design lens. To seek the signal in the noise and to try and provide commentary and advice that will be value-additive rather than value-destructive. And to do so with a healthy dose of humor and fearlessness.

It’s not for everyone, as I’ve learned over the years. But there are already enough milquetoast agency newsletters out there. The world doesn't need another one.

As for me, newsletter writing is a passion project done at night and on weekends. By day, I run a consultancy called Invencion that helps clients think differently about their businesses. This is delivered through the lens of competitive and corporate brand strategy, and the focus is very much on the idea that differentiation starts from the top.

A client once described me as “the antidote to groupthink,” which I’ve always loved.

Prior to this, I spent 10 years at global brand consultancy Wolff Olins, first in the UK and subsequently in the US, where I was a client principal and head of strategy.

Originally, I’m from the Shetland Islands in Scotland, which has roughly a 10:1 ratio of sheep to humans, which probably says something about me that I lack the self-awareness to describe.

These days, however, I live in the New York ‘burbs with my family and dogs.

As for what’s next. Well, there are a couple of things in the mix.

First, a new Invencion website is being built that will ship sometime in the next month or two. A huge part of this change is turning the Off Kilter archive into a useful resource, which should make finding, sharing, and navigating so much easier.

Beyond that, we shall see. Please let me know if there are any topics you’d like to see covered.  

3. Blah, Blah, Theory, Blah.

tl;dr: Byron Sharp taking issue with the wrong orthodoxy?

At business school many moons ago, I remember a professor making the point that while theory and practice should be mutually reinforcing, reality tends to demonstrate the opposite - a divergence.

His lament was that while business academics tend to navel gaze, leading to theory so abstract as to have little or no practical application, practitioners tend toward the JFDI (Just F’ing Do It) school of management, where there’s little or no thoughtfulness or reflection, just activity.

It’s a mental construct that’s stuck with me throughout my career and is writ large in today’s marketing environment.

The shift of the theory/practice debate toward online channels did little to reconnect theory and practice. Instead, it accelerated their divergence. This happened because online discourse, particularly social media, “flattens debate.” In other words, social media channels don’t lend themselves to reasoned conversation involving subtleties, especially among people who may disagree, instead functioning more as a platform for simplistic and binary win/lose arguments.

The marketing academic most in tune with this flattening of debate appears to be the Dumbledore of Marketing Science, Professor Byron Sharp of the Ehrenberg Bass Institute of Witchcraft and Wizardry. Unfortunately, I can’t help but feel that he expends too much of his considerable intellect on win/lose arguments against the theories of Philip Kotler than on creating more valuable debate around the practices of marketers who’ve never heard of Kotler. (Before I go any further, I want to say that I think Prof Sharp’s book, ‘How Brands Grow,’ is a critical reference that everyone should flick through at least once and that marketers should probably keep under their pillow).

Although many practitioners may not have heard of him, academically, Kotler is a giant of marketing theory and has been required student reading for decades. Marketing Management, first published in 1967, was a required text during my undergraduate degree in the ’90s, and I’m sure Kotler is still a core part of university reading lists today.

I mention this because of a recent academic paper by Prof Sharp that shows his continued zeal for taking direct aim at Kotlerian orthodoxy. It’s a reasonably interesting read, and there’s already an excellent critique available, so please forgive me for not doing a blow-by-blow here.

That’s because my real point is a macro one. Marketing theory and practice are probably more diverged now than at any time in the past fifty years, to all of our detriment. And if, like me, you believe they should be reconnected rather than disconnected, we’ve got our work cut out because neither the most influential academics nor the loudest braying practitioners appear interested in playing ball.

For me, as a practitioner with an interest in academic theory and a desire to see it put to greater practice, what I see is something you won’t find in Sharp’s paper, which is that rather than his “Market-Based Assets” theory being a replacement of Kotlerian “Segmentation, Targeting, Positioning,” they instead feel complementary.

In other words, there may be more practical value in layering these concepts than in viewing them as binary opposites.

Why do I say this?

Well, let’s take one example. One of the concepts Sharp has been most vocally critical of is positioning. He claims it to be unnecessary and irrelevant. Meanwhile, Kotler, who puts positioning upon a pedestal, doesn’t directly address what Sharp views as the most crucial thing - mental and physical availability - at all.

But why does this have to be binary? If I put my over-simplifying practitioner hat on, I don’t see these as competing theories of how the world works at all. Instead, I view them as complementary tools to be placed within the mental toolbag.

Is positioning valuable? I’d unequivocally say yes. Do consumers often mistake how a brand is positioned? Yes. Do consumers often see brands as being somewhat undifferentiated from each other? Also, yes. Does this mean we should ignore positioning as irrelevant? No.

Why? First, Sharp fails to address how vital a clear positioning can be in guiding the organization’s internal behavior and sense of self, especially ensuring that its marketing activities don’t become chaotic. While this is less of a concern within his preferred CPG/FMCG environment, it’s a persistent issue across large corporate brands that encompass portfolios of hundreds, sometimes thousands of products, experiences, and customer journeys. Second, he doesn’t consider the role of positioning in helping guide and shape ongoing product, experience, and portfolio innovation. Done well, positioning isn’t just about what the consumer perceives through advertising; it’s also a strategic tool the organization uses to guide a broader suite of actions. Third, there are times when positioning dictates an entirely different way of thinking about an organization that, in turn, might drive fundamental business decisions. To take an example from my own career, I once worked with a client that saw itself in the publishing business. Based on our work together, we re-positioned the company as being in the learning business. This mental reframe led to a significant change in corporate strategy and M&A behavior and which business lines to divest from and invest in, ultimately leading to a fundamental transformation of the company and its value proposition. Fast forward to today, and based on this re-positioning, the company now has an entirely different competitive strategy and customer base and finds itself on a completely different growth trajectory relative to where it was before.

Equally, mental and physical availability clearly matter. And while the language may be new, the practice has been ongoing for years. Just think of Coca-Cola, which has overtly connected Coke to thirst for over 100 years while continually seeking to make it as readily available to as many people in as many places as possible.

So, if these connections seem obvious to me, you might well ask why Prof. Sharp doesn’t present his work this way.

While I have no insight into his thought processes, as I mentioned earlier, he does seem quite attuned to capturing attention within a world of flattened debate. And in a world of flattened debate, it typically behooves you to position yourself as a challenger of conventional orthodoxy rather than someone who builds upon it.

I just can’t help but feel that in a world where so many marketers haven’t even heard of Kotler because they’ve never experienced marketing academia, Sharp is choosing the wrong orthodoxy to oppose. It might have been better for us all had he focused on modern marketing's vacuous tactical dogma instead.

Volume 160: End of Year Special.

December 21st, 2023

End of Year Special.

tl;dr: We could all do with some good karma.

It’s that time of the year again, you know, where professionally, we spend more time thinking about next quarter than we do the end of this one, while personally, it’s mostly the opposite.

While I could probably use this as a jumping-off point to talk about strategy being the one element of business that deals solely with the future, that the strategy process is an act of de-risking the future, and that one of our biggest problems in achieving this effectively is our inability to measure the riskiness of the status quo. But I won’t.

Well, maybe I will. But just briefly. You see, we have this annoying tendency to look at strategic choices being made by executives and then make snap judgments as to whether these choices are “brave” (AKA risky) or “expected” (AKA risk-less) without first taking into account the cost of doing nothing (AKA the status quo). You see, there’s an inherent square that needs to be circled when we engage in future scenarios, which is that even though CEOs overwhelmingly believe their current business models will be non-competitive within five years (a pretty stunning statistic, actually) the vast majority of future scenarios start with a baseline of current performance continuing onward in perpetuity, rather than sliding backward toward irrelevance.

And, this, I’d argue, is a huge problem. If we have a huge blindspot relative to the future performance of today’s activities, it potentially flips what we think of as risky completely on its head. Instead of the expected choice being riskless and safe, it may actually be the riskiest choice with the lowest chance of success.

Or, as I occasionally say to clients, “Sometimes taking no risk is the biggest risk of all.”

Changing tack completely, while this is a time of celebration for many, especially those with young children, the holidays can also be the hardest time of year for many, including some in my own family.

And, while it’s good that there’s now a greater acknowledgment of the mental health challenges some of us have at this time of year, it’s still easier to ignore it than to address it. It’s easier not to call. Not to engage. To not have to talk around it by not talking at all. To simply bury the powerlessness we might feel at being unable to help someone in a moment of emotional distress.

It’s a natural instinct to do everything you can to avoid an 800lb gorilla that isn’t just lurking in the corner of the room but hangs above it like a particularly hirsute Sword of Damocles, cracking its knuckles as it waits for that tiny puff of wind to make it fall upon our heads.

But we shouldn’t.

For while we may feel helpless to address someone else’s trauma, we can still make a small difference, and sometimes small differences make a big difference. We can reach out to people we might not have spoken to for a while just to say “hi.” We can tell the people we love how much we love them and do so repeatedly. We can say “thank you” to those who should be thanked, and we can tell those we work with who are doing a good job just how good a job they’re doing.

We’re living in a moment where there’s a societal crisis of loneliness. And while maybe we can’t fix that, maybe we can put a dent in it. Just by saying hi, listening, telling a joke or two, reminiscing, saying “thank you” and “I love you,” and being present for someone who needs us to be present for them.

I’m not an expert on any of this stuff. Don’t take anything I have to say as gospel on any topic, least of all this one. But if we can put good karma into the world, then why not? It might make a difference to someone.

And if you’re the one feeling the tug of depression and loneliness and dark fantasies, know that it’s not weakness to ask for help. It’s strength. If you need a hug, ask for one. If you need a boost, ask for it. And if you need deeper help, don’t bury it or act on it. Seek professional treatment. It’s out there, and they know what they’re doing.

And, while you probably think it’s you, it isn’t you. It’s a medical condition. And medical conditions can be treated.

And, if you do need help, especially at this time of year, which can be so difficult for so many, then know that I salute your strength, character, and bravery for seeking it. There are people who love you, need you, and care about you. While the end may be inevitable, it doesn’t have to be today, or tomorrow, or next week, or next month even. Me? I want to be one of the two people a year killed by a vending machine. When I’m 102, maybe 103, depending on how I’m feeling that day.

I don’t know where you may be in the world, but here in the US, the number to call if you feel you have no other option is 988.

So thank you. Thank you for subscribing. Thank you for reading. Thank you to everyone who likes to email with praise or disagreement or to make corrections. And thank you for sticking with me throughout this edition. I know not whether it will make a difference, and perhaps it’s selfish to think that it will, but I sincerely hope that maybe it might.

See you in 2024. Bigger, brighter, better…and maybe even a bit riskier.

Volume 159: Look Back, Look Forward.

December 14th, 2023

Look Back, Look Forward.

tl;dr: Yeah, it’s that time of year again.

This is likely the penultimate Off Kilter this year, so it’s inevitably the time to look back at 2023 and forward to 2024.

I’d say the past year has been dominated by the continued impact of high inflation and high-interest rates to combat it. At the beginning of the year, corporations were playing a game of publicity ninjutsu. Publicly apologetic about prices having to rise because of supply chain issues while crowing to investors on earnings calls about their ability to raise output prices higher than input costs, increasing margins in the process.

The impact has been to, at least partly, fuel record corporate profits from 2022 into 2023 alongside persistently high inflation that, while it looks to have stabilized for the moment, could certainly spike again should the economy heat up.

The fact that interest rate increases aren’t factored into inflation calculations has largely hidden the extent of a global cost of living crisis, where the poorest half of society faces the greatest degree of distress when both the cost of goods and the cost of borrowing to buy goods go up while their salaries and ability to pay stay largely the same.

Rising interest rates have also had the additional effect of shifting how capital flows within the economy. The easiest way to think of money at a macro-level is that it flows like water toward sources of return. When interest rates are at zero, money left in the bank earns zero, so it flows toward riskier assets with the potential for future returns instead. Because interest rates were at zero for so long, it didn’t matter that these returns might not appear for, say, ten years because the return from alternatives was zero. This is why so much money was pumped into persistently profitless startups over so many years. Today, interest rates are no longer at zero, which means the risk-free return of “money in the bank” is conservatively around 5%. Compound this over ten years and a risky alternative must now return circa 165% to equal the risk-free return. Add the risk premium (e.g., the expectation that we should earn a greater potential reward for taking on markedly higher risk), and the expected reward must be exponentially greater in practice.

This is why capital flowing into VC funds has slowed to a trickle, while the money being distributed by these funds to startups has slowed to a dribble, and pressure has shifted toward the delivery of profits now rather than profits in the future.

We also saw in 2023 that many of the businesses that were funded on the basis of future returns were never likely to become profitable at all. As the poster child for ZIRP (Zero Interest Rate Policy) excess, WeWork burnt over $22bn in shareholder capital to build a business worth roughly negative $3bn when we take the debt it’s attempting to discharge through bankruptcy into account.

But WeWork is just the tip of the iceberg; a chill wind has blown through the non-AI startup world in 2023, where at least $27bn worth of shareholder capital was incinerated by the failure of 3,200 funded startups. And while I feel for the people impacted, I’m far from surprised. Unfortunately, rather than embrace ZIRP as a low-cost mechanism to decarbonize the economy, vast gobs of capital were instead wasted on never-to-be-profitable corporations built atop the fantasy of being technology companies while exhibiting none of the economics of a technology company. (Investors love technology companies because, historically, they’ve had excellent economics. In most corporations, costs and revenue grow roughly linearly, meaning margins stay about the same as a percentage of total revenue. In technology companies, especially software, costs and revenue tend to diverge over time, with revenues growing faster than costs, leading to high gross margins at scale. These high margins can then be reinvested organically into sales, marketing, and engineering, which serves to maintain market position over time, while the increased value of the corporation overall means it can use cheap shareholder capital to grow inorganically via acquisition, with the potential reward of becoming an unregulated monopoly. This is exactly the path Google, for example, took over the years.)

Relative to the worlds of marketing, branding, and design, I’ve long felt that we should be wary of leaning too hard into the activities of the startup community. Without insight into their financial performance, it was always impossible to understand whether they’d stumbled onto a magical formula for growth or were spending shareholder capital like drunken sailors in the pursuit of growth at all costs. Well, now we know; it was a lot less of the former and vastly more of the latter. This is also why, I believe, we’ve started to move away from the startup brand aesthetic of undifferentiated, boring, minimal modernism in pastels, for it can no longer be viewed as the look of success when the corporations draped in it have been reduced to a valuation measured in pennies. The fact that the aesthetic didn’t work because it lacked distinctiveness simply pales into irrelevance by comparison.

Regarding skillsets, I fear 2023 may have begun to expose an entire generation of ZIRP-era marketers as being singularly ill-equipped to deal with its aftermath. Skilled as they’ve become in delivering growth tactics that depend upon cheap capital and unrealistic unit economics within fast-growing categories, without realizing the period represented a huge and artificially stimulated bubble. (A conversation for a future edition).

So, what’s my summary of 2023? While there’s a bunch of stuff we could talk about, from the economic phenomenon that is Taylor Swift to the Saudis buying up sports wholesale to McDonald’s retro-future Starbucks competitor, I think the true underlying tale is of the impact of high inflation and high-interest rates on people and on corporations. Of a cost of living crisis across vast swathes of the consumer landscape and of the death of the profitless corporation.

So what comes next? Well, as I’ve said before, the only thing human beings are consistently accurate at predicting is that our predictions will almost always be wrong. With that caveat in mind, here are three things I think are imminent, if not underway already. (I’m only going to focus on three here, but I have four in mind. SaaS entering category maturity is the fourth, and it deserves its own dedicated edition).

Anyway, here goes. In 2024:

1. Auto loans will be the canary in the coal mine of a consumer recession

2. AdTech & Martech will be radically humbled

3. AI will become ubiquitous yet pedestrian

Let’s take each in turn:

1. Auto Loans Will Be The Canary in The Coal Mine of A Consumer Recession.
   Economic indicators continue to be distinctly mixed in terms of whether we will or won’t see a recession next year. It’s clear the Fed believes it possible, if not probable, since they just announced the likelihood of interest rate cuts rather than rises next year. If a meaningful consumer recession does get underway, it’s likely to show up first in consumer debt, with auto loans being the bullseye. Why auto loans? Well, the pandemic really messed up the market for vehicles. In terms of new cars, supply chain constraints led to auto-makers leaning heavily into models where profit potential was highest, which meant the most expensive and heavily optioned. A lack of supply bled through into the used market, where prices spiked higher than in living memory. Add higher interest rates than anyone has seen in almost twenty years, and you get the double whammy of non-affordability: highly-priced vehicles combined with highly-priced financing. This has driven three effects. First, expensive new vehicles are piling up on dealer lots, and we’re beginning to see a return to heavy discounting, albeit government incentive-fueled. Second, more buyers are now sitting on expensive, long-duration loans than ever before. (Almost 70% of auto loans are on terms longer than 61 months, while 84 and 96-month terms are now common.) Third, expensive financing combined with an increasing supply of new vehicles means used car prices are finally reverting toward the historical mean. If the economy softens further, people will increasingly try to get out from under their expensive auto loans. First, they’ll try to sell or trade the vehicle in; only they’ll find they can’t because they owe more than the vehicle is now worth. When they realize they can’t sell it or trade it in without having to stump up money they don’t have, what follows next is as obvious as it is predictable. They’ll hand the keys to the finance company and say, “Here you go; it’s your problem now; you deal with it.” The threat of personal bankruptcy being the only option when you have a vehicle you can no longer afford to pay for.
   
   So, yeah. If auto-loan providers start truly howling in pain and there’s a commensurate spike in vehicles entering the auction market at firesale prices, then look out. It’ll be the beginning rather than the end of a down-cycle. And if that doesn’t happen, then we’re probably not going to see a bad recession at all. Not right now, anyway.

2. AdTech & Martech to Be Radically Humbled.
   Here’s a scary Venn diagram for you. Over the past ten years, exponential growth has led to there being somewhere between ten and twenty thousand AdTech and MarTech solutions out there. Technology now represents 25%-30% of marketing budgets depending on which report you read, second only to staff costs and above both creative agencies and media spend. Meanwhile, Gartner states that MarTech utilization has dropped from 42% to 33% in just twelve months. And, a recent ANA report says the programmatic supply chain for digital advertising is so convoluted that only about 36 cents of each media dollar makes it to a potential customer.
   
   The above numbers are simply incompatible with a continued status quo.
   
   With marketers being asked to tighten their belts and do more with less, technology is already being touted as the next thing on the CMO chopping block, and it’s going to get ugly.
   
   I’ve worked with several AdTech and MartTech firms over the years, and I can confidently state that the category does not fully comprehend what is coming. Rather than adopt the broader B2B shift from vendor toward business partner focused on consultative selling and the delivery of business outcomes, the AdTech and MartTech worlds remain stuck in a race to see who can shout loudest, are decidedly ambiguous about the line between hype and reality, make things overwhelmingly complicated in order to extract excess profits, and typically sell the sizzle over the steak. Worse, there’s a strong tendency toward personal ego, narcissism, and arrogance.
   
   As a result, and almost certainly without realizing it, they’ve rooted themselves firmly in the camp of vendors rather than business partners. And I’ve yet to meet a client unwilling to jettison a vendor when the opportunity arises.
   
   Now, clearly, the above generalization does not reflect every player in the space. Far from it. I’d just say that while overall, there’s been a broad shift underway in the B2B environment to increase value and stickiness by acting as business partners supporting the delivery of key business outcomes, those focused on selling to marketers remain largely in the camp of selling shiny objects.

   
   And in 2024, that’ll almost certainly begin grinding to a distinct halt.
   
   Want to free up some budget to do more with less? Cut your unproductive MarTech spend. Want to increase your media efficiency and effectiveness? Knock a few steps off the programmatic supply chain to shorten it and get more of each media dollar in front of real human eyeballs.
   
   It’s literally that simple. The marketers in 2024 that are the most effective in driving business results from constrained budgets won’t be magicians. Instead, they’ll almost certainly be those that are most aggressive in re-engineering their tech spend to free up incremental dollars to be reallocated toward better creative, superior customer experiences and harder working media.

   
   So, my second prediction is that there’ll be a widespread culling of the shiny object brigade. The weak will be gobbled up by the strong, and the weakest will go out of business entirely. This time next year, the landscape will be radically humbled relative to where we stand today.

3. AI Becomes Ubiquitous Yet Pedestrian.
   I love this quote about self-driving cars. Unfortunately, I can’t remember who said it. It goes something like this:
   
   When you first get into a car that drives itself, it’s frightening; after five minutes, it’s exhilarating. And after fifteen minutes, it’s boring.
   
   This almost perfectly encapsulates how I feel about AI. Initially, it was frightening as we all feared losing our jobs. Then it felt exhilarating as we sought to come to terms with new and magical tools like ChatGPT, and then, after a bit, you realize that you’ve now become a bit bored by it.
   
   The problem, I think, is that while AI can be very smart in some ways, its primary applications (at least in my business) seem overwhelmingly pedestrian. It’s truly magical at some things - it can instantly turn this Off Kilter edition into a compelling 10-tweet thread, for example. But no matter how hard I try to force ChatGPT, Claude, or Bard to give me compelling outputs for competitive or brand strategies, they simply don’t. (Don’t worry, these are experiments; I never play fast and loose with client data) No matter how hard I try to make them do otherwise, what they do is spit out the expected category tropes, the obvious and the uninteresting. As a result, the best use I’ve found in terms of creating outputs is as an obvious filter. Put simply, if a GPT suggests it, then it’s probably something so obvious that it should be avoided.
   
   I’m stealing from something a former colleague said on LinkedIn (hey, Nick) about separating work from labor. The gist is that labor is no more than that, while work requires the use of imagination, creativity, strategic reasoning, and experience. I like this parsing because it gets to the heart of an issue I see with knowledge work, which is that much of it isn’t knowledge work at all. More accurately, we might label it manual labor of the mind.
   
   As a result, while I think there will continue to be much AI hype and a whole slew of dedicated AI tools rather than general-purpose GPTs, their most successful implementations will almost certainly be decidedly pedestrian. Things like analysis at scale, writing and designing for content factories, coding websites, and navigating complex bureaucracies. Meanwhile, the meaningful work that truly requires human expertise will be safe. Yes, the pedestrian elements will be increasingly delivered by AI, but the important stuff will still be driven by people.
   
   And this may not simply be an “only for now” answer. There’s increasing evidence that the scaling of AI intelligence may slow precipitously unless hardware, algorithms, AI models, and synthetic data all improve significantly from where they are today. And while I’d never bet against that happening, I’d also be willing to bet that it’ll take a lot longer than anyone thinks if historical patterns are anything to go by.
   
   So, yeah. My last prediction is that 2024 is the year that AI tools become ubiquitous yet pedestrian. They’ll do much to disrupt the aspects of knowledge work that represent manual labor of the mind and not much at all to disrupt knowledge work that represents true work. That’s not to say people won’t lose their jobs because they undoubtedly will. It’s just that we need to pay particular attention to the nature of the jobs that are lost before hitting the panic button. (And yes, in case you are wondering, 2024 is an important year to ensure that your own job can’t be viewed as modern-day manual labor, and if it can, to try and find a new one that can’t).

So, there you have it. 2023 has been a year defined by the twin challenges of high inflation and high-interest rates. And while both will likely recede in 2024, we’ll continue to feel the effects in the consumer economy (watch the auto loan providers). I predict a bloodbath in the AdTech/MarTech bubble, which it isn’t at all ready for. And, finally, I think that while we’ll become accustomed to ubiquitous AI tools disrupting manual labor of the mind, it’ll play much more of a supporting role in what we might consider truly meaningful knowledge work

Volume 158: Follow The Money.

December 8th, 2023

Follow The Money.

tl;dr: Casting a critical eye.

Earlier this week, I had dinner with a client who originally found me via this newsletter. As we ate, he asked an interesting question:

“I subscribe to several paid newsletters that I find much less insightful and useful than yours. Why don’t you charge for it?”

My answer was that I don’t want to charge for Off Kilter because if it’s at all useful to someone, especially someone earlier in their career, then I’d rather they benefit without payment. As far as monetization goes, if I get a couple of consulting projects a year from it, then it more than pays for itself. And I view that as a win for everyone.

Of course, this neatly brings me to the subject of this week's edition: Following the money.

There’s been a lot of money to follow lately. Whether it be the farcical scenes over at OpenAI, where firing the CEO led to an open revolt by employees deeply upset at the rug being pulled out from under an imminent payday. Or the ANA reporting that only 36 cents of each programmatic media dollar makes it to the consumer. Or Elon Musk telling advertisers exactly what to do with their money. Or Saudi-backed LIV Golf, which barely anyone watches, poaching world no.3 Jon Rahm from the PGA Tour on a package rumored to be worth somewhere north of $500m. (He’s in good company on the not-being-seen front. The promise of riches has lured many prominent soccer stars to the Saudi Pro League, where the average attendance is less than half that of a high school football game in Ohio).

Anyway, way back when I first started my career, I was a voracious reader of books, white papers, and articles on pretty much anything related to business, strategy, marketing, and branding (my chosen field at the time). I had an insatiable appetite for learning.

But very quickly, it became apparent that there are agendas out there and that for every commentator who says one thing, you can easily find another saying the opposite. So, I figured that in order to make sense of this seeming incompatibility, maybe I should look deeper into the economic incentives. Figuring, rightly as it turned out, that money talks and bullshit walks.

This has stood me in good stead over the years as we must increasingly parse everything we experience through a lens of economic incentive.

In the public square, a steep decline in journalists has been more than made up for by a steep increase in PR professionals. According to the US Bureau of Labor Statistics, there are now twice as many people employed in PR than there are in journalism, with the former projected to grow 8% by 2031 and the latter to decline by 3%. The net effect is that the news we consume will be mediated by corporate and political interests to an even greater extent than it already is.

As an aside, I once had dinner with a former journalist turned gun-for-hire at the Economist Intelligence Unit, which had been retained by a shared client to deliver a series of thought leadership reports. I’ve never met anyone so depressed at how deeply their professional life had slipped from youthful journalistic ideals to middle-aged pragmatism. At one point, he simply shrugged and mumbled in a defeated tone, “I have a mortgage to pay.”

In the business sphere, where consulting firms like McKinsey, PwC, Deloitte, and others used to treat thought leadership as exactly that - a brand equity building opportunity to present their smarts and intellectual leadership, a shift to lead-generation means that what were once great resources are now little more than low-value advertorials. (FYI, this is also why HBR.org is the HBR magazine’s dumb Internet cousin. An online business model incentivized by click quantity over article quality can’t afford meaningful editorial rigor, so instead, we must put up with its brand-dilutive mediocrity).

Technology firms have proven particularly adept at using their financial muscle to place concepts into our psyches that have dubious validity yet obvious economic benefit to themselves. For example, information never wanted to be free. Information is inanimate; it doesn’t want anything. Rather, technology companies wanted information to be free because it suited their own business interests. Or take the “sharing economy,” initially presented to us through a lens of innovation, idealism, and economic progressivism. However, the poster child for the concept has turned out to be little more than a taxi company with an exploitative business model that arbitrages labor laws and may never make an actual profit. (And by actual profit, I mean a real one, not the fan-fiction of adjusted EBITDA)

Equally, marketers themselves have faced an onslaught of dubious concepts, advice, and thought leadership from Silicon Valley firms in recent years. Everything from last-click attribution to impressions to performance marketing. It’s almost impossible these days to reliably find the signal amid all the noise, not because it isn’t there but because it’s being so heavily drowned out by the economic incentives of the technology firms themselves.

I read recently (sorry, I forgot to save the link) that the most likely impact of AI in augmenting knowledge workers won’t be to turn them into productivity superhumans but to de-skill entire professions, which will likely create significant downward pressure on wages. Evidence of this is already showing up among freelance content writers, where both the volume and value of opportunities have declined since the release of ChatGPT.

I’d argue that this isn’t at all new; technology has always done this. It makes things that were hard easy. Things that were slow, fast. And things that were expensive, cheap. In other words, the primary impact of technology on any economy is commoditization. But this isn’t necessarily a bad thing at a macro level because when we commoditize things that are slow, hard, and expensive by making them fast, easy, and cheap, we then get to build entirely new value-creating industries atop. I often joke that not only would you struggle to find anyone willing to work in a typing pool, but they’d be horrified to find out what a typing pool even did.

As a single contemporary example of this in practice, there’d be no Starlink without the smartphone. Mass smartphone adoption commoditized advanced, miniaturized computing hardware that’s now available off the shelf at an exceptionally low historical cost due to economies of scale. Without smartphones, not only would a tiny satellite be nigh on impossible to build, but the cost would render the economics of having 5,100 floating in low Earth orbit entirely non-viable.

Getting back to marketing for a second, I’d argue that while digital technologies have massively increased what we’re capable of executing in a narrow sense, the downside has been a widespread de-skilling of marketing at a strategic level and an associated lack of understanding of the total system. The negative side of seamless, easy-to-use, integrated software that’s capable of the seemingly magical being our inevitable dependence upon it, followed by an equally inevitable failure to question it in the context of the broader systems that are in play.

This is why I’ve talked before about the likes of Google acting like a drug dealer with marketers as its addicts. Put simply, it has a strong and entirely rational economic incentive to maximize our dependence upon its tools at the expense of alternatives. As do thousands of Martech and AdTech vendors out there.

This brings me, at long last, to the actual point of this piece.

After I wrote about the weaponization of the Wanamaker Paradox last week, Thomas Rasmussen kindly shared it on LinkedIn, highlighting the paragraph stating that less than 30% of US marketers have any training.

Predictably, yet depressingly, the vast majority of comments were of the confirmation bias variety, stating that marketing training is unnecessary and irrelevant, that they’ve never been trained and they’re doing all right, and that a marketing degree is about as useful as used toilet paper. You get the gist.

While I find the “less than 30%” statistic problematic because it ignores autodidacts and people who’ve learned excellent habits on the job from others with more experience and, likely, education, any response that advocates for wilful ignorance doesn’t sit well with me.

Why? Well, let’s follow the money. Who benefits financially from there being a broad cohort of largely untrained and undereducated marketers? The technology companies. Who benefits financially from there being downward pressure on marketing wages? Again, technology companies because these lost wages can now be viewed as their future profit pools.

Now, don’t get me wrong, this isn't an anti-technology polemic, far from it. I’m a huge believer in technologically driven progress, and I fully accept that there’s a vast array of things marketers can do today that were simply impossible in the past. However, we must also recognize that technology companies aren’t philanthropic entities out for our benefit and nothing else. They exist to pursue the rational economic interests of their shareholders. And in response, we should do the same for ourselves.

I have no dog in the marketing education fight. I don’t sell it, I don’t contribute to it beyond what I write here, and I have no economic incentive tied up in it. I simply ask that you follow the money and think for yourself about which path best fits your own economic incentives.

Pundit/used-marketing-course-salesman Mark Ritson writes on the subject of marketing training often, including a recent haranguing of US marketing ineffectiveness. There’s a clear economic incentive for him to do so. Educating marketers is how he makes a living. So, of course, he’s going to find a way to highlight, and perhaps exaggerate, marketing ineffectiveness in the world’s largest economy. It’s in his own economic interests to do so.

So forget all the BS you see spouted online on the subject from both sides of the argument because everyone has an agenda. Instead, ask yourself the following:

Which agenda better aligns with my own economic interests? If technology is already de-skilling my profession, and the advent of AI is likely to de-skill it yet further, is it in my own best interests to have a broad knowledge of how things work at a systemic level so that I can seek ways to create new value atop, or is in my own best interests to have a narrow understanding focused on the tools that I use and risk becoming a victim of commoditization?

Am I better served by seeking out marketing and broader business education and training, or am I better served by depending on what the toolmakers tell me? Would I rather control the tools I use, for what, and when, or have them control me? Would I rather take my learnings exclusively from technology companies whose economic interests are best served by my ongoing dependence upon them, or would I rather seek out educators whose economic interests are best served by upskilling the profession? (And yes, ironically, an AI may very well come along that becomes best in class at doing just that)

This is all I ask. If you do nothing else, follow the money and make your own choices.

Volume 157: Weaponizing The Wanamaker Paradox.

November 30th, 2023

Weaponizing The Wanamaker Paradox.

tl;dr: An end to the emasculation of marketing? Maybe. 

Somewhere around 20 years ago now, marketing began a fundamental slide into emasculation driven by the weaponization of what is commonly referred to as the Wanamaker Paradox, which states that “50% of my advertising is wasted, I just don’t know which 50%.” 

In a self-serving and ultimately wildly successful attempt to accelerate the shift of advertising budgets from hard-to-measure "traditional” channels, such as TV, radio, and print, toward easily surveilled, “digital” channels, such as search, social, and the web, the exploding world of digital, including the platforms, the AdTech and MarTech vendors, the data brokers, the digital agencies, the management consultancies selling “marketing transformation,” and the VCs funding it, all beat the same drum: Waste is the biggest problem in marketing, and digital the only solution. 

The net result some 20 years later has been the transformation of marketing from a Big Number game to a little numbers game, and now we’re reaching the inevitable endgame.

Marketing was once a Big Number game. It dealt with customers, products, competition, strategy, growth, and business performance accelerators we call brands (thank you, Jonathan, for this definition) that directly contributed to the Big Number of enterprise value. Then, digital came along, and marketing began shifting toward a new and tactical existence as a little numbers game. Instead of top-line impact, marketing had a new master, bottom-line efficiency. Instead of growth, it was now obsessing over budget protection. Instead of strategy, it became mired in operational efficiency. Instead of the Big Number goal of increasing enterprise value, it found itself drowning in little number goals like impressions, attribution, ROI, and ROAS. 

To illustrate the state of where this has pushed us, ROI has been driven so deeply into the modern marketers’ psyche that few understand that it’s a measure of efficiency rather than effectiveness. In order to grow a business, advertising ROI will go down. Why this happens is simple. Growth means attracting customers who aren’t already inclined to buy from you, and customers who aren’t already inclined to buy from you are more expensive to attract than those who are. It’s really that simple. However, those few marketers who know this aren’t going to take it to a CFO who knows precisely zip about marketing yet demands ever greater efficiency. Why? because their world is dominated by little numbers, and they’d rather have a job than not.

Wanamaker weaponization has been wildly successful for three reasons. First, corporate boards are dangerously lacking marketing representation(Only 2.6% of board members of the Fortune 1000 are marketers), so there was little pushback from the top. Second, non-marketing leaders in the C-suite have always viewed marketing budgets through jealous eyes, so the waste narrative played straight into existing prejudice and presented an opportunity to reallocate those precious resources...to themselves. Third, FOMO, the shifting of eyeballs toward new screens, and a fear of being left behind by technology drove a huge shift in that direction.

This then led to the serial picking apart of the marketing function. If, at one time, the 4Ps (Product, Price, Place, Promotion) represented the marketers’ dominion, it does no longer. A slew of new C-level titles - Chief Customer Officer, Chief Digital Officer, Chief Experience Officer, Chief Brand Officer, Chief Transformation Officer, Chief Product Officer, Chief Design Officer, Chief Revenue Officer, etc., have chipped away until all that’s left is the promotional P, and sometimes not even that.

In addition to dangerously fragmenting and siloing an experience that should be completely integrated from a customer perspective, it was inevitable that as others picked over the choicest cuts at the marketing charcuterie, it would change how the function is viewed, not just by other members of the C-suite but by the people attracted to work in the field.

Here, I’d observe three interrelated issues. First, marketing is attracting an ever-weaker flow of talent. As its influence within the C-suite wanes, fewer of those with CEO ambitions choose marketing as a track, weakening bench strength across the economy. Second, as marketing delivery becomes more technical, it’s attracting more inexperienced technical talent to the field (more on that in a second), and third, as marketing becomes ever more about budget efficiency, tactics, and operations and ever less about strategy, business growth, and enterprise value, executive-level competence in the discipline has fallen off a cliff.

In the US today, less than 30% of people working in marketing are trained in the subject. That’s an absolutely stunning statistic. Imagine, for a second, if less than 30% of finance hires had any training in finance or if less than 30% of legal hires had any training in the law. It’s ridiculous, right? But seemingly, we think it entirely acceptable to have untrained marketers. Why? Well, the only reason I can think of is that we’ve decided it isn’t all that important. 

What’s particularly concerning about the direction we’ve been headed in is that the primary skills most marketers have today are in what we used to refer to as direct response advertising and its sibling direct mail. It’s the exact same thing; it’s just that today, we mediate it with technology and deliver it digitally, and call it sexy things like “performance marketing” and “growth marketing,” and its shady little cousin, “growth hacking.” Why this is worrying is that DR/DM was never historically in charge. It was always a tactical and transactional practice that followed the strategic lead of others. In my own career, we used to shudder when talking to the DM team when doing brand identity work because their first inclination was always to atomize the old and new identity systems into their component parts and then A/B test every single element (logo, color, type, image style, etc) independently, before jamming it back together into a Frankenstein’s monster based on minuscule differences in response rates. Sound familiar? 

So, the dog caught the car. And now marketing is dominated by a skillset that failed in the physical world because the economics didn’t really work very well when response rates began plumbing the depths of 0.3-0.5%. The irony isn’t lost on me that we weaponized waste as the biggest problem in marketing and then handed the keys to the people whose core competence was doing stuff that 99.7% of people completely ignored. Yeah, we really did that. And that’s why today’s web sucks as badly as it does. Websites being little more than technically advanced shells for the delivery of direct mail. Only we don’t get to throw it in the garbage, and it’s surveilling our every movement.

Net, net, we now have deeply inexperienced and untrained marketers who simply don’t know how to tackle the Big Number stuff.

I once had a CMO client who presented himself as having a background as a growth marketer. In conversation, he said he was an engineer who’d entered marketing “when it became a technical discipline.” The problem was that while he knew inside-out how to run direct response campaigns, he’d only ever done so for large brands, where “growth marketing” really means “leveraging the brand.” Now, he was staring down the barrel of loss-making campaigns because he didn’t have any brand strength to leverage, and it was his job to build it; only he hadn’t the first clue where to start on that journey because he had zero experience, training, or resources. Was he smart? Absolutely. Was he appropriately trained, experienced, and philosophically suited for the task? No, not really. Not at all. 

But wait. There’s a glimmer of light at the end of this grim tunnel.

For the first time in a long time, we’re starting to see pushback against the waste narrative. Suddenly, the folks doing econometrics and marketing mix modeling are saying, “Hold up, wait a minute. Maybe letting Google and Meta grade their own homework wasn’t such a good idea after all.”

Consistently, we see that the most expensive things the likes of Meta will sell you - highly targeted media focused on driving sales, tend to perform much better on a Meta dashboard than they do in an independent MMM analysis. Hmmmm, I wonder why? In simple terms, the way it achieves these amazing-looking sales results is to target the people it knows are most likely to buy from you already. That’s right; you’re paying a premium to sell to someone who will buy from you anyway while completely ignoring the fact that growth requires an incremental sale to someone who wouldn’t have otherwise bought from you at all. Why? Because your CFO is hammering the table for ROI efficiency rather than the CEO hammering the table for business growth. 

If I boil the econometrician perspective down, it goes something like this: We know how to be effective at marketing irrespective of whether it’s a “traditional” or “digital” channel, and we know what we should be doing to grow the business and impact the enterprise value of the corporation. As a result, our analyses show that the biggest problem in marketing isn’t waste; it’s a lack of resources focused on doing enough of the right things often enough, artificially constraining the growth of the business in the process.

In other words, they’re saying that the Wanamaker Paradox is no longer the biggest problem in marketing, assuming it ever was. Instead, the little numbers game of marketing is the biggest problem because it’s ineffectual. As a result, we need to return to the Big Number game, where, bonus, we now know more about what works and why than we ever have.

However, change will be exceptionally difficult, not least because advertising behemoths like Google and Meta have business models that explicitly create dependency, meaning they look suspiciously like drug dealers, with advertisers as their addicts. And no dealer willingly lets their addicts fly the coop without a fight.

And marketers increasingly act like addicts because of the intense efficiency pressures they’re under, frantically checking their dashboards, obsessing over an array of largely irrelevent metrics, and running around like headless chickens without direction, desperately seeking something, anything, that might work. Why? Because we put tacticians in charge of strategy and then under-resourced them and told them their primary goal was to be efficient, with a secondary goal of doing it as fast as possible. And just like addicts, marketers are largely in denial.

If you’re a marketer, what looks better when asked about how your latest campaign is performing? 1. Stating that you’ve driven a million impressions in the past week, that you’re seeing through-the-roof campaign ROI, and that the new blog is seeing unprecedented levels of engagement? Or, 2. That a million people or bots (we’re not sure which) saw your ad for at least one second, that even though campaign ROI is exceptional, you’re yet to see any impact in incremental sales, and that your blog seems particularly attractive to bots, as proven by the distinctly weird comments they’ve been leaving. 

It doesn’t take a rocket scientist to see why your average marketer has little or no interest in rocking this boat. 

Looking at the longitudinal data, marketing budgets as a percentage of overall GDP have remained remarkably steady over time. They essentially track economic growth. However, the makeup of how that money is spent has transformed remarkably. Today, technology makes up approximately 25% of marketing budgets, which is higher than that spent on creative agencies.

The net effect of a flat budget, with a relatively new line item taking up 25% of it, is that we’re left trying to fit 10lb of shit into a 5lb bag. Recently, we’ve become acutely aware of the impact of this on creative agencies. Whether it’s deeply sad tales of people being worked to the bone for little reward or massive holdcos like WPP desperately merging failing agencies, the evidence is all around us. However, there’s another impact of such changes, namely, that creative quality declines as creative agencies become an ever worse place to work. And this matters quite a lot because quality creative is the most important variable in whether a campaign performs highly or not. Yet, System1, which ranks ads in ascending order from 1 (worst) to 5 (best), highlights a very worrying statistic, namely a high incidence of 1-star ads. And this isn’t just a consumer brand problem. Research by the LinkedIn B2B Institute reached an even starker conclusion about how deeply ineffective B2B advertising has become.

On the media side, efficiency pressures have pushed marketers toward ever worse inventory quality as the sheer complexity of the digital advertising ecosystem kicks in. In much the same way that George C. Parker had a bridge he wanted to sell you, the digital advertising world continues to peddle the myth of a “long-tail” of consumer attention. This is a fairytale. Real consumers don’t spend their time visiting a smorgasbord of websites nobody has ever heard of; the bots do. And the fraudsters have done an amazing job of making those bots look really attractive. In pretty much every analysis I’ve looked at on the subject, the conclusion is that you’re better off buying reach than you are buying a highly targeted audience unless your first-party data is bulletproof. Why? Because the targeting is highly inaccurate (gold standard 3rd party data vendors are about as accurate as a coin flip at accurately targeting male/female. It gets worse from there), it’s expensive (meaning your money is going to intermediaries in the form of fees, rather than media a prospect will see) and the more narrowly you target, the more likely you’re only being viewed by bots rather than actual people. (As an aside, while estimates vary, there’s widespread acknowledgment that digital ad fraud is a huge problem. Some estimate it as being the 2nd most lucrative line of business for global organized crime after drugs. And at vastly less risk). 

So, how do I wrap all this up?

First, we’re currently suffering from the entirely predictable endgame of the AdTech industrial complex weaponizing the Wanamaker Paradox for its own gain, leading to corporations accidentally constraining their own growth.

Second, it’s becoming increasingly apparent that waste is no longer the biggest problem in marketing, assuming it ever was. Instead, it’s a lack of resources and expert human capital doing enough of the right things to increase the enterprise value of the business commensurate with its potential.

As to how we should get back to Big Number thinking and tailor it for the world we’re in today, rather than 20 years ago? Well, that’s the subject of a future edition.

Thank you for sticking with me for so long this week. More to come.

Volume 156: Authentically Fake Redux.

November 17th, 2023

1. Authentically Fake Redux.

tl;dr: A clarification.

Well, Off Kilter put a cat among a few pigeons last week. Quite a few of you seem drawn to the concept of authenticity. And, as I went back and forth over email with a few of you, I began to see a definitional issue emerge that I’d like to clarify.

Unfortunately, the word authenticity is a bit like the word purpose in that it’s an imprecise term with more than one meaning.

In the case of authenticity, it appears to break down as follows:

1. A brand is authentic, meaning it attempts to reflect real, unvarnished life and purports to be deliberately free of artifice.

2. A brand is authentic to its own values, heritage, or belief system and builds a world of artifice around it.

Of the two, the first definition is what I was calling out as nonsensical. All brands represent artifice and image-making, so pretending yours doesn’t is ridiculous.

The second definition, which might also be referred to as consistent, cohesive, etc, is actually representative of the kind of behavior really great brands deliver all the time.

I referenced Ralph Lauren last week, to which I was sent a much more definitive history that I found fascinating (thank you, Christopher). A large part of the success of this brand has been the consistency and depth of its world-building. Is it authentic, as in free of artifice? Hell no. Is it authentic, as in reflecting its own perspective on the world? Hell yes. 

Equally, someone I was emailing with brought up Google. If the Google brand were “real” without artifice, it would be rather different from what it purports to be. As we’re finding out in court right now, Google engages in serially questionable conduct, not to mention issues over at YouTube. However, the brand that has been carefully built as a friendly innovator largely shields it from consumer pushback.

In the interests of precision, I often think we might be better off borrowing from the language of storytelling and movie-making, a point I made way back in 2009 in this Fast Company article (blatant plug, sorry).

Here, we wouldn’t talk imprecisely about authenticity; we’d talk about things like canon, character backstory, narrative arcs, and world-building. All things that are potentially valuable in the context of a brand. Equally, we might talk about things like continuity errors, which I believe to be the bane of so many brands these days.

As we jump from campaign to campaign, shout ever louder for attention, treat re-brands as if they’re advertising campaigns, and generally become ever more tactical and short-termist, what are we really doing?

I’d argue that we’re simply introducing continuity errors across our narrative arc. Taking people out of the story and making them realize how inauthentic it is (haha, see what I did there?) rather than having them dive deeper and spark their imaginations. 

2. IDEO Reboot?

tl;dr: Yeah, I have a view.

A recent Fast Company article on IDEO has been doing the rounds. The basic gist is that 1/3 of its people were made redundant in the past year because design thinking has become commoditized, and for the first time, a non-designer is the CEO.

I have absolutely zero connection to IDEO beyond a few conversations I had with them years ago, but I wasn’t particularly impressed by the quality of the analysis in the article—more on that later.

First, I want to point out that while designers have taken great joy in dunking on design thinking for years, the online crowing around IDEO’s recent issues leaves a bit of a sour taste. No matter your thoughts on design thinking and whether it represents “real design,” we’re talking about hundreds of people losing their jobs during a challenging time for most in the design industry. I’ve been in that position before, and I can tell you it’s not pretty. It’s demoralizing. And, while I was in the fortunate position of being the person making the layoffs rather than facing a future without a job, I can’t even imagine how those who lost their jobs must be feeling. It caused me many sleepless nights, a blown disc in my back, and I became completely burnt out trying to keep the lights on. So, no. I can’t find satisfaction in the misfortune of others. 

We also have to accept that crowing about the decline of IDEO is fun for some because IDEO did a great job elevating itself to the top table in discussions with clients. Rarified air that very few designers ever get to taste that I’m sure left some feeling jealous. No matter what you might think of design thinking as a methodology (and its merits have been widely debated), what it unequivocally did do was get IDEO a seat in the boardroom advising CEOs and boards on the future of their businesses. And for that, I must salute them. 

Anyway, back to the article for a moment. Here’s my alternate take. As I said, I have no connections to IDEO, so take this for what it is…pure speculation.

First, a couple of caveats. I don’t know if IDEO did what many did during the pandemic and overhired and then had to correct. Nor do I know whether the cultural issues that led to the previous CEO stepping down last year made a difference. But with that in mind, here goes.

I suspect the real issue with IDEO had little to do with design thinking in and of itself and more to do with an overall lack of commercial focus and strategic responsiveness to a changing business environment. 

When IDEO popularized design thinking in the early to mid-2000s, method was very much in vogue in business circles. For example, Six Sigma was very much the in-thing as a do-it-all continuous improvement methodology. As a result, there was an open runway for a do-it-all innovation method. And they took it.

However, over time, three things changed. First, competition in the innovation space exploded as every agency, consultancy, and their grandmother re-labeled themselves an “innovation consultancy.” Second, the world shifted from a focus on method to a focus on outcomes. And third, the center of gravity for innovation shifted heavily toward the digital realm.

With this in mind, and with 20:20 hindsight, it appears that IDEO didn’t respond well to these changes. First, rather than ramping marketing up to maintain leadership in the face of competition, the IDEO marketing machine went strangely quiet (Fun fact: I once had a discussion with an IDEO partner where he proudly declared that they’d pursued a strategy of “de-branding” under his guidance. My enduring memory is of his being dangerously ignorant on the subject).

Second, instead of focusing on commercial outcomes, IDEO appears to have become increasingly esoteric in its focus. It used to be much more confusing, but even now, it feels more like an NGO than a consultancy in the business of driving commercial value for its clients. 

And third, digital left IDEO behind. They’re not even in the conversation in this arena, which represents a massive commercial blindspot.

So, no, I don’t think the commoditization of design thinking in and itself represents IDEO's downfall. Instead, it feels more like leadership complacency and a lack of commercial focus manifesting itself via a lack of response to intensifying competition, a lack of connection to the changing commercial imperatives of its clients, and a failure to adapt to a much more digitally enabled environment, where coming up with ideas (what IDEO is good at) and building them into products (what IDEO doesn’t do) are increasingly integrated and inseparable.

The non-designer CEO schtick is a red herring for me. How well someone can lead and manage a business rarely has anything to do with the craft they’ve been trained in, and often, an outside perspective is exactly what an inward-looking culture (like IDEO seems to be) needs. 

Of the stated intentions for the future of the business, two things stick out from the article. First, shifting to a lower-cost model, where freelancers primarily staff projects. This is an increasingly fashionable and overtly cost-driven approach. As a result, I’m somewhat dubious about the likelihood of sustained quality and consistency. It’s also a brand leverage play, so it may work for IDEO, whereas it won’t for others. As far as I’m aware, the IDEO brand remains stronger than perhaps its business results would indicate. The other intention to “build and scale a media brand” is much easier to explain. This almost certainly has nothing to do with becoming a media agency or consultancy, as the article intimates; instead, it looks like they’ll create a thought leadership vehicle equivalent to what the likes of McKinsey have done so successfully.

That’s pretty smart because it suggests a CEO who intends to re-energize the IDEO marketing machine after years of neglect and sharpen its commercial focus in the process. 

What does the future hold? Who knows, but I’m more bullish than I am bearish. It’s a good brand. It stands for innovation in the minds of many, and if it can refocus and resolve the issues I mentioned above, it’ll likely do well.

However, the runway will be short, and I have no sense of whether a culture reeling from layoffs and the public airing of historical issues will accept such change and how difficult it might be to shift the business as a result.

Volume 155: Authentically Fake.

November 10th, 2023

Authentically Fake.

tl;dr: Yet more bullshit in branding.

First, I need to put my cards on the table. I’ve never valued authenticity as a branding concept. I’ve always found it nonsensical on its face, and no matter how many clients or colleagues I’ve met who throw the term around with abandon, I never know what they’re on about.

Now, don’t get me wrong, I get it. I get that it’s meant to be about being real, not sugarcoating, being transparent and genuine, following through consistently, and not overselling features or functions. It’s the sterility and oh-so-boring self-righteousness it inevitably generates I have a problem with.

My life is authentic enough already. I don’t need brands to reflect it. My greying, thinning hair, ever-expanding gut, and left hip that’s started to hurt in the morning. I also don’t want brands that reflect my average boring-ass day: Get out of bed, take the dogs for a pee, work, take the dogs out again a few more times, talk to some clients over Zoom, have dinner with my family, write a little Off Kilter, watch TV or read a book and eventually go to bed. Rinse repeat.

This is why authenticity is so much bullshit. Every brand is fake, no matter how authentic it may claim to be. It’s just that those wrapped in a cloak of “authenticity” are terminally dull and forgettable. This is because brands are artifice, no matter how “real” we might think we’re being. The entire concept of what a brand is and how it works reflects the power of image-making, so authenticity, no matter how much you think you’re reflecting it, isn’t possible. And by trying to fake your way to reality, all you do is turn people off rather than turn them on. Why? Because no matter what people might tell you on a survey, most don’t want you to reflect a boringly forgettable reality. We want you to be a memorable escape, even if it’s momentary.

Why is Santa red? Because Coca-Cola advertising popularized it. Think Polo is authentic? It sure looks like that because the designer is a master of artifice, but when the brand was created, Mr. Lauren was a kid from the Bronx, where there aren’t a lot of horses, let alone a polo field. He chose it because he liked sports. He had literally zero connection to that particular sport before creating the label.

Look at any truly successful brand, and what you’ll find isn’t authenticity at all but carefully managed and constructed image-making. Some entire categories, like luxury Swiss watches, are the product of years upon years of carefully crafted artifice.

So, why mention it now? Well, because of three things:

1. A DTC category that draped itself in “authenticity” is collapsing as we speak.

2. Authenticity represents lazy thinking and an abdication of responsibility to build your own world of artifice, AKA standing out.

3. Authenticity is a classic example of flawed research leading to wrong-headedness, ultimately leading to poor business outcomes.

Let’s take each in its turn.

First, how many DTC brands have you seen claiming “authenticity” when, in reality, they’re little more than a Lego kit version of a brand? Same wireframe, same colors, same “real-people” imagery, same aesthetic tropes, same Shopify-enabled commerce engine…and even the same origin story focused on how the founders couldn’t find a version of whatever-the-hell, that fit their needs and desires, so they made it their life-mission to create it. Bullshit. If you’ve ever met these founders, they’re typically businesspeople who saw an opportunity to present a lower-cost version of a product that they then successfully pitched to a VC investor. This matters because of how many of these there are, how commoditized they are as a result, and how instantly forgettable. To the point that we barely even notice as they increasingly go bankrupt.

Second, authenticity represents lazy thinking. It’s simply an abdication of responsibility to create the artifice that takes people out of their day-to-day. Anyone can reflect reality. It’s all around us. It’s easy. And it’s really f’ing lazy. And lazy does not deserve to succeed. Since I was just talking about it, let’s use the laziness of DTC as a foil and compare it to, say, Liquid Death. This is a brand that doesn’t even pretend to be remotely “authentic,” yet it’s done an absolutely stellar job of layering together a compelling story of brand-artifice. Liquid Death shouldn’t really work at all. It’s competing in the most overtly branded and competitive commodity category on earth - water. Yet look how successful it’s become. Why? Not because it draped itself in the authenticity of the provenance of the water, the ideals of the founder, its desire to save the planet, or any of the other boring-ass water tropes out there. Nope. Instead, it literally turned category conventions on its head and set out to be flat-out entertaining. It’s not programming itself for an algorithm; it’s creating a sense of frivolous escape for human beings. And guess what, sometimes we quite like a bit of frivolous escape as an antidote to the real.

Third, and this is a big one, there are times when poorly constructed research leads to widespread wrong-headed thinking and terrible business outcomes as a result. When you do research and people tell you they want authenticity, what does that mean, and should you pay attention? Well, here’s a controversial opinion. Just because someone says something doesn’t mean they have any clue what they’re saying, nor does it mean that’s how they’ll ultimately behave. It’s up to us as professionals to take what they’re saying, translate it, interpret it, and use our interpretation rather than their responses to inform what we ultimately do.

One of the biggest errors we make, again and again, is to think that just because everyone is a consumer that everyone knows how marketing, advertising, branding, etc works. They don’t. I use an iPhone every day. This doesn’t make me an expert in how the iPhone works. I could no more figure out how to build an iPhone than I could operate on a human brain or send a rocket into space. To think I could is, quite frankly, ridiculous.

To illustrate this relative to branding, let me tell you a story from almost thirty years ago. Just after I graduated college, I went to stay with a friend who lived in Edinburgh. He worked for the now-defunct Scottish and Newcastle brewery and had just spent months doing focus groups with beer drinkers. His apartment was vast, chopped up from what must have been a truly magnificent Edwardian-era home. The rooms were grand, with ceilings that towered toward the stratosphere. And, stacked floor to ceiling, was more beer than I’d ever seen before or since.

Turns out that after the focus groups had finished, he’d been keeping the leftover beer…and nobody had said anything. So here we were, doing our level best to eliminate the evidence.

What was particularly striking were all the packaging differences. There were cans and bottles, tall and short, fat and thin. There were different colors, labels, and logos. There was bold, there was subtle. There was attitude, and there was provenance. You name it, it was there—a literal smorgasbord of beer. I must admit that I felt like a kid in a playground because I’d never heard of any of them before (more on that in a minute), and I was determined to try them all.

After a while, and as the empties began to pile up, I expressed my preference for one of the brands we’d been drinking…to which he laughed hysterically as only the very drunk can.

You see, the beer inside the cans and bottles was exactly the same. The only difference was the packaging, and I’d been suckered into thinking this one label and bottle was superior to all the others. Except it wasn’t, well, not objectively anyway. Yet if you asked me, I could’ve sworn blind that it was better. It was; it had to be.

Yet it wasn’t. It was the product of my imagination, spurred on by the artifice of the packaging.

And this, my friends, is why we must always interpret and translate what we hear from consumers in research. They don’t know how this stuff works; they just think they do. It’s our job to take claims like a desire for “authenticity” and the real and interpret it, try to understand what it is they’re really saying, and most importantly of all, use it as a part of a broader look at where we might have an opportunity to play or to identify where we should absolutely not play at all.

So, next time you’re in a meeting and you’re tempted to throw around the term “authentic” or “authenticity,” don’t. That’s just being lazy. Instead, take a step back and think about the world of artifice you’re creating and how that’s going to make your brand stand out rather than fit in.

Volume 153: Loyalty. Or What Passes For it.

October 13th, 2023

1. The Techno-Optimist Manifesto. What A Pile of Old Bollocks.

tl;dr: Marc Andreessen has his Marie Antoinette moment. 

I love it when experts in a field share their inner thoughts because it gives us a unique insight into how they think about what they do and, unintentionally, where their blindspots are. And God help me, but I’ve just realized that if you read this newsletter even remotely often, you probably know mine, too. Now I feel naked, which is a terrible mental picture for us all.

Anyway, I used to inhale Fred Wilson’s “A VC” blog. And while he’s undoubtedly a very smart man, it quickly became apparent that he couldn’t tell the difference between marketing and advertising and was pretty clueless about both. When the new Slack identity was created, Micheal Beirut shared the thinking behind the work and concepts that hit the cutting room floor. This was amazing because while it was long on craft, there was a clear blindspot of conceptual creativity and strategic thinking, which is why, in my opinion, Pentagram is great at modernizing existing identities and godawful at creating new ones.

Then, this week, Marc Andreessen placed the cherry on the blindspot cake with a thinly veiled libertarian screed that’s wildly lacking in self-reflection entitled “The Techno-Optimist Manifesto.” Now, for anyone who doesn’t want to wade through a 5,200-word ode to Ayn Rand, the basic gist is that the tech-innovator class should be free to do whatever it wants, without regulation or limits, and everyone else should just suck it up because it’s progress and it’s good for them. Maybe this view shouldn’t be all that surprising considering the prevalence of libertarianism among tech billionaires, but there were two big surprises. First, among other things, he names “sustainability,” “stakeholder capitalism,” “ESG,” “tech ethics,” “trust and safety,” and “risk management” as ideas that are the enemies of progress. (I can’t help but think about the Titan submarine that catastrophically imploded when I read that). Second, he lists the “patron saints of techno-optimism,” which includes a number of out-and-out fascists. And when I say that, I don’t mean the people who get called fascist by others on Twitter, but rather those who embrace fascism as their own self-identity.

Wowzers.

Truly, the most surprising thing about this manifesto isn’t the way the press has tried to spin it as “reclaiming the moral high ground for tech,” but that it was published at all, especially on the website of such a high-profile corporation. 

I’m far from a Luddite or a socialist. I’m a capitalistic small business owner, and most of my clients are tech corporations, yet I find this manifesto deeply uncomfortable. Twenty years ago, there was a clear tech dividend for Silicon Valley corporations. In a phenomenon Scott Galloway refers to as the “idolatry of innovators,” we wanted to believe. We lauded them; we loved what they were up to and couldn’t wait to see what they’d do next. 

Twenty years later, while there’s been tremendous wealth created by Silicon Valley, it’s ironic that it’s society’s reaction to the behavior and actions of people like Mr. Andreesson that made him feel the need to write this manifesto in the first place. Techno-skepticism replaced the tech dividend because tech broke whatever social compact it had. It surveils us, taxes us like a feudal landowner, says we don’t own the products we bought, gets to rifle through our posts to train AI systems it hopes will replace us, gets to change the rules on a whim, enables bad actors to drive disinformation wedges through society, encourages our children to harm themselves and commit suicide, and if we don’t like it, tough. We have no other choice. 

So, with the sure knowledge that I’m vastly less wealthy, less of an innovator, less visionary, less influential, less egotistical (barely), and a whole helluva lot less fascistic, here’s an alternative perspective:

Technology and the innovation that drives it is core to human progress. Throughout history, the people driving technological development have pushed societies, economies, and our species forward. However, technology does not exist independently of people or society’s rules. It exists to serve them. The gains of technological progress should be felt broadly rather than being the sole purview of the few and the rich. It cannot be left to operate in a vacuum; it should be appropriately regulated and taxed, and we should recognize that harm often accompanies progress, so we should be ready to act proactively and reactively to mitigate the effects of said harm when and where it occurs, 

It’s not that hard. But if Mr. Andreesson’s views truly reflect the Silicon Valley condition, then huge challenges will be ahead. Because what he’s saying is that what’s good for the very few at the top is good for everyone else. And history suggests that’s rarely, if ever, true. 

2. Bigger Than AI.

tl;dr: Weight loss drugs. A truly disruptive technology. 

Sticking with technology for the moment, what’s fascinating is the sheer volume of tech innovation that’s both really interesting and super impactful and isn’t coming out of Silicon Valley but the pharmaceutical industry. 

The COVID pandemic supercharged the previously sleepy world of vaccination development, introducing a novel new approach that uses mRNA rather than more traditional methods. This is a technology with game-changing potential. Already, there are human trials for an RNA-based malaria vaccine. (Fun fact: while the claim that malaria killed half of all humans who ever lived is likely untrue, it remains one of the most common causes of death globally, and climate change is making it more prevalent in more places.) And very soon, we’re likely to see RNA-based cancer vaccines and other, more tailored therapeutics focused on genetic conditions. 

At least equal, and potentially greater in its society-changing potential, is a new class of weight loss drugs known as GLP-1 Agonists, which include Ozempic and Wegovy. Initially created for the treatment of diabetes, weight loss was an unanticipated side effect that has the potential to catapult these drugs into the stratosphere of societal and cultural disruption. They’ve also been found to significantly impact the neurobiology of addictive behaviors, which means they may also be effective in treating addictive disorders, such as alcoholism. 

Let's look at the numbers to understand why the potential economic effects of this new class of drug might be greater than that of AI:

First, almost 70% of Americans are either overweight or obese, with 36% being clinically obese (having a BMI in excess of 30.) The economic costs associated with this statistic are vast. It’s estimated that obesity costs the US between $147bn-$210bn annually, not to mention the emotional and psychological costs individuals have to bear.

I once had a client in the clinical weight loss space. Listening to their patients talk was heartbreaking. They were desperate. They’d tried every diet and exercise regime known to mankind, and nothing was working; their self-confidence was shot to zero, and they had various health complications to boot. Put simply, the myth of being fat and happy was exactly that—a myth. The reality of obesity is that it’s all too often life-destroying, either physically or emotionally, or both. 

Economically, there are also second-order effects we must take into account. Because these drugs reduce appetite, 70% of people using GLP-1 drugs report significantly decreased cravings for junk food. Morgan Stanley estimates there could be a 3% decline in demand for junk food, snack products, and carbonated drinks by 2035, but this number could be greater depending on how rapidly this new class of drugs is adopted. 

Even the airlines are getting in on the act. United believes that across-the-board weight loss could save as much as $80m in fuel costs annually.

This is before we even get to the economic impact of buying new outfits and newfound confidence encouraging people to go out more, go on vacation to the beach more, and generally live differently. 

So, yeah. I know we in the marketing arena love to think about technology trends through the lens of shiny objects, apps, and whatever the cool kids in Fort Greene are up to, but we should be looking more broadly. Because GLP-1 drugs, RNA vaccines, and whatever else pharma is cooking up have the potential to be radically more disruptive than putting a $3,000 computer on your face. 

3. Very Much Losing?

tl;dr: More acts of holding company weakness. 

This week, the advertising holding companies were at it again. Consolidating and merging agencies, that is. 

In India, Omnicom placed a bunch of ad agencies under the moniker “Omnicom Advertising Services.” At the same time, WPP took its ongoing consolidation to the next level by merging the vowel-challenged VMLY&R, a product of a previous merger between VML and Y&R, with Wunderman Thompson to form…a new VML. I have no idea what VML was initially a contraction for, but make no mistake, this isn’t an act of strength; it’s an act of weakness, so VML may as well stand for Very Much Losing. 

So how did we get here, and what happens next?

Well, let’s start at the beginning.

Back in the go-go 1980s, some very smart financial brains in the advertising business, most notably Sir Martin Sorrell, recognized that a dollar of advertising revenue generated by a public company was more valuable than a dollar of advertising revenue generated by a private company. In financial terms, this phenomenon is known as arbitrage. This essentially means exploiting the difference in value between the same or similar assets to make a profit.

Arbitrage in financial markets is extremely common. For example, foreign exchange arbitrage, where you might convert Dollars to Pounds, Pounds to Euros, and then Euros back to Dollars to realize a tiny percentage return. Rinse, repeat.

With this realization in mind, public companies like WPP were explicitly created to buy privately held agencies to exploit valuation arbitrage, where the price paid for a privately held agency was less than the value it would add to the publicly held corporation. (I know it’s a bit more complex than that, but I’m oversimplifying to make a point).

To continue growing the share price, the holdco’s bought more agencies to increase revenues above whatever organic growth their portfolios were delivering, thus smoothing out the curve and delivering compellingly predictable revenue growth to Wall Street. Unfortunately, this model bears more than a passing resemblance to a Ponzi scheme. More on that in a minute.

Anyway, so far so good. What’s important to note about the historical root of today’s problems is that holdcos like WPP, Omnicom, Interpublic, etc., were never set up nor intended to be client-facing operating entities. They were formed as financial vehicles to face the stock market.

Fast forward through the ‘90s into the 2000s, and the Ponzi-like model of buying under-valued revenue in the form of privately held agencies to juice growth numbers had become a treadmill: Entrepreneur builds agency business, sells to holdco, works through the earnout, leaves, sets up new agency. Rinse, repeat. Everyone wins. Meanwhile, the holdcos became bloated, inefficient agglomerations of hundreds upon hundreds of agencies with few synergies and little or no strategic cohesion. Why? Because the purchase rationale had little to do with client need, operating excellence, leadership capability, or strategic synergy. It was about finding undervalued revenues and bringing them into the mix to feed the revenue growth necessary to drive the stock price.

Then, the internet happened. And the Ponzi scheme began to crumble.

Again, oversimplifying, the Internet massively changed how and where marketing happened, meaning shareholder value shifted from media andthe holdcos to Google and FB/Meta, which meant the holdcos suddenly had to answer questions about portfolio composition. And, as it turns out, it was ugly: Hundreds of under-scale agencies with weak technology capabilities, often operating in fields being disrupted by digital, and a few massively bloated advertising networks acting as anchor tenants, utterly dependent on broadcast TV, which Wall Street was now, quite rightly, questioning the future of.

To add to the panic, the shift in the media landscape meant consulting firms, which had quietly grown off the back of more integrated operating models, were now keen to take advantage of the holdco weaknesses in areas they were strong in - technology, data, operations, strategy - to drive growth from marketing departments. Only they had the distinct advantage of picking and choosing their acquisition targets, focusing on “digitally native” businesses that would enhance their overall offering. Meanwhile, the holdcos were busy fiddling while Rome burned, consolidating real-estate holdings and establishing shared services models to take cost out of the portfolios without altering the operating model meaningfully. 

Fast forward to today, and the dynamics have worsened still further. The holdcos are still staring down the barrel of confusing, inefficient portfolios loaded with underscale agencies on the one hand and bloated advertising networks on the other. The consulting companies have doubled down on integrated operating models (e.g., Accenture Song) that can handle large, multi-capability, complex challenges at higher margins. Brands, for various reasons, have built in-house agencies for themselves. Money has continued to flow away from the holdcos and into ad and martech firms. Finally, independents have increased competition further as working in holdco agencies became an increasingly grim proposition, and top talent realized technology could augment their capabilities to the point that scale wasn’t necessarily necessary. 

And now AI isn’t just on the horizon; it’s already here, and predictions are that it could cut around 7.5% off advertising agency headcount over the next ten years. 

So, what next? Well, we rarely see huge corporations like the holdco’s collapse spectacularly. Instead, it’s usually a slow slide into irrelevance and a much lower-value business. Even long after digital photography had disrupted it, Kodak was still worth $2.5bn in 2013; ten years later, it’s still around but is only worth $300m.

It’s common that once the slow collapse into irrelevance begins, it’s very hard, if not impossible, to arrest because the root cause goes back to decisions made years, sometimes decades, earlier.

In the case of the holdco’s, with the benefit of 20:20 hindsight, I’d suggest they should’ve been much more strategically aggressive, much sooner. They should’ve seen through their own rhetoric that a consulting company couldn’t run a creative business (They were accountants themselves, for goodness sake, and they managed it). They should have radically consolidated the operating model from a position of strength rather than a position of weakness, focused much more intently on serving higher-value client needs, invested heavily in cross-portfolio data-sharing, focused more on beating the consulting firms at their own outcome-driven game, and been vastly more aggressive in shuttering and selling off underperforming assets to free up resources to support innovation and businesses where there was strong growth and margin potential.

Instead, they’re now stuck in what may be a terminal downward spiral. Anemic stock performance means there’s very little leeway to acquire their way out; agencies they already own face major margin and growth challenges; they’ve systemically excised experienced (and more expensive) talent, leaving them with a gaping expertise gap relative to the consulting competition; they’re way behind the 8-ball on the integrated model front, where hope springs eternal that merging two or more underperforming businesses will somehow create gold rather than dogshit; and to add insult to injury, their clients don’t trust them very much.

So, what happens next? Well, here’s my prediction, which, if it happens at all, will likely take years to pan out:

First, look for a continued consolidation of the large, bloated, underperforming agency networks that stand for nothing in particular. Next, look for further consolidation, shuttering, and/or selling off of the smaller underscale agencies. Then, out of desperation, as stock prices continue to stagnate, I predict one or more holdco will split, forming a “good bank” and a “bad bank” model the way banks like Citi did during the financial crisis, moving their strongest assets into one portfolio and their weakest into another. Then, private equity will pick over the carcasses like vultures, looking for the choicest cuts at bargain prices. Finally, when all is said and done, the likes of WPP, Omnicom, Interpublic, and the rest will be much smaller and, hopefully, a lot better. Still, they’ll look more like Kodak and less like Accenture from a size, scale, capability, and relevance perspective.

Nostalgia is a powerful drug. And it would be easy to mourn what these agencies once were, the work they once did, and the careers they once fostered. But nostalgia is not a business strategy.

I’ve never particularly valued the management competence of the holdco execs I’ve met. With a few rare exceptions, they’ve been little more than odious, aging, narcissistic, backstabbing old salesmen and accountants who lacked leadership, strategic vision, and operating competence. 

However, it would be harsh to say this is entirely their fault. To quote Warren Buffet: 

“When management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”

In other words, it’s unclear that even the most brilliant business leaders could’ve more effectively navigated the holdcos through an ongoing series of disruptive shocks that have fundamentally re-engineered how marketing happens and, thus, where the value lies.

Volume 153: Loyalty. Or What Passes For it.

October 13th, 2023

1. Loyalty. Or What Passes For It.

tl;dr: A quick review of a fleeting concept, which most get wrong. 

Brand loyalty is one of those concepts that, at first glance, seems entirely logical, especially if you’ve drunk the branding Kool-Aid and are busy pouring it out for others. Yet the further down the rabbit hole you dive, the more you realize just how wrongheaded so many “data-driven” executives are on the concept.

Let’s start with my own summary of the empirical data: 

True loyalty is rare. And it’s almost never strong enough to base growth predictions on.

Famously captured by Byron Sharp in his book “How Brands Grow,” where he says:

“Your loyal customers are just someone else’s customers who buy from you occasionally.”

This very much tracks with my own educational background, where we were taught that repeat purchase behavior and loyalty are rarely the same thing, and by my own experience where I can’t tell you how often I’ve said to a client that “loyalty is something to be earned, daily.”

In other words, the combination of brand affiliation, product performance, communications effectiveness, and overall experience necessary to create meaningful loyalty from a customer is both hard to develop and even harder to keep.

So, why, you might be forgiven for asking, if loyalty is rare and hard to develop, do corporations spend so much time and energy obsessing over it?

Well, at least some of this is emotional. We want to think people will be loyal to our brand and to our products because we spend all day thinking about, talking about, and working with said brands and products. In other words, we really, really want customer loyalty because their loyalty says we must be doing something right. I mean, they tried us, and then they came back for more! Win!

A second reason, and vastly more pernicious, is that we’ve mastered the art of projected loyalty. What I mean by this is that we love nothing more than to use loyalty as a core part of future sales projections. And it’s seductive because we’ve persuaded ourselves that it’s cheaper to re-attract a customer to buy more from us than it is to bring a new or occasional customer into the fold. Even though the evidence to support that supposition is relatively thin.

This concept of projected loyalty is made almost laughable when you consider startups confidently projecting their “Customer Lifetime Value (LTV)” based on a single purchase, maybe two.

Even though common sense says this is entirely daft, it’s easy to see why it happens. When a startup looks at the cost of acquisition (CAC), it’s a hard number that says what it costs to attract a new customer. Chances are, whatever this CAC number is, it more than wipes out the unit profitability of any sale. But, since you’ll be about as popular as a fart in an elevator if you go around telling investors that it’ll permanently cost more to sell your products than you’ll ever make back in profits, there has to be some kind of mitigating number just laying around here somewhere….and, oh, here it is: LTV, AKA Customer Lifetime Value. 

Yup, you guessed it. You project the lifetime expected value of the loyalty of a customer, and then you marry it to a projection that this loyalty will lower your CAC costs over time as more people become more loyal. And, just like magic, there’s now a point in the future where profits outweigh your costs. And, for some startups that scale successfully, this will be true. But since somewhere in the region of 90+% fail, it won’t be very many. (OK, so that was a bit of an overgeneralization, but you get the gist.)

Of course, this kind of magical thinking on loyalty is not at all limited to startups. Adidas had a famous mea culpa when it came to its foray into DTC online retail. Turns out the entire approach was predicated on assumptions of loyalty that turned out to be incorrect. As a result, instead of finding itself in a land of milk, honey, and profits, it found itself reliant upon discounting to attract customers back to the brand while ignoring the 60+% of sales that came from first-time Adidas buyers completely.

Equally, consider an average customer loyalty program. While these could, and likely should, be more imaginative in adding value to the lives of the people buying from the brand, it’s far more likely that the loyalty program will be little more than a volume-based discount or bribe.

This is something that’s always struck me as a bit bizarre. Why give discounts and bribes to the people who’ve shown they’re most likely to buy from you already anyway? I can’t speak for everyone, but I can confidently state that if I’m inclined to buy from a brand anyway, I’d much rather have things like excellent service, exclusivity, and after-sales care than a discount. I mean, don’t get me wrong. I’ll take the discount, and depending on the price point, it may be the key driver. It’s just not as generally valuable to me as other elements of the mix.

However, it’s in the B2B landscape where the whole arena of loyalty gets completely out of whack. I don’t think it’s exactly controversial to suggest that in many, perhaps most, B2B organizations, marketing is serially underfunded. As a result, B2B marketers are continuously having to make trade-offs. Do we spend money on top-of-funnel activities to ensure we have the awareness to build out our pipeline over time? Or do we spend money on lead generation and sales activation to support our sales teams with qualified leads immediately? We know we should be doing both, but we can only afford to do one. 

With that as a background, the idea of loyalty becomes unduly attractive as a crutch. Especially if you’re in a situation where “we already serve 482 of the Fortune 500.” However, both the empirical data and my own experience suggest this assumption is dangerous.

The idea that you can cross-sell your way to growth from within your existing customer base is seductive but rarely plays out in reality. When I meet clients who hold this assumption, they almost always find themselves with the following symptoms:

1. They feel that a competitor is sucking all the oxygen out of the room, even though the competitor's product is inferior.

2. They feel that they’re not getting enough top-of-funnel interest, but they convert more than their fair share of the opportunities they do get.

3. They believe that their existing relationships should be driving a loyalty dividend; they just need to find the right message to activate it.

Truth is, this isn’t a messaging problem. It’s a strategic assumption problem. Instead of taking the view that existing relationships will make cross-selling somewhat easier if appropriately supported by a whole-funnel approach to marketing, the assumption is that customer loyalty will make cross-selling performance vastly easier without requiring us to focus on the top of the funnel at all.

Unfortunately, this fails to take a few things into account. First, just because someone is an existing customer doesn’t make them loyal. In fact, they might not enjoy doing business with you at all. Second, only a very small percentage of potential buyers are actively in the market for a new product at any given moment, and that includes your existing customers. And, finally, it’s dangerous to assume that a customer looking for a new product or solution isn’t going to do their due diligence first and will simply hand you their business because of “loyalty.”

2. Identifying a Categories Negative Visual Space.

tl;dr: Doing a visual audit isn’t enough; you need to know why you’re doing it. 

I’ve talked before about how not considering the existing visual landscape when designing an identity system is problematic. The major issue is that if you don’t consciously identify the things you need to avoid, then the forces of entropy will inevitably drive you to replicate them instead. 

Unfortunately, because it’s much easier to fit in than to stand out, it takes more effort and conscious thought to do the standing out thing.

And it’s not just smaller branding shops where this issue rears its head. The Slack logo was designed by Michael Beirut of Pentagram fame, and it uses the same colors and basic quartered form that both Microsoft and Google already use. This is why there’s a very good chance you’ve mistaken the Slack icon on your phone for one of the myriad Google icons that all look the damn same.

This all came to a head for me this week with a LinkedIn post from James Greenfield, founder of Koto, pointing out the obvious problem of looking exactly like a much bigger competitor.

So, of course, I felt the need for a short-term dopamine hit and commented:

Preach. I would like to think every design agency will read this post and absorb it. But I fear that is unlikely. The willful ignorance of the visual landscape within which a brand will compete has become so prevalent that we must now view it as a feature rather than a bug when it comes to the practice of brand design. It's a crying shame, because it's so easy to do, and the effects of not doing it are potentially so value-destructive.

But, as is usually the case, once the dopamine rush of having-my-say-goddamnit wore off, it left me feeling a little hollow. For beating people up for doing something wrong is pointless unless you do something to help them get it right. So here goes. Here’s how I’d think about this task.

First. Lots of designers will say, “Of course, we do a visual audit.” To which my response is simple. Why? Because if you don’t know why, you’ll never know what to do with the audit, and it’s the doing something part that matters. 

So, why are you doing it, and what are you looking for? All too often, junior designers are told to “do a visual audit” without further context, which inevitably leads to the work they do being contextless in turn. Which is why you typically end up with little more than hundreds of pages of neatly gridded pictures of competitor websites, signs, and ads.

In other words, it’s a complete waste of time that nobody pays any attention to and just gets buried on a cloud drive somewhere. 

Instead, here’s an alternative brief: “We need to understand the negative visual space in the category. To do that, we need you to look at how competitors present themselves and identify common colors, common type usage, image styles, etc. What we really want to know are the common tropes and patterns so that if we were to take them away, we can see the space that’s left behind. Because that negative space is the space where we get to create something distinctive that will stand out.”

Then, after conducting the audit, you want to identify very simple principles. For example:

“The category is overwhelmingly blue and red, so we should avoid using blue and red unless we use a particularly bold or unexpected shade.”

Because people like mental shortcuts, when presenting the audit findings to your client, it’s often useful to name what you see. For example, you might analyze the landscape and say something like, “There are two dominant visual styles in this category. One, we’re labeling “DTCforZ” which leans heavily on pastel colors, serif type, graphically minimal layouts, and reportage-style imagery of younger consumers,” the other we call “Corporate-camouflage” which uses a sea of blue, is Helvetica dominant, relies on more decorative graphical elements, feels very small-c conservative, and utilizes a lot of stock photography.”

Then, go on to describe the negative space that’s left behind when we take “DTC-Z” and “Corporate Camouflage” away, and describe it overtly as the space in which you intend to play. 

Then, make sure this becomes a core part of the brief and the principles against which you ask your client to judge the work when they’re making a selection. Using the audit ahead of time, before they see any design work, to prime them to expect something different from the category norms.

And that’s really all there is to it. It’s not a difficult task, and most already do a version of it. It’s just possible that you’re doing it without context, without coming to a conclusion, and without clearly articulating what you intend to do with what you find out.

Volume 151: Internet Magpie.

September 28th, 2023

Internet Magpie.

tl;dr: AKA a random walk through my mind.

I read so many interesting things this week that I figured I’d try to connect them into a single post. 

I’m going to start with Roger Martin pointing out that the great management thinker Peter Drucker never said many of the things he’s supposed to have said, including the infamous truism, “what gets measured, gets managed.” For that, we need to look to another great management thinker, W. Edwards Deming, who did say the words, but it turns out they’ve been taken wildly out of context. What he actually said was: “It is wrong to suppose that if you can’t measure it, you can’t manage it — a costly myth.”

Amazing, what a difference a little sentence topping and tailing will make, don’t you think? (My version of that statement, FWIW, has always been, “What’s easily measured gets manipulated, what’s hard to measure gets ignored.”

I’ve always held that what’s not measurable - what Cory Doctorow labels “qualia” - is equally as important as what is, which I find particularly critical when we consider how important the experience of what we buy has become. Take, for example, a recent bout of car test-driving. My wife and I test-drove what appeared to be two very similar-looking vehicles by the numbers on paper, and yet when it came to actually driving them, the experiences couldn’t have been more different. One put a smile on our faces, while the other made me feel like my soul was being sucked out of my body. Cars are fundamentally emotional purchases, not rational, which is why it’s often nigh on impossible to capture what’s magical about an experience on a spreadsheet.

Thinking about spreadsheets, I read a thought-provoking piece on how airlines are now banks. Frequent flyer miles being a currency that’s more valuable when sold to credit card companies than anything involving an actual aircraft. There’s no doubt that market concentration has led to a steep decline in service quality, amenities, and affordability. What I hadn’t considered is that magicing a made-up currency out of thin air had now become the core business of the airline. Well, from an enterprise value standpoint, anyway. 

From thin air, we move to a missive that’s probably making a few ad people hyperventilate, namely, this little expose on the business of digital advertising. It’s hardly a new tale, but it bears repeating. There are big problems sitting at the heart of digital media, and they’re yet to work their way through. And when (or if) they do, the big ad holding-co’s, aren’t likely to come out the other side smelling of roses. 

Thinking of the big ad-holding companies brings me to downsizing. Namely, that the firms that do so are statistically more likely to fail than those that do not. Which might come as news to more than a few Wall Street analysts. However, I can’t help but think that downsizing is often forced upon you due to financial pressures, so it’s pretty easy to see why a company that doesn’t need to downsize is more likely to survive than one that does. It simply doesn’t face the same pressures. (Please forgive me for overgeneralizing. I know it’s not that simple.)

Almost done. Thank you for sticking with me. I really enjoyed this puff piece on the reality of running a stock trading app during the heady days of Gamestop-mania. It’s both sobering and amazing to realize just how good we’ve become at making tiny corporations built from Band-Aid and Flex-Tape appear as large, capable, secure, and customer-friendly as their much larger competition. But with more speed, “go for it” chutzpah…and Michael Bolton.

Finally, I’d like to circle back to where I started and leave you with the rather delightful Tim Brown, of IDEO fame, talking about something very hard to measure - creativity. (I met Tim once for a cup of tea, and he’s exactly as thoughtful in person as you’d imagine. Although, I, to my eternal shame, ended up being a bit of a dick. Story for another time.)

Here, he fleshes out the need to de-risk creativity - the most messy of things - in order to solve the really big problems. You know, problems of a magnitude that years of analytical thinkers doing their thing have failed at. Anyway, I really loved his point that asking better questions is often more important than seeking a better idea. Having grown up professionally in an ideas culture, it’s hard to give this a wholehearted “right on” even when I believe he’s correct. However, I’m working with a client right now that’s exceptional at the art of asking better questions, and I’ve never seen so many clients of my client say such glowing things about a business partner. So, right on. Better questions, everyone.

That’s it. Thank you for your time and attention. Onward!

Volume 150: Thank you. Joining the 2,000 Club.

September 21st, 2023

1. Joining The 2,000 Club.

tl;dr: Thank you, thank you, thank you. And a little update.

Hello again. First, I must apologize for Off Kilter having been so sporadic recently. The simple truth is that I’ve been busy, and when it comes to a choice between writing Off Kilter and delivering work for clients…well, you know what pays the bills, as much as I wish it were the other way around. 

Second, I want to thank everyone who gets this newsletter from the bottom of my heart. Last week was my birthday, and I had the best gift ever when the subscriber count ticked over 2,000 for the first time. I have no idea if 2,000 is good or bad as far as newsletter subscriber numbers go. But I do know that it started with me randomly sending it to 90 or so people. (sorry for spamming your inboxes. You know who you are) I then placed a signup box on the Invencion website as an afterthought. Never for a second did I think I’d be saying thank you to 2,000 subscribers to a newsletter written by someone nobody has heard of who runs a one-man consulting shop. And it’s all down to you. Not just for signing up but for sharing with others and encouraging them to do so, too. So, thank you. Genuinely. 

I’m not very comfortable with self-promotion. I suspect it’s got something to do with being from Scotland, where the concept is commonly followed by an accusation of “‘yer heid bein too big for ‘yer boots.” However, deep breath; if you have anyone you think might enjoy Off Kilter, please share it with them and encourage them to sign up. They’ll be joining a community of over 2,000 like-minded folks by subscribing to a newsletter that has an average open rate of 65%, has been described (among other less nice things) as “The only newsletter I watch out for and save so that I can read it at the weekend,” and has been known to do things like accuse BMW of being a total bag of dicks for charging a monthly fee for a warm backside.

Next, you might wonder why the online archive of Off Kilter posts seems to have stalled out about ten issues ago. Well, it’s because I’ve been working with the lovely folks over at Design Systems International on a new website. And with the almost-ready-to-go one being so nice, I find it hard to force myself to look a the old one anymore. Ha!

The good news for Off Kilter subscribers is that a major focus of the new site has been turning the Off Kilter archive into a usable resource. Easier to search through, easier to discover relevant content in, and easier to share with others. (I wanted to give it a chatbot AI interface, but unfortunately, the meager amounts of money available to me can’t afford to do that properly yet. But when the cost drops and quality rises, look out). 

It’ll probably take longer than I want to do the final copy edits, but a new and improved Invencion website and Off Kilter archive is coming soon.

Anyway, enough about me. Let’s take a look at what’s been going on in the world. Starting with those seemingly delusional late adopters over at J&J…

2. Oh No, J&J. Oh Good God, No.

tl;dr: Johnson & Johnson. Late adopter.

OK. So, Johnson & Johnson has a new logo, and there’s literally no good way to put this. It’s mediocre as shit. 

The biggest problem isn’t that it’s poorly designed because it isn’t, not really. No, the real issue is that it’s utterly boring, generic, forgettable, and is reflective of… absolutely nothing. Its standout feature being its sheer vacuousness, which is a crying shame when we consider how unique, iconic, and instantly recognizable the old one was. Even when shortened to just say J&J. 

I can’t help but find it ironic that the first major new identity to be launched after I wrote a polemic on the subject of boring identities is an exceptionally boring identity. It’s also deeply ironic that J&J decided to play late adopter to the minimalism party as an accompaniment to a renewed commitment to innovation. Surely we’re past the minimalism-equals-innovation-just-because-Apple-is-minimal-and-it-is-innovative phase?

Anyway, here’s what’s going on.

Johnson & Johnson has been around for 135 years. In recent times, it’s generally been viewed as a boringly predictable business that pays good dividends, which has been reflected in a stagnant stock price. In an attempt to juice that higher and thus boost their own stock-based compensation packages, the C-suite recently embarked upon a major business transformation, almost certainly recommended to them by McKinsey and/or Goldman Sachs. In essence, it meant two things:

1. Spinning out the lower growth, lower margin consumer businesses as a new company called Kenvue. (Another paint-by-numbers identity and an awful name. I’m spotting a pattern here, are you?)

2. Simplify, streamline, and invest in innovation within the remaining pharma and medical devices businesses, which have both higher growth rates and higher margin potential. 

As a part of this transformation, J&J also decimated its in-house design team. If the new logo is anything to go by, that was ill-advised.

Now, it’s not uncommon for businesses to deliver an identity change as an accompaniment to a broader business transformation. What’s important to understand is that when this happens, the primary audience is rarely the customer. Instead, it’s more common for the audience to be internal. The change in identity viscerally signaling a change in corporate direction and associated changes in expectations from both staff and management.

So, it’s no surprise that there’s also a broader consolidation on the way as the newly focused company phases out brands like Janssen Pharma to be replaced by “Johnson & Johnson Innovative Medicine” (I’m sorry, I can’t help but think “George Carlin Funny Comedian” when I see this. It’s a pharma business. Of course, it has to be innovative, so why feel the need to put it in your name…unless, perhaps, you’re worried that you aren’t very?) Anyway, to see how beige and horsey the new identity is going to be when fully rolled out, look no further than what they’ve done to the former Janssen website. 

Now, there’s one more issue facing J&J. One that it wants to get as far away from as possible, namely a potentially costly lawsuit based on the accusation that its baby powder was loaded with cancer-causing asbestos, which J&J knew about for decades, and yet still chose to do nothing.

In an attempt to avoid liability for people getting sick and then dying, J&J spun out a third company as the owner of the talc products, with the sole intent that it declare bankruptcy upon arrival, thus neatly avoiding J&J itself having any financial liability beyond the paltry sum given to that new entity to be on its way. You would be correct in viewing this as a morally dubious path; the strategy itself is known as the “Texas Two-Step” and was initially popularized by Private Equity companies attempting to avoid liability related to acquired entities. The problem for J&J is that so far, the courts haven’t been buying its bullshit. So now it looks like their appeal is going all the way to the Supreme Court.

I did see someone somewhere try to justify the specific changes made to the logo as being for legibility reasons due to kids no longer learning to read cursive script at school. But that’s plain daft. First, the pharma and medical device customers of the new J&J aren’t exactly tweenagers. And second, if that rationale held any weight, we’d see a shift toward legibility by Ford, Coca-Cola, and GE, among others…which simply isn’t happening. Just listing them out makes it obvious how asinine that argument really is. (The following is an old piece of identity advice, but a good one: Don’t think of a logotype as something you have to be able to read. As soon as it acts as a logo, it becomes a symbol more than a word. And what matters is the recognizability of that symbol, not it’s legibility, which is one reason why the Kia logo is brilliant, btw).

Being serious for a second, the rationale here is pretty obvious. J&J is no longer a consumer business; it now has a new focus and (unsaid) a tremendous amount of pressure to live up to the promise of its transformation. When you think about it in such terms, it’s easy to make the connection between “transforming business” and “transformed identity.” However, there’s been a well-trodden path of corporations spinning out their consumer arms and then struggling (IBM, cough, cough). One reason is that these consumer arms drive brand salience that bleeds through to the B2B side of the business (look, it’s no surprise that the likes of Microsoft, Google, and Amazon have huge consumer brands directly connected to massive enterprise businesses). Unfortunately for J&J, this is a big reason not to change the identity, especially one with 100+ years of equity built into it. Personally, I’d want to hold onto as much consumer-built equity as possible for as long as possible. So, for me, at least, this renders the change unnecessary. In simple terms, the identity wasn’t broken; now it is.

Finally, I would like to leave you with the act of fan fiction that is the press release. You’re welcome. Among all the transformation-related hyperbole is a monster-level of bullshit related specifically to the boring and mediocre new logotype. It’s bad. But what’s worse is that we’ve come to expect such nonsensical justifications for new logos.

I just wish that we, as branding professionals, would put even a fraction of the effort into doing better work that we currently put into the breathless hyperbole of the language we use to disguise the mediocrity of said work. 

It doesn’t take a rocket scientist to see the difference between what’s being done and how it’s being described.

Anyway, RIP distinctive J&J logo. It lasted you well for a hundred-plus years. Hello, boring new zzzzzzzzzzzzzzzz.

Volume 149: Where Next Brand Design?

September 7th, 2023

Where Next Brand Design?

tl;dr: Swimming in warmer commercial currents again.

We’re at an inflection point in the business of branding design. The go-go good times from 2010 to 2022 lifted all boats, masking the fact that we were headed in a perilous direction.

Some called this period blanding rather than branding, but while that’s a neat rhetorical quip, it fails to address the commercial danger inherent in the slide toward bland, sterile, minimal modernism that’s now all around us, especially in the digital environment.

The commercial value of any brand identity – which I’ll use as shorthand for logo, design system, colors, imagery, secondary graphics, etc. – is primarily exhibited via its distinctiveness. In simple terms, how uniquely identifiable a brand is relative to every other brand. This distinctiveness comes in many forms: For Coke, it’s the bottle shape, the red color, and the cursive logotype. For T-Mobile, it’s magenta. For Nike, it’s the swoosh. For McDonald’s, the golden arches and that creepy f’ing clown. You get the idea. 

The memory structures built by repeated exposure to these unique and legally protectable brand assets are what make a brand identity commercially valuable. 

Yet, this is a task at which branding is failing.

Over a six-year period from 2014 to 2020, US trademark filings more than doubled. From just over 300,000 to around 650,000. Allied to this doubling in trademarks, audiences, and marketing channels continued to fragment. Combine an environment that is now more than twice as competitive with a continuing fragmentation of audiences and channels, and it becomes radically more challenging for a brand to be noticed, let alone achieve success. Some have dubbed this phenomenon the “attention economy,” within which capturing attention has become the new currency.

With this as the backdrop, you’d be forgiven for thinking the branding industry would rise to the moment. To see it as an opportunity to deliver stand-out brand identities that move the needle commercially.

Yet, not only did this not happen, we arguably moved the entire industry backward instead. A recent study sponsored by JKR posits that a mere 15% of brand assets are distinctive. This means the vast majority of everything we’ve designed is commodified, non-differentiating, and does little or nothing to deliver the primary job a brand identity is supposed to fulfill.

Put another way, it’s not utterly ridiculous (only a little bit) to suggest that 85% of brand design has little or no commercial value. An untenable reality for any business, in any category, if it wishes to stay in business. 

This is a particularly important observation right now as the design hype bubble of the past twelve years bursts amid a crucible of rising interest rates, constrained client budgets, VC and tech tumbleweeds, and the new threat of AI-driven automation on our doorstep. 

So, what happened? And how do we ensure a successful emergence, like a phoenix from the ashes, of this particular period?

There are likely many reasons for where we find ourselves, but one of the most obvious is that as design became more commercially popular, we began falsely equating good design with good branding. As design shifted from a niche skill to a necessary capability, the level of craft became more important than how well the identity made the brand stand out.

The problem is that no matter how well-crafted an identity, it’s irrelevant if it doesn’t deliver on its most basic requirement. Yet, spend any amount of time in the comments section of any well-known design blog, and you’ll see little conversation about how distinctive and unique a solution is and much focused on the nuances of its craft. In fact, the further removed any identity is from an extremely narrow bound of what might be deemed “acceptable,” the more likely it is to be shot down rather than celebrated. 

This needs to change for multiple reasons, not least of which is that craft is the least valuable aspect of great brand design and the one that’s under the greatest threat of commoditization through AI-driven automation.

Allow me, for a second, as a non-designer, to lay out the three core attributes that I believe are shared by the best brand designers I’ve worked with over a twenty-plus-year career.

Ideas. 
The best brand designers think in ideas. Specifically, conceptual ideas that connect to the strategy and drive the identity in unique directions. These are not ideas for the sake of it; they’re ideas that move the brand forward in surprisingly fresh ways.  

Taste. 
Taste is the umami of branding. We know it when we experience it, but it’s almost impossible to define in words. Of all the elements of design, I feel taste is the least trainable, which is why so much brand design is so derivative. You either have taste or you don't, and those who don’t copy.

Craft.
While this may be a controversial perspective, I view craft as the least valuable and most table-stakes quality in a great brand designer. You need enough to be functional, but diminishing returns kick in quickly, and designers with a high bar for craft but limited abilities with ideas and no real sense of taste rarely do great work. Neat and tidy? Absolutely. Great? Rarely.

Of these three elements, it’s very difficult to train a machine to have superior taste or superior ideas. Yet, craft is eminently trainable. Taste and ideas have neither rules nor limits, yet craft is driven by the rules and principles that are taught to designers. And if rules and principles can be taught to a person, they can just as easily be taught to a machine. 

If I sum up what led us to where we are, my diagnosis is that as more designers entered more corporations, design became an insular professional culture that elevated craft above all else. As a result, we quickly lost sight of the commercial imperative to create innovative, different, and distinctive identities. We stopped having new and fresh ideas, stopped pushing the edges of what is possible, and stopped applying taste in ways that make brands stand out across a more challenging, fragmented, complex, and competitive array of online and offline channels. 

And, while we may have observed this phenomenon academically at the time, the rising tide of design was busy lifting all boats, which meant there was little or no commercial penalty for delivering bland, derivative, sterile work. In fact, for many clients, the clarity of knowing exactly what they were getting -modernity- became something of a comfort blanket, especially if their reality was defined by chaos (startups) or complexity (large organizations).

But the tide doesn’t rise forever. And, as Warren Buffet once famously said: “Only when the tide goes out do you learn who has been swimming naked.” And today, the tide very much appears to be on the way out. 

So, what will it take for us to begin swimming in warmer commercial currents again?

First, we must recognize that conformity, no matter how well crafted, is not our job. Difference is. To deliver that, we must embed new processes that seek to understand category, and broader design tropes, with the express goal of avoiding them rather than fitting in with them. 

Second, we must do a better job of educating ourselves and our clients on what makes for a successful brand identity, re-focusing on the paramount importance of creating unique, distinctive, and differentiated brand assets with which they can more effectively fight the battle for attention. 

Finally, we must rethink our own priorities as we consider what makes for great work and be brave enough to elevate novel conceptual ideas and non-obvious expressions of taste while simultaneously moving beyond our dogmatic obsession with craft. 

For, while the challenges of the moment are obvious, so is the opportunity. If only 15% of all brand assets are currently distinctive, the opportunity is to make a meaningful dent in the remaining 85%.

This isn’t just an opportunity; it’s a generational one. An opportunity for the next generation of branding professionals to supersede what came before. To play with new ideas, to explore fertile new aesthetic territory. To use the tools of automation to augment their work. And to make it their mission to forge a new path that’s unique to the challenges of the 21st century rather than continuing to be stuck plumbing the existential depths of the 20th.

Those who take this to heart will make their mark as we move forward, while those who do not will fall by the wayside. Reduced to mere a footnote in the history of our field.

Volume 148: Dog Days of Summer.

August 17th, 2023

Dog Days of Summer.

tl;dr: A trawl through the recesses of my mind.

I don’t have anything prepped this week, so this edition is more of a ramble through the disorganization of my mind. My apologies.

We’ve been seeing various articles about the transformation of advertising agencies lately, which suggests the long-running saga of long hours for poor pay to deliver mediocre work in a grim environment led by terrible human beings is finally catching up to them.

It’s pretty obvious that a rose-tinted view of design as the savior of advertising is abject nonsense. Not least of which because, A. Every ad agency has stumbled when creating design or branding shops, so why will now be different? (Hint, it’s a different business, not a tack-on service you chuck in to try and “rescue the relationship”), and, B. Ad agencies are suddenly recycling design as an idea just as the design hype cycle passes. Oops.

Then we have multiple articles focused on the transformation of Huge into a “product” shop. Not sure this is the answer either, but I understand that pricing by product is likely vastly easier and more effective to manage than the “all you can eat buffet.” (Nice analogy, by the way).

We could talk until we’re blue in the face about what ails advertising agencies. I’ve never worked in one, so I’m conscious of the potential for my own Dunning Kruger bias to be at play, but there is one issue that doesn’t get talked about enough. I wonder if a major wrong turn wasn’t taken back when digital first started rearing its head. For the first time in a long time, ad-agency revenues became truly squeezed, and they suddenly realized they were viewed as fairly low-level vendors rather than strategic partners to their clients. So they renamed planning departments “strategy” in the vain hope that it would magically enable a journey up the totem pole toward a seat at the top table.

The problem is that it was never going to work. First, clients already have strategic advisors crawling all over them; they work for the likes of McKinsey, BCG, and Bain. Second, nobody ever hired an ad agency to be strategic because advertising is widely viewed as a tactical discipline. So, labeling planners strategists didn’t make the agency more strategic, it just rendered the strategist title meaningless. Let’s face it, no client is ever going to hire an agency strategist to do what a management consultant is vastly more experienced at, known for, and well-armed to do. In the process, the agencies lost sight of their actual value, which is surely to be master tacticians within an increasingly complex and difficult environment.

We’ve lifted so much of our strategic discourse from the military, so I guess someone might have realized that when we discuss history’s great generals, we don’t refer to them as great strategists. No, we laud them for their tactical genius. Rather than deny what they had become, I suspect ad agencies could have fashioned a unique seat at the top table had they transformed themselves into the best tacticians money could buy rather than waving the term strategist around in surrender like a pair of dirty white underpants tied to a stick.

Next up, B2B branding has been getting a lot of attention recently, and not before time. This article from LinkedIn & WARC really caught me off guard. Not because it’s amazing but because it’s highlighting something so utterly basic and obvious that it was a straight-between-the-eyes moment. The premise is simple. Companies have pursued lofty purpose at a brand level and deeply activation-focused feature/function messaging at a product level, leaving a gaping hole where the promise to the customer should be. D’oh!

It’s frankly shocking that this should have to be written down, but it’s clearly necessary because it’s clearly a very real problem.

Staying on the B2B theme, I stumbled across this article over at the Harvard Business Review’s dumb Internet cousin, which also highlights something utterly obvious that many companies are getting wrong. Put simply, 80-90% of B2B buyers already have brands in mind when drawing up an RFP shortlist, and that shortlist often has as few as two companies on it. So if you’re focusing all of your attention on activation-based activities, sales enablement, account-based marketing, lead generation, and all that bottom-of-the-funnel stuff, you’re toast. Your customers are likely bypassing you because you did nothing to appeal to them or attract their attention before they were ready to buy, so you’re not on the list.

I’ve witnessed the ill effects of this for years, where a client feels like a competitor is sucking all the oxygen out of the room, that they’d really love it if they weren’t having to spend half the precious time a prospect gives them just explaining who they are, and although they believe they have a superior product and win more than their fair share of opportunities, they’d really love to have more of those opportunities in the first place…this, folks, is an archetypal manifestation of B2B brand weakness.

So, to round this off, here are three things that B2B marketers need to fix:

1. Invest in your brand, not just sales activation. The idea you can effectively capture the small percentage of customers who are ready to buy at the exact moment they’re ready to buy is nonsense. You need to prime the pump first.

2. Grow your base, don’t just view cross-selling to existing customers as a sure-fire path to growth. While it sure feels comforting when you have a huge sales team to feed, there’s zero data to support this as a growth strategy. 

3. Get your value propositions sorted out. It’s crazy how few B2B companies know how to frame their offering relative to real client needs and problems. The shift to a business outcomes focus is rendered moot when you can’t articulate the business outcome you’re delivering. Saying “we deliver business outcomes” is just as frustrating to prospective clients as describing your product features.

Finally, and this is a bit more philosophical, I wonder if the era of “product-led growth” is over, or at least the current iteration of it. (Although this guy thinks it’s taking off ¯ \_(ツ)_/¯ ). It’s been notable in the past year or two how many clients and potential clients I’ve talked to about how their products aren’t selling themselves anymore. To be honest, I’m not sure they ever did.

However, it’s also obvious to see how the world has changed. The idea of “product-led growth” was very much espoused by digital-native corporations over the past ten or twenty years. Certainly, it’s a term I first heard around 2009/2010. And, if we go back in time, there were vastly fewer digital products available back then. For context, the Apple App Store in 2008 had 50,000 apps; today, it has almost 4 million. I’d also hazard a guess that a smaller percentage of the 50,000 apps in 2008 were good products compared to a higher percentage of the current 4 million. 

It doesn’t take a rocket scientist to figure out that when there are vastly more products available, and more of these products are good rather than mediocre, then having yours stand out and sell itself because it’s superior to competing options is going to be increasingly unlikely.

In many ways, I think digital world products are just becoming more like physical world products. It was never the case that a superior product sold itself, it just felt like that when there were fewer options available, and most of those that were were crap. Bring the volume of choices up to par with the broader market environment along with a general bar raising on quality, and suddenly product-led growth doesn’t look quite so viable anymore.

Of course, there’s also a philosophical meta-theory that overlays the term, which is the engineer’s perspective that products that require “marketing” (by which they really mean “advertising”) are drastically inferior, only made successful via the advertising crutch supporting it. 

This has always been complete nonsense, but it’s an exceedingly common trope. As the old saying goes, nothing kills a bad product faster than great advertising. 

No. I deeply suspect a lot of digitally native corporations are going to have to fundamentally re-tool themselves to be great at product and great at marketing, and the marketing they need to get great at isn’t in their comfort zone of product marketing. Instead, it will require brand-building competence to stand out and drive preference in an increasingly competitive world.

Volume 147: Techno Feudalism?

August 3rd, 2023

Techno Feudalism?

tl;dr: Thought-provoking new work from Varoufakis & Doctorow.

OK. So, before we get into this, I want to issue a caveat. This issue has little explicit connection to branding, marketing, or design. So why am I sharing it? Many years ago, when I studied for my MBA, the most compelling and thought-provoking class I took was in philosophy, which I’d never previously considered relevant to a career in business. Yet I’ve relied more on those philosophy lessons over the past twenty-odd years than any business concept I studied. So, with that in mind, I think it’s worth sharing a perspective that’s, shall we say, a little more epistemological than usual, focused as it is on the end of capitalism and the feudal nature of what some believe has replaced it. Why is this relevant? Well, if true, it will have considerable knock-on effects on everything from consumer behavior to corporate strategy to the very nature of society. Meaning this has the potential to become the overarching context within which every business decision, including brand, marketing, and design, gets made. 

I promise I won’t be this philosophical again in a while. But I sincerely hope you find it as thought-provoking to read as I found it thought-provoking to write.

——————————————————————————

I’ve never really understood the term “late-stage capitalism,” no matter how many mouths I’ve heard utter it. Every time someone says it, I find myself missing the next five minutes of what they say because my inner monologue keeps asking questions like: “What does that mean?” “How do we know? “What if capitalism lasts for another two or three hundred years?” And, “Wasn’t this term invented 80-odd years ago already?”

And then I start thinking about civilizations and empires and wondering whether there was a point where the Roman Empire realized it was “late stage” or whether they just kept on blithely keeping on until it all fell apart. Or the Byzantine, the Dutch, or the British Empires. 

And then, exhausted by my inner monologue, I refrain from diving down the Wikipedia rabbit hole to find out and tune back to wherever the conversation has now gone. 

And while I understand that it’s largely rhetorical: An overt statement of fear of environmental destruction, an understanding that finite resources cannot possibly drive infinite growth, and a queasy sense that something seems to be rotten in Denmark, it’s also hard not to notice that those most likely to utter the term “late stage capitalism” tend to have visibly benefited from the system, being comfortable if not outright wealthy.

However, while I’ve never understood the statement in a literal sense, it’s hard not to argue that something doesn’t feel right. Clearly, something really does seem to be rotten in Denmark, or perhaps more specifically, at the heart of our regulatory systems.

For a long time, corporations have understood that the highest ROI of any dollar they spend is on political lobbying. The results are all around us, all the time: the vastness, complexity, and cruelty of the for-profit healthcare system, check. The squalor of for-profit prisons, check. The inevitable multi-billion dollar cost overruns by defense contractors, check. Regulators captured to the point that planes fall out of the sky, check. Productivity improving by thousands of percent while the returns go primarily to the already rich, check. Super expensive broadband without competition, check. And the fact that today the planet is -quite literally- on fire, check.And then there are the small things, like private equity companies vacuuming up entire sectors of the economy, like cheerleading, and then jacking the prices way up because there’s nobody to stop them, check, check, and check again. 

The reasons are simple. If we think of business as a game, then regulations represent the rules by which the game is played. Want to win the game? You have two options. Compete harder, which Peter Thiel famously described as being “for losers,” or encourage the rule-makers to either change the rules in your favor or look the other way when there aren’t any. Of course, given the choice, the answer is as simple as it is obvious; put your energy into capturing the regulatory system for your own gain. 

And that’s what Cory Doctorow has been writing about relative to cars as he reflects on a new book about to be published by Yanis Varoufakis called Techno Feudalism.

The way they see it, capitalism is already dead, replaced by modern-day feudalism. And it’s hard not to see what they’re referring to. 

If the defining factor of capitalism is to make a return by using capital actively - by doing things like investing in factories, building products, and then using tools like branding to compete against others in trying to sell them, then the defining feature of feudalism is to make a return by using capital passively - to hold a monopoly upon which you charge rents like charging people monthly fees for essential features in a car they already own.

In the middle ages, feudal monopolies came in the form of land controlled by kings and the aristocracy, from which rents were extracted from the populace. The authors postulate that digital platforms are the landowners of our modern digital economy, using monopoly powers to extract excess rents rather than compete on a level playing field for our business. 

This is Apple charging 30% for every transaction on its app store, advertisers sucking it up when Google rips them off because they have no other choice, BMW being a bag of dicks and charging a monthly fee for a warm seat, John Deere bricking equipment you thought you owned (but you don’t because you’ve only licensed the software the equipment relies on to function), or your Tesla driving itself out of your driveway and unlocking the doors for the repo-man, and so much more.

Their case is that as layers of software and “digital” are added to everything we buy, corporations are no longer competing to provide value in the capitalist sense but are abusing the legal protections provided to software and internet companies to extract ever greater rents in return for marginal delivery of value.

It’s hard not to see their point. Digital rent-seeking is all around us, it’s impossible to avoid, and it does feel like it’s making a mockery of our stated societal commitment to capitalism. Want to compete against vast unregulated monopolies, aided and abetted by the abuse of DRM laws and Section 230? Good luck because you won’t find a VC on the planet willing to back you. 

And this isn’t just about the biggest digital platforms. Any corporation can now “digitally enable” their products. Connected toothbrush, anyone?

Such seemingly odd decisions -does anyone want a connected toothbrush?- make vastly more sense when we realize that digitally enabling a product changes the very nature of what the product is and, thus, how it can be monetized. Once a product is connected, we no longer own it; we’ve merely rented it. While the hardware might be ours, the software necessary to function has only been licensed. And because the legal protections pertaining to software are so strong, we have little or no agency. Without right to repair laws, we can’t fix it if it breaks. Because DRM laws are so strict, we have no clue what data the product collects and sends home to base. Worse, it’s illegal to investigate and find out, and even if we could, we’d have no say in what the corporation does with that data anyway. And business models can now become overtly extractive rather than value-additive. All those options you specced on your Tesla when you “bought” it new? Well, as soon as you try to sell your car used, Tesla can easily and legally turn them off. Then the person buying the car from you has to rent these features all over again from Tesla, significantly reducing the value of your used vehicle in the process. Heads, tails, it doesn’t matter. Either way, we lose.

And yet, as compelling as this perspective appears to be in describing a good portion of what seems so rotten in Denmark, I’m still finding it hard to wrap my head around it completely. I really like Apple products, and as a consumer, it’s hard to view the company as extractive when I so clearly value what it offers. Equally, I’m an Amazon Prime addict. As with many, it’s my most salient retail brand, with me everywhere I go at any time of the day, night, and early hours of the morning, enabling incredible convenience at -usually- reasonable prices. While I’d never buy one, people seem to love their Teslas. And having worked in the ad-tech space, advertisers seem to like working with Google almost as much as they hate working with Meta. So, is this really a case of extraction without value? 

I genuinely don’t know. But I can see that paying a monthly subscription for a heated seat in my car is just the extractive beginning. The opportunity to make excess, extractive profits in industries that have never had that opportunity before will be too great to pass up. And without stronger regulation designed to protect the consumer rather than the software owner, it’s hard to see the pendulum swinging back anytime soon.

And that should worry all of us. While capitalism has many flaws, it’s proven vastly more beneficial to society than feudalism ever was. Universal schooling is a product of the capitalist-driven industrial revolution, as was mass production, which revolutionized modern society, and child labor laws protecting children from exploitation. China’s shift from collectivism to capitalism raised more people out of poverty faster than any other society in history. And the famed Scandinavian social democracy depends upon robust free-market capitalism to pay for it, managed by a regulatory state focused resolutely on ensuring meaningful competition throughout the economy. 

As an Island Scotsman from the very North of the country, the idea of modern-day feudalism is chilling. The feudal era was not a time of progress but of cruel regression. The history lessons of the Highland clearances and indebted people sold into indentured servitude in the new world are burned into my memory. I’ve walked the hills past the gutted remains of entire communities kicked out because they couldn’t afford to pay rent to the Laird, packed off to the colonies, and then forced to work for decades to pay the debt and earn back fundamental freedoms. And, with the idea of modern feudalism in mind, it’s hard not to view heartbreaking issues like medical bankruptcy as the modern-day equivalent.

So, yeah. It’s hard to see where this ends, but this is one of the most thought-provoking, hard not to nod your head to, and difficult to come to terms with arguments as to how the very economic system we live within has changed that I’ve seen in a very long time.

I hope they’re wrong. And if they aren’t, that our legal institutions and political bodies haven’t been so thoroughly captured as to never do anything about it. But I fear that ship may have sailed, at least for now. 

But, if this all seems a bit depressing, here’s some good news. Scientists believe they’ve successfully synthesized a low-cost room-temperature superconductor. Granted, this sounds like a snoozefest until you realize that if true, it’ll completely revolutionize everything electronic, enable the shift to electrification that a low-carbon economy requires, and make super cool but rare and expensive things like maglev trains entirely economically viable.

Volume 146: Corporate Seppuku.

July 27th, 2023

Corporate Seppuku.

tl;dr: Time to X-it.

It’s become pretty clear in the past few days that anyone who knows anything about this branding stuff thinks changing the name of Twitter to X is deeply and utterly daft. I concur. It’s literally insane.

So why do it?

My guess is that Twitter is in much worse shape than anyone realizes.

To understand why, look no further than the historic behavior of Twitter owner Elon Musk.

One of his defining characteristics is his narcissism and publicity-seeking. Understanding from a very early point in his career that personal fame could be extremely valuable as a corporate competence because staying top of mind in the current media landscape directly translates into value. This is why he doesn’t seem to have minded his own perception shift from innovator to infamy. Understanding that fame is fame and that infamy is valuable too.

What isn’t valuable is irrelevance.

At Tesla, his carnival barker routine proved game-changing. It single-handedly allowed the company to pour its resources into product development and the experience rather than being forced to go toe to toe with the automobile industry in the advertising stakes. Because of the sheer cost this would’ve incurred, it’s almost certain that Tesla could not have succeeded the way it did had it not had a carnival barker like Musk at the helm. 

What’s most interesting about this is that whenever doubts emerged and Tesla stock started to flag, Musk would pop up with a new announcement designed to seize the narrative, like Autopilot (2014), blasting a crash test dummy into space in a roadster (2018), Cybertruck (2019), and robotaxis(2019). In other words, he’s proven adept at opportunistically manipulating media narratives in his favor when he needs to the most.

Enter X.

First, why do this at all? Second, why do this so shambolically? Third, why do this with nothing but a never, never promise of “everything” as the reason?

Why, the existential dread of irrelevance, of course. The thing Musk fears most of all.

Clearly, many forces are intersecting to put a crimp on Twitter: increased competition - Threads, Mastodon, Post, Bluesky, Spoutible, to name just a few. Advertisers bailing, rampant bots and conspiracy theorists, Elon stansand their blue checks, bits and pieces breaking and not being repaired, and other self-inflicted wounds such as DDOS-ing itself and then claiming it a feature. Not to mention the sword of Damocles that hangs over the whole thing, its debt.

Add it all up, and almost certainly, time spent on the app has declined, subscribers have declined, advertising revenue has collapsed, and for the first time in a long time, perhaps ever, Space Karen is staring straight down the barrel of irrelevance.

So, he reacted the only way he knew how—as a media opportunist, firing off a big statement without anything meaningful to back it up. In this case, announcing the shift to X.

Will the “everything” app work? Well, the product would need to change fundamentally, gatekeepers like Apple would need to get on board, regulators would need to be happy, and consumers would have to suddenly start trusting an app that’s barely capable of handling posts…with their financial information while simultaneously overcoming their worry that X sounds like p0rn. So, no. Probably not.

But here’s the thing. When we look at rebrands like the shift from Twitter to X, we can’t view it through anything approaching a normal lens. Because it’s entirely possible, indeed it may even be probable, that in a couple of days, weeks, or months when he needs another hit of publicity, Musk will simply turn around and hype the return of Twitter and retiring of X.

And, as for the continued irrelevance of Twitter/X? It’s tough to see a future that offers anything else. So watch for further braying from Musk. Because the deeper X slides into irrelevance, the louder and more outrageous his oh-so-very-public existential crisis will become.

Until eventually, he gives up, bails out, and moves on. 

Or…as some people believe, he tanks the business to the point where he can buy the debt for pennies on the dollar, then rebuild it like a phoenix from its ashes. 

Me, I’m not buying it. I think this is nothing more sophisticated than an unbelievably rich man experiencing a very public midlife crisis as he wrecks his way through a business he desperately tried not to buy in the first place.

Volume 145: The Branded Feature.

July 13th, 2023

The Branded Feature.

tl;dr: Another in my occasional brand architecture specials.

I’ve talked before about how poor the branding literature tends to be on brand architecture. A realization I came to many moons ago while consulting with G.E. while at the same time reading a book that showcased it as the premier example of a master branded/branded house architecture. Except that what I was reading and seeing in the real world were two radically different things. (For the record, what was happening within G.E. is what I call an accidentally atomized portfolio. The organization had responded to a CEO edict to be “no1 or 2 in any market or get out” by defining its markets ever more narrowly and thus atomizing the brand into thousands of disparate little G.E.s in the process).

Anyway, there are vastly more areas of confusion in brand architecture than simply between the four classic frameworks that are commonly labeled: master branded/branded house, sub-branded, endorsed, and portfolio/house of brands, and not just because most large organizations utilize multiple differing architectures, rather than just one.

Prime within that list of confusion is the branded feature.

What is a branded feature, and why does it matter, you might ask? Well, if you’ve ever heard of a Retina Display, that’s a branded feature. It’s when you take a product feature, and instead of simply describing it, which in this case would be a 300 pixels per-inch screen, you brand it (Retina Display).

What’s fascinating is that branded features are far more definitive of the Apple brand architecture than whether it’s a singular brand or sub-branded (in case you’re wondering, anyone who thinks Apple has a sub-branded architecture would be incorrect). 

Why Apple pursues this strategy requires us to look back historically. Steve Jobs was famously enamored of Sony co-founder Akio Morita, who’ll go down in history as the inventor of the Walkman and a strangely unappreciated marketing genius.

The branded feature is one of the brand architecture techniques Morita pioneered at Sony, which Steve Jobs then copied. When I was kid, for example, I distinctly remember the Sony Trinitron being the best TV in the market, which remains the reason I exclusively buy Sony TVs many years later, and long after Trinitron ceased being a thing. (In case you’re wondering, back in the day, all CRT TVs were curved across all four sides, except the Sony Trinitron T.V.s, which were only curved top and bottom, leaving the sides perfectly flat, giving you a less visibly distorted picture as a result).

Why do you waste time and energy branding features, you might ask?

Well, put very simply for two reasons: 

1. Because you’re operating in a category where product obsolescence is quick, and opportunities for differentiation are limited, for example, T.V.s. Here, you might brand a particular technology or feature that will run across a model range and longitudinally across the replacement cycle. To continue with the Trinitron example, it represented a screen technology you could only get from Sony; it ran across multiple T.V. models and remained consistent over time as newer ones replaced older models. In other words, the branded feature had greater longevity and distinctiveness and delivered more value in driving consumer desire than any individual product, which were largely unbranded outside of a model number because there were too many being replaced too quickly to bother putting scarce brand-building resources into any one directly.

2. Because you can, this is not me being frivolous. One of the critical aspects of the branded feature is that it requires a lot of marketing discipline and resources to pull off, so it tends to be a strategy only available to the largest brands in a segment as, in general, only the largest can afford to establish and then build and manage multiple feature brands across their portfolio and have consumers get some sense of what they mean. (This doesn’t mean others don’t try, it’s just that if you lack the resources and discipline, it’s unlikely any branded features you try to launch will become meaningful as differentiators).

Let’s look at Apple through this lens for a second. Off the top of my head, I can think of the following branded features they offer - Retina Display, Bionic chips, M chips, MagSafe, Thunderbolt, ProMotion, TrueDepth, Photonic Engine, Digital Crown, Dynamic Island, FaceID, TouchID…

Some of these are proprietary technologies (MagSafe), and some are widely available features labeled to look like a proprietary Apple technology. ProMotion, for example, means a 120hz refresh rate screen, widely available on PCs and Android phones.

Net, net, however, what Apple does is run branded features across its product categories (e.g., Retina Display on your iPhone, iPad, and Mac, and FaceID on your iPhone and your iPad) and over time. Hence, as models change, they will still have a Retina Screen or FaceID. And, because these things have been branded, they now look like things the competition doesn’t offer. Not necessarily because they don’t (Facial recognition, for example, is pretty standard these days), but because they can’t offer the specifically Apple-branded variant.

The goal is to create simple shorthands for feature superiority, create consumer desire for branded features with a longer arc across which to become distinctive than any specific product and create competitive separation and differentiation - especially if you seek a category price premium, which branded features enable because it gives you something the competition does not have. 

A further benefit is that you can turn branded features on and off within a product line, which then helps your customer navigate through different price points. Thus, the iPhone 14 Pro has more branded features than the iPhone SE, which helps justify a significant difference in price between two products that essentially do the exact same thing. 

So, when and where do you use a branded feature strategy, and when and where don’t you? 

Well, just in case Sony and Apple weren’t a big enough clue, the defining characteristics for when branded features might be appropriate are generally when:

• You’re in a category within which there is a fast turnover of SKUs due to an ongoing cycle of obsolescence/upgrade. E.G., consumer electronics, computing, SaaS.

• It’s hard to differentiate individual products because they won’t exist long enough to make the investment worthwhile.

• You wish to establish the basis for charging an ongoing price premium because you have something the competition lacks.

• You need many individual SKUs to compete in all market segments, so you need a shorthand for the customer to navigate the price/value equation at each price point.

• You have the consumer attention, resources, and marketing discipline to build meaning into branded features across multiple product SKUs and over time across multiple product cycles. 

When a branded feature strategy doesn’t work is probably easier to describe using an example. Take the W Hotel, which tried to re-brand the concierge desk as “whatever, whenever” without realizing that:

A. What you call the concierge desk makes little or no difference in differentiating a hotel brand; it simply isn’t something anyone chooses a hotel based on. 

B. If you don’t have the discipline and resources to build meaning into the branding, all you create is confusion rather than value. 

This is why, when I used to stay at the W Hotel, I’d stare at the in-room phone in frustration before randomly hitting buttons because I couldn’t figure out which of its seemingly random labels would do something as basic as put me through to reception.

So, yeah. The branded feature. Kind of an old-school brand architecture strategy first popularized by Sony, then widely copied by the consumer electronics category, before being perfected by Apple.

If you fit the criteria of fast product cycles and rapid technological churn, where it’s hard, if not impossible, to build long-term equity into any single product variant, then it might be the strategy for you too.

If you have the discipline and cross-silo management competence and can afford to do it, that is.

Volume 144: A Little Less Grey.

July 6th, 2023

A Little Less Grey.

tl;dr: FIAT hides EV inferiority behind brilliant new branding campaign

I own a grey car. There, I’ve said it.

I don’t love that it’s grey, I don’t hate that it’s grey. It is, however, infinitely better to be grey than white. However, grey isn’t the color of emotion; it’s the color of compromise. 

Unfortunately, our previous car lived up to its name (Found On Road, Dead), which meant we were limited to taking whatever was on the lot (no luxury of being able to wait six months for us). We chose grey because my wife is pathologically opposed to owning a colorful car, believing that it’s “more likely the cops will stop you,” as if being grey magically renders a massive SUV invisible to the cops.

Anyway, I mention this because talking heads are, quite rightly, losing their minds over a new campaign from FIAT that centers on the idea that FIAT only sells color, not boring old grey. And I can see why they love it so. This post on LinkedIn doing a much better job than I of explaining why it represents such good branding.

Now, while it would be very tempting to ask the simple question of how car ads became so lazy that this single one stands out the way it does, I’ll refrain. 

Instead, I’d love to talk about the market conditions into which this ad is being placed and hence the specific importance to FIAT.

First, the car industry faces an imminent reckoning. For decades, it overproduced vehicles necessitating deep discounting, interest-free financing, and sweetheart lease deals to keep iron shifting from the dealer lots. Most of this was in the interest of volume and market share rather than profitability, which the industry has been historically poor at.

Then two things happened, electrification and Covid. Let’s take each in turn:

First, bizarrely, electrification appears to have caught many in the automotive industry napping, specifically FIAT owner Stellantis, which is way behind the eight-ball EV-wise. (I’ll come back to this later)

To fund the shift from cars that run on dinosaur juice to those that run on electrons, the focus on market share has been tempered by a new emphasis on profitability. Ford being a notable example: it massively slimmed its portfolio of gas vehicles and cost-engineered the crap out of what was left. (If you’re wondering why a Ford cabin feels so cheap and has such a poor new car reliability record, saving pennies to pay for the shift to EVs is why). 

Then Covid came along and put the kibosh on supply (first from locked down factories, then supply chain snafus, most notably, chips) at the same time that stimulus fueled consumers increased demand. This led to car companies doing two things. First, they maximized profits by only releasing fully optioned vehicles at top-end prices to their dealers. Second, they tried to reduce inventory costs by shifting people from the habit of buying a discounted vehicle from dealer inventory toward paying full price, sight unseen, and then waiting several weeks or months for it to arrive.

However, all good things must come to an end. Supply chains have largely come back to normal. New car inventory is spiking. High-interest rates are crimping demand. And, it’s very unclear whether people will continue to order and wait when dealer lots are full and discounting is back.

This means that while dealers could get away with charging over list for even modest family vehicles in the last couple of years, now they cannot. 

As a result, automotive companies find themselves in an increasingly tight bind. Expensive, fully optioned vehicles are piling up on lots. They need to shift this inventory, but they don’t want to go too heavy on the sales promotions because they need profits to help fund the shift to EVs and because Wall St. has become newly enamored of the idea of automotive profitability. And while a singular bright spot is that demand for EVs and fuel-efficient hybrids remain extremely robust, certain brands have been way behind in the development of such vehicles…namely, Stellantis, owner of FIAT, which the US EPA has labeled as having the worst fuel efficiency of any major automotive group, dependent as it is on some pretty ancient engine designs.

So, what do you do if you’re way behind on the technology that’s driving demand, find your brand (almost certainly) losing relevance as a result, yet don’t want to discount the crap out of your inventory because it would mean entering a downward price spiral that would trash your brand and severely crimp your ability to fund the shift to electrons that you’re already behind in?

Why you focus on color. Of course.

It’s a brilliant example of what I label “playing baseball while everyone else plays football.” (Insert sports of choice wherever you may be). What I mean by this is that instead of attempting to play someone else’s game that you’re not best suited to play, try and change the nature of the game instead.

In this case, if you don’t have decent EV tech to offer, then attempt to change the basis of consumer choice: Celebrating Italian-ness, bringing color to people’s lives, and proving it out by promising never to sell you a grey car. 

Brilliant.

And it’ll almost certainly work because instead of trying to duke it out on the marginal functional gains of a little more range here or a little higher gas mileage there, FIAT is going straight to the emotional cortex of the car buyer. 

This campaign isn’t asking if you want a grey car or a colorful one. It’s asking whether you desire a life with a little more non so che in it. And, within a desperately serious industry that’s spent years preening about being globally from nowhere, and where color options have become limited to white, black, and fifteen shades of grey. Well, I get where they’re going. 

So, yeah. This is a great campaign. Not just because it’s a great ad built atop an obvious-in-hindsight category insight (and obvious is not intended negatively here because it’s only obvious now somebody has done something with it) but because of the particular circumstances FIAT finds itself in where such a campaign has the potential to solve a genuine business problem.

It’ll be interesting to see how it does. I suspect it’ll make a meaningful difference in maintaining and possibly elevating market share while reducing promotional price pressure. And, if it’s successful and they stick with it (by no means guaranteed with a car company) and extend the idea further, it’ll likely do plenty to help once Stellantis does have the EV tech to compete.

Because, for once, we now have a car brand taking a position on something rather than blathering on and on about absolutely f’ing nothing.

Over to you, well, every other car company.

Volume 143: The Schrodingers Cat of Business.

June 29th, 2023

1. The Schrodingers Cat of Business.

tl;dr: Generative AI: Be neither hype-bro nor Luddite.

Shortly after starting my first job in branding in December of 2000, an aged production specialist regaled me with tales of the beforetimes when he used to typeset client presentations by hand. And while he talked of these all-night typesetting sessions with a distinct sense of rose-tinted nostalgia, I remember being horrified at how labor-intensive something as seemingly innocuous as preparing for a client meeting used to be.

Moving forward, I expect this same feeling of shock when the next generation of talent listens to someone like me regale them with tales of how everything used to be done by hand on a computer screen…using a keyboard, mouse, or Wacom tablet. Wut?

This is because the Schrodinger’s Cat of Generative AI is upon us. 

Schrodinger’s Cat because we don’t yet know its limits. So, until we open that door, it has the potential to be either shockingly terrible or utterly amazing at the exact same time. This means I’m equally unwilling to make breathless predictions of what’s possible as I am to make scorched earth pronouncements of why it can’t, won’t, or shouldn’t be used.

So, please think of me as the Schrodinger’s Cat of vacuous talking heads 😉. 

Speaking of talking heads, Mark Ritson recently took an impassioned anti-AI stance on LinkedIn. Yet as I read it, I was struck by the contrast that, even as the likes of Mr. Ritson and others decry AI-driven advertising as being deeply lacking, experiments happening in real-time show we already struggle to tell the difference between human-made ads and those made by machines.

So, aside from the inevitable conclusion that, much to Mr. Ritson’s chagrin, most human-ad making will likely be toast in the not-too-distant future, why can’t we tell, and does it matter? 

Well, at least some of this comes down to a trend that’s been happening for a long time: while the creative services industry pretends to sell creativity, it doesn’t. Otherwise, the largest and most financially successful agencies would be the most creative, and they most certainly aren’t. (As an aside, whoa, try clicking that link. Interbrand has always been shocking at communicating, but I have no clue what these talking heads are on about, and I’ve worked in this business for over 20 years). Anyway, contrast this with management consulting, which sells analytical capabilities. McKinsey is both ginormous and could easily be defined as the most analytical. Corruption aside.

In truth, real creativity -insightful, empathetic, challenging, and differentiating- is a niche product sold to buyers with a higher risk tolerance than the norm. Why? Because creativity is messy, risky, ambiguous, and rebellious. It’s unpredictable and desperately hard to measure ahead of time. For example, the now-famous and very effective Cadbury gorilla spent months in limbo between production and the ad running because the execs in charge were afraid of it. Instead, most of what agencies sell as “creative” is comfortably dull, predictable, middle-of-the-bell-curve, low-risk formulas with the merest gloss of creativity sprinkled atop.

And machines are excellent at replicating formulas.

This inevitably brings me back to the question of what we’re selling and, as a result, what AI will really be mimicking. Especially when the majority of the creative services industry appears to have largely abdicated responsibility for being, you know, whisper it…creative.

Let’s look back for a second to better understand why. Over the past twenty years, VC-backed adtech and martech firms have done an incredible job of weaponizing the so-called Wanamaker Paradox under the guise of “digital transformation.” Persuading almost everyone that the biggest problems in marketing aren’t problems of creativity but efficiency.As a result, efficiency has become the meta-narrative that dominates everything within today’s marketing conversation.

The net result? The best and the brightest creative minds no longer work in the creative services field. They have better opportunities elsewhere. 

As I joined the branding game back in 2000, there were vanishingly few commercial jobs that openly sought creative, imaginative minds, and pretty much all were at the creative services end of the marketing spectrum (advertising, branding, industrial design, retail architecture, etc.). Today, that’s not the case at all. Today’s best creative minds are building their startups; they’re joining tech companies; they’re making TV shows; they’re becoming innovation consultants; they’re building their celebrity on TikTok; they’re adding creative capacity to management consulting firms or private equity; and they’re increasingly becoming software engineers as code becomes the material from which modern-day creativity makes the world. 

And as writing code shifts from logic and math to the fuzziness of natural language, this shift will only deepen.

This leads me to believe that before we reflexively decry the use of AI in delivering creative output for marketing, we must first acknowledge that we human beings haven’t exactly been outstanding in our use of creativity in the field ourselves, no matter how loudly we might proclaim otherwise. 

And that’s important because when we hear about NVIDIA doing a global deal with WPP to offer things like AI versioning, post-production services retouching, background replacement, etc., we must remember that this use-case has little or nothing to do with creativity. Production re-touching could reasonably be viewed as low-value manual labor that can now be automated for speed and efficiency. Equally, much of the manual labor currently labeled UX design will likely be automated, as will those things agencies like to charge free/intern labor for doing, like designing the mechanical variants for CPG packaging or creating brand guidelines. Yes, this shift will have a material impact on business models, but it isn’t replacing creative work. It’s replacing the manual labor profit pools that creative work has traditionally surrounded itself with.

So, what about the creative work itself? Clearly, this will face AI-driven disruption, and I’ll be curious to see how that pans out. And while I promised not to make predictions, I do have a totally unsubstantiated theory I’d like to share (A distinction without a difference? Dunno, but I dug a hole for myself when I oh-so-cleverly referred to Generative AI as the Schrodinger’s Cat of business, so now I’m digging my way out of it any way I can). Anyway, here goes:

• The ad-tech/mar-tech narrative around efficiency has played out, and clients are now (quite rightly) beginning to look at the tech stacks they’ve been sold as sources of inefficiency, ripe for cost-out transformation.

• The tech co’s aren’t daft and know this is coming. As a result, they’re about to pivot from media efficiency to creative efficiency as their focus. In the past, creativity was ignored because you couldn’t build a tech solution to solve for it. Now you can.

• The impact will be intense as generative AI is pushed into every area of creative services, likely before it’s ready for prime time, before we have a good handle on what it’s good and bad at, and before people really know how to use it. Adoption will be rapid because 1/ Clients value efficiency and predictability more highly than the riskiness of creativity, 2/ We struggle to tell the difference between AI-driven and human-driven creative output anyway, 3/ Billions of dollars worth of VC and management consulting hype will tell clients the Schrodinger’s Cat is utterly amazing at this creativity lark, 4/ Corporations, especially public corporations, are under intense Wall Street pressure to show they have “an AI strategy,” and, 5/ Because it’ll be cheaper.

• At least one of the major advertising holding companies will self-immolate during this transformation as they gleefully slash human costs while continuing to charge fat fees. Well, they’ll try to anyway. This will backfire because clients don’t trust them, and Silicon Valley will be busy turning creativity into a tech solution in the exact same way it turned media into a tech solution. 

• Over time, diminishing returns from AI will kick in. Like anything everyone can access, any advantage it once provided will be competed away. And, as more work becomes generative, purely AI-driven creativity will stall. With less human creativity for the machines to learn from, we’ll be left with a synthetic loop, which will increasingly struggle to provide novel or interesting creative solutions as it gets stuck in a rut of predictability…

• …which will precipitate a phoenix-like rise of “idea shops” from the ashes AI leaves behind. Only these will be different. They’ll be a lot smaller in headcount. The days of advertising agencies with a thousand people in a single office will be long gone by then. Manual labor jobs will have been automated, many “creatives” will now be machines, and we’ll be left with a few smart, talented, highly creative people pulling the levers. Many of these idea shops will likely work solely to inspire the machines - improving the creative quality of the model - rather than making ads, logos, or other creative assets themselves.

• Aside from the VCs, data vendors, and a new generation of creative tech, small businesses will be winners. They’ll now have access to professional quality creative assets generated cheaply. What happened before when technology firms massively democratized digital media will happen again, only this time in the production of creative assets. 

But again, please don’t read this as a prediction—merely an unsubstantiated theory. In other words, I’m probably full of shit. 

2. Google Enters The Finding Out Phase.

tl;dr: New revelations that Google serially defrauded its advertisers.

It’s a popular misconception that Google became as big, profitable, and influential as it is because it’s a brilliant tech innovator with the smartest people, platforms, flywheels, and suchlike. This is a smokescreen. In truth, Google is as big and as profitable, and influential as it is because it was a brilliant dealmaker that saw the potential for online advertising before anyone else did and serially gobbled up its competition through acquisitions to the point that it now monopolizes all sides of the ginormous business of digital advertising.

As a result, it could reasonably be argued that Google’s success has more to do with a failure of antitrust regulation than with Google’s innate capacity for innovation. 

The challenge with being an unregulated monopoly is no longer having to find ways to match or exceed your competition because you have none; instead, you must now resist the temptation to place your fingers on the scales in ways that benefit you at the expense of your customers.

And this is a challenge at which Google increasingly appears to have failed. Now appearing to enter the “finding out” phase as a result.

In addition to facing two EU antitrust investigations, there have also been US court revelations vis a vis an allegedly illegal sweetheart deal with Facebook, codenamed “Jedi Blue” (very quickly, Google and FB are accused of illegally colluding to lower advertising costs for FB in return for it killing something called “header bidding,” which competed with Google’s Open Bidding alternative). And now, a WSJ article (paywall, sorry) accuses Google of having serially failed to meet its stated standards, possibly defrauding its advertising clients in the process. 

It’s a doozy.

Put simply, advertisers have been paying to run ads on Google-owned YouTube, but they don’t run there. Instead, they’ve been running on 3rd party sites, where the ad often isn’t viewable—running muted off in a corner somewhere. In financial terms, the issue is significant because YouTube ads are roughly 20X more expensive than running a video ad on these third-party sites. Worse, the sites these ads have been running on were found to be generally low quality, often espousing misinformation and hosting pirated content. In other words, the very last place any blue chip brand wants to be seen, assuming real people saw the ads at all. 

Google, of course, refutes that it did anything wrong, but advertisers are likely to take a very different tack. Especially since those named in the article, such as Disney, J&J, American Express, Samsung, and the US Army, aren’t exactly lacking in legal firepower.

So, what next? Well, in addition to going on a major apology tour to placate its biggest advertisers, Google will almost certainly have to pay back a tonne of money that’ll likely represent a significant financial hit even to a business that prints money the way Google does. Not to mention the fuel it adds to the already rising antitrust flames.

Beyond that, I suspect we’ll see further fallout as advertisers that no longer trust Google start looking more deeply into their relationships and begin auditing what’s really been going on. And, I deeply suspect that where there’s smoke, we’ll probably find more fire…

And ultimately? Well, for me personally, I want to see Google broken up. Not because they’re -allegedly- fraudsters but because whenever a company finds itself with unregulated monopoly power, it has adverse societal effects. Innovation and competition get stifled, costs rise, and the chances of thumbs being placed on scales increase. And in the specific case of Google, there’s a direct thread between its excess monopoly rentsand the financial collapse of publisher business models.

Instead, we should treat them like Standard Oil or the Bell Telecom Systemand break them up. And no matter how much whining we might hear, it would be a good thing. Government-mandated corporate breakups almost always lead to a more valuable and dynamic set of new corporations than the monopolist that was originally there.

The capitalist thing to do is to break them up. The crony capitalist thing to do is to leave them alone.

Anyway, expect this story to run and run. 

3. Distinctly Barbie.

tl;dr: One of the vanishingly few brands to be distinctive.

If you’ve spent any time on LinkedIn or Twitter recently, you’ve almost certainly come across someone pumping the marketing tactics utilized to promote the forthcoming Barbie movie.

And it’s a fun thing to look at, Barbie being one of those franchises that’s so non-threatening that it’s super easy to get other brands to come along for the promotional ride, opening up all sorts of co-branding opportunities. Barbie-themed AirBnB in Malibu, anyone?

I have no proof to back this up, but I also wonder if the recent spate of underperforming movies, in addition to the inevitability of sequel fatigue, has something to do with a pullback in marketing spend by studios facing deep financial concerns as interest rates rise, cinema audiences fall, streaming media continues to be a money pit, and cable TV revenues decline? If so, it might suggest going big on Barbie to improve its chances of breakout success.

However, it’s the distinctiveness of the Barbie brand that makes these lists of tactics look so impressive. With JKR recently sponsoring a proprietary report into distinctiveness that shows only 15% of brand assets have any,this is the thing that stands out an absolute mile for me. (As an aside, thank goodness someone has finally done this research, and thank goodness JKR didn’t pursue the path of least resistance, which every other agency does…and create a list. The easy thing would’ve been to create a list of the “most distinctive” brands. Yawn.)

Anyway, as I look through these LinkedIn posts and Twitter threads, my primary response is that the promotion of the Barbie movie reads like a love letter to the distinctiveness of a Barbie brand Mattel has done an incredible job building over decades. 

How else could you do a billboard with nothing but a single color and date and have anyone know what it’s for?

I have no idea how the movie will do at the box office, but I would suggest that anyone client-side look at their brand through the Barbie lens. Chances are, somewhere in the region of 80+% of what you find won’t be distinctive at all.

And if you decide to do something about it, keep those Barbie images handy as a reference. Because the truly damning indictment here is that the very same branding agencies that might reasonably be viewed as guides through a process of creating distinctiveness are exactly the same agencies that spent the last twenty years blanding the crap out of everything and making the terminal error of conflating good design with good branding when it’s so often anything but. 

So take that list of Barbie tactics and be explicit, “I want my brand to be as distinctive as Barbie.” 

And nothing less will do.

Volume 142: To Re-brand Or Not.

June 22nd, 2023

To Rebrand or Not.

tl;dr: A largely misunderstood activity.

With WeWork undertaking something of a rebrand, I figured it might be good to discuss rebranding because, in the WeWork case, it’s unlikely to make much difference. Not because of anything that changed graphically but because it’s a business incinerating cash, with a stock price that’s precipitously collapsed under the weight of its cumulative losses and has a bleak future. (Fun fact. Softbank invested over $10bn in WeWork. Ousted founder Adam Neumann was given almost $2bn to leave. And the business is now worth around $450m in total. Ouch) Under such circumstances, any rebrand activity is going to make about as much difference as rearranging the deckchairs while Rome burns. 

However, it demonstrates an increasingly common reality, which is that rebranding - especially the variant where you change the full identity system, logo, and all - is increasingly being treated more like an advertising campaign than something you engage in only very rarely. With some businesses rebranding multiple times in just a few short years. 

Clearly, rebranding, like much in the branding sphere, is a deeply misunderstood activity. Not least because it also suffers terribly from a medical condition that courses through the veins of marketing: vaguedefinitionitis.

So, before we get into the question of when it makes sense to rebrand and when it doesn't, it’s first worth defining what we mean when we’re using the term.

There are generally four situations commonly termed “rebrand,” but each is a bit different, and to make things even more confusing, they can also be layered atop one another. Let's take each in turn (Note, that since I come from the branding side of things, that’s my bias in these definitions):

1. The advertising rebrand:
   This is when the company or product has repositioned and has a new advertising campaign/platform and tagline, but there isn’t a meaningful change to the name, logo, visual system, or other evergreen brand assets. Here, the term rebrand is commonly used in the advertising media press to announce a new campaign, but it may be more accurate to frame it as a re-positioning or simply a new campaign (depending on the depth of change) rather than a rebrand. 

2. The identity system rebrand:
   This is where the company or product has a new visual identity system (colors, type, graphics, imagery), but the name and logo remain the same, perhaps with some subtle tweaking to the logo. New positioning and campaign/creative platform often accompany these changes, but not necessarily. 

3. The logo rebrand:
   As the title suggests, this is where there is a major change to the logo rather than a subtle tweak, almost always accompanied by a big change to the broader identity system, but the name remains the same. Again, this is typically accompanied by a new positioning and advertising creative platform, although not always.

4. The name rebrand:
   Finally, we go the whole hog and change everything. We change the name, the logo, the visual system, the positioning, and the advertising. We change it all. This is the most aggressive form of a rebrand.

If we work backward, we see that the most significant degree of change to the totality of the branding is in 4, working back toward the least amount of change, which is 1. That’s not to say an advertising rebrand or changes to the value proposition and experience can’t change a lot about the brand because it absolutely can. It just doesn’t change what we might label the “evergreen” branding assets people use to identify, associate with, and remember it by.

Phew. Halfway in, and I still haven’t gotten past the definitions. Sorry, but it’s an important frame of reference for what’s to come.

Now, there are some people who will tell you it’s never, or almost never, a good time to rebrand. They are wrong. There are also people who will never pass up an opportunity for a rebrand. They’re also wrong. Let’s start there.

If you work in a branding, design, or advertising agency, it’s highly unlikely you’ll respond to a client saying, “Maybe we should rebrand,” with anything else but a resounding “Yes, you should!” Now, that yes might be couched in all sorts of rigorous analysis and insight, but we also have to acknowledge the 800lb gorilla in the room: the money for the agency is in the rebrand. This is why anyone on the client side needs to be careful whom they’re asking advice of. I’m not suggesting there’s anything nefarious going on, just that if you ask someone with a hammer whether or not you should hit a nail with it, they’re almost certainly going to say yes.

With that out of the way, let’s start with 3 and 4 above, as these represent the most significant degree of change. When should you do these?

First and most importantly, significant rebrands shouldn’t be undertaken lightly, and definitely not just because a CMO or Design SVP has declared it time, mostly because they just arrived at the company and feel the need to make their mark. That’s simply not a good enough reason because the risk of causing harm often exceeds whatever may be viewed as the problem. 

That said…

You should only change your name if you absolutely have to (e.g., you’re being sued for infringing on someone else’s trademark or you’re demerging from a parent brand), if there’s a material problem that will hold that name back from future success (like it being offensive in another language, or that you didn’t register the name internationally where you now need to grow) if you’re too young to have built any equity yet (way back when they were both tiny, Google was called “Backrub” and Instagram “Burbn”) if you’re going through a merger or similar driver of an architecture shift where there needs to be a new name to reflect a new start for both cultures and/or encompass a newly combined value proposition. And finally, if your company or product has done something so terrible that you need to run away from it with a completely new name…like Altria. (Hopefully, none of you will find yourselves in that position.)

Otherwise, name changes almost always create bigger problems than they solve. Put simply, “Hating the name” isn’t a good enough reason to change it.

The why of this is very simple. Of all your assets, your name is the singular thing you’re going to be recognized by first. As soon as you change your name, people won’t recognize who you are, and you’ll invariably have a negative hit on your business while you’re in the process of rebuilding recognition. As a result, it’s rare that a company has a name so bad, so inappropriate, and so generic that shifting to a new name creates less negative impact than the upheaval of changing it. 

There’s no guarantee the new name will be any better than the old one, and you have to be willing to accept that the opportunity cost of building equity into the new name will likely require resources that could be better spent on things that might be more valuable, like enhancing the value proposition, instead. 

So, as a general rule of thumb, do everything else before considering a name change-driven rebrand. It represents deep surgery, and as exciting as that surgery might sound, most businesses are not ready for the inevitable challenge of the rehab that follows. 

So, what about leaving the name alone and engaging in a full change to the logo, visual identity system, advertising, positioning, etc? When is that appropriate? Well, many observers, especially those hewing from the marketing science end of the spectrum, will say “almost never” and “very subtle if you do” to this question. They say this with good reason, as it represents a change to the distinctive assets that you may have spent years building equity in. However, there are three specific situations when such a re-brand can be valuable. 

1. Your brand lacks distinctiveness

2. Your brand looks and feels increasingly old-fashioned

3. Your business has transformed significantly, but brand perceptions have not.

Let’s take each in turn:

Your brand lacks distinctiveness.
It’s all well and good to say you shouldn't rebrand because you might lose the distinctiveness you’ve invested millions in, but if your problem is that you lack distinctiveness in the first place, then a rebrand may well be in order. Reversing the trend toward boring minimalist genericism, this is exactly what Burberry did when it ditched the sans serif and embraced a richer and more figurative mark that’s closer to its heritage. Look for more of this in the coming years as more marketers realize that “blanding” was simply an exercise in letting designers with a penchant for minimalism light the company’s money on fire.

Your brand looks and feels increasingly old-fashioned.
In an ideal world, you don’t do big swingeing changes to your brand identity. Instead, you evolve it subtly over time, like Coca-Cola or, more recently, Porsche. These are the kinds of rebrands that happen all the time and shouldn’t even warrant a press release to announce them because the whole point is that you don’t really want anyone to notice. (Note to branding agencies, please stop breathlessly hyping minimal graphical updates; it just makes you look stupid). However, we don’t live in a perfect world, and all too often, identities aren’t updated on an ongoing basis, so what happens is that you eventually start to look a bit faded and old-fashioned in your dad jeans. Often, what precipitates change is the brand finding itself with broader relevance challenges among younger customers and, as part of a broader package of change, decides to engage in a more wide-ranging rebrand. This is a completely appropriate response. My primary advice, if you find yourself in this situation, is to make sure that A. You identify what within your existing brand identity is distinctive and differentiated so that you can update it rather than accidentally throwing it away without knowing. (This doesn’t mean you can’t still throw it away if you have good enough reason, just that you aren’t doing it blindly). And B. You identify what’s going on in your competitive environment, so you can identify the common tropes to avoid and ensure that your brand will stand out relative to the competition. As an aside, my experience is that designers tend not to be great at either of these analyses. But, if this is the path you are going down, you should definitely insist on it as a part of the process. 

Your business has transformed, but your brand perceptions haven’t
It’s not uncommon, especially in a B2B environment, for a business to undertake a sometimes quite radical transformation that fundamentally changes the business model, the value proposition, and even the customer target. However, while much emphasis has been placed on transforming the business, brand perceptions can remain rooted in the past. Under this circumstance, you may decide on a rebrand to act as a signal of change. Essentially you want to send a flare into the sky saying, “Look at us. We’re not the same anymore.” As a part of a package of activities designed to align your business transformation and your brand perception, this can be a powerful tool, especially if you can connect the narrative around the rebrand directly to the transformation that’s occurred within the business. However, what you can’t do is assume that the rebrand is all you need to do. Changing perceptions is a long game play, and it requires discipline to get right, and because you now look very different, you’ll need to spend a period of time getting people to recognize you as the new you rather than the old one.

Finally, on the topic of wider-ranging rebrands, a key stakeholder that’s often forgotten about, especially by the marketing science folks who tend to be ultra-focused on the customer, is the employee. Especially the prospective employees you might be trying to entice into your organization to help you level up your skills and capabilities. A not insignificant number of rebrands are less focused on the customer and more focused on marking a strategic change of direction internally. Using the rebrand as a leadership tool to mark new expectations the organization has of existing employees while also attempting to make it more attractive to the new talent that it needs. 

So, when it comes to wide-ranging rebrands, where you’re engaging in a high degree of change, there are a limited number of circumstances where it makes total sense. Yet none of these circumstances includes a new CEO, CMO, or Design SVP coming in and mandating a rebrand as part of their desire to leave their mark on the brand. Yes, that remains a big reason why they do happen, and no, it’s not a very good reason. 

Finally, when do the system and advertising-driven versions of a rebrand make sense? The deeply unsatisfactory answer is probably more often than you’d like and less often than you anticipate. In general, however, as long as you understand the distinctive assets that need to remain evergreen, you can engage in this kind of rebrand on a more regular basis, as appropriate and depending upon whatever other things you might change. Like Peloton shifting focus to being a fitness app rather than a stationary bike company.

Overall, though, the most successful approach is also the least exciting. Rather than rebranding through the lens of big sweeping changes (unless you have a really good reason to), the better option is normally to engage in a process of ongoing incremental updates, nipping here, tucking there, and retaining an ongoing tension between the dynamism of the new and the familiarity of the old.

Volume 141: World’s Most Expensive Scuba Mask.

June 8th, 2023

1. Don’t Bet Against The World’s Most Expensive Scuba Mask.

tl;dr: Apple Vision Pro demonstrates a very different strategy.

When Mark Zuckerberg bizarrely debuted as a low-rez cartoon avatar with oversized eyes and no legs, it rendered the billions he intended to lavish on the Metaverse moot: The whole thing looking too ridiculous to spark the imagination and lacking any obviously compelling use case.

Fast forward a couple of years and his metaverse ambitions appear dashed upon the shallow rocks of hubris. A rapidly sliding stock price forcing Marky Mark into a swift rethink and shift of attention back to his core business that turned 2023 from a year of pouring cash down a metaverse-shaped drain into a “year of efficiency,” AKA cost cuts and significant staff layoffs.

It’s easy to see why Zuckerberg wanted the metaverse to take off so badly. Right now, his core businesses - Facebook, Instagram, and WhatsApp - depend on others acting as gatekeepers, illustrated most vividly by Apple arbitrarily giving consumers the Facebook revenue-destroying power to de-personalize in-app advertising.

In Zuckerberg’s dreamland, Meta would own not just the apps you use but the hardware you access them through, too, thus giving him unfettered access to whatever user data he may so please and the power to use that data howsoever he may wish.

Having previously tried and failed (a couple of times) to create a compelling Facebook phone, he realized the only way to remove the shackles of the hardware gatekeepers was to wait for the next device opportunity and jump on it in an attempt to build a first-mover advantage and, ideally, a dominant monopolistic position.

This is why he bought Oculus before it even had a commercial product and then lavished some $37bn on the metaverse.

As a result of his strategic desire to control a new hardware and software ecosystem, Oculus/Meta products have been heavily cost-engineered from the get-go. And still, almost certainly sell at an outright loss. Simple math dictating that it’s hard, if not impossible, to scale a new hardware category to millions and billions of units unless it’s cheap enough for millions and billions to afford it.

This is why the upcoming Quest 3 will cost $499, while the existing Quest 2 has dropped to just $299.

However, when you cost engineer a product, you inevitably make compromises. And when you cost engineer a product in a nascent category that hasn’t yet had the chance to benefit from economies of scale, you’re inevitably forced into making big compromises.

So, weirdly, in an attempt to dominate a new market with a product affordable enough to sell millions and perhaps billions of units, he accidentally constrained the potential of that market by releasing hardware that simply wasn’t that great. Not because the technology didn’t exist for the product to be incredible but because the hardware has been cost-engineered to a place where it can’t be.

And then Apple entered the chat.

Apple’s strategy is the opposite of Meta. Where Meta feels existential pressure to lose the shackles of the gatekeepers, Apple faces no such need. Apple is the world’s most powerful gatekeeper, which affords it the luxury of time to build this category in its own image.

Rather than cost-engineering a market entry product in the hope of rapidly scaling, Apple released an aspirational $3,500 product that raises the category price floor, entering from the top rather than the bottom. Along with that higher price comes the ability to create a radically better product that does things existing products can’t. So, rather than the launch response being a resounding “meh,” which consistently happens to Meta, journalists who’ve tested the Vision Pro universally report an experience that feels magical, if not borderline creepy.

Having learned from the iPhone, where the App Store, rather than the phone, fundamentally differentiated it from the competition, Apple likely doesn’t view the Vision Pro as a true consumer device. Instead, this is a luxury product for early adopters and, most importantly, a technology demonstrator designed to spark developers' imaginations so they can use all that hardware goodness to create apps, services, and experiences that we’ll become desperate to experience. Like fart apps did for the iPhone back in the day.

While I can relate to commentators like Scott Galloway’s assertion that nobody will want to be seen dead walking around with Scuba/Ski goggles on (mind you, if you want to see something truly daft, take a look at what Dyson has been up to), a part of that might be because we’re yet to see what’s possible from this class of device, and while the incoherence of the metaverse never made much sense to me, Apple seems to be much smarter in rooting the vision for Vision very much in the real world.

Given a choice of sitting courtside at an NBA game or floating legless in a cartoon environment, I’m pretty sure I know which experience wins.

It also shows that Apple has a much more acute understanding of the power of its brand than Meta does, as it launches the Vision Pro months before it’ll be available and is advertising it heavily. Why advertise a product that doesn’t yet exist? Three reasons: First, Apple is using its media dollars to sow the seeds for future dominance of the category (and to make any potential purchasers of an upcoming Quest 3 think twice). Second, Apple is using the Vision Pro as the carrier of its brand. The bet is that an ad for Vision Pro is effectively a brand ad that will lift the salience and sale of Apple products more broadly. (When we consider that for most consumers, Apple is innovation, that’s likely to be exactly what happens). And third, this product inoculates the Apple brand against generative AI criticism. Fewer questions will now be asked about its lack of LLM vision while it’s screaming, “Don’t look over there; look over here instead.”

At some point in the future, perhaps fast following the Vision Pro launch next year, Apple will figure out what’s working and what isn’t, it’ll have a portfolio of partners and killer apps to draw from, and it’ll have built up latent aspirational desire among consumers more broadly for its product. And then it’ll release a Vision SE or similar product. Only it won’t be $500. Instead, it’ll offer 95% of what the Vision Pro can do for about $1,000-$1,500.

And as soon as it does, it’ll be game over for Meta unless it can figure out a way to offer similar functionality at a fraction of the price. But even then, Apple is aspirational and trusted, while Meta is anything but. Not to mention the Apple ecosystem is unparalleled, and its hardware chops are unmatched by anyone. And if iPhone vs. Android has taught us anything, it’s that given a choice, developers would rather bet on the purchasing power of the Apple consumer.

It’s too early yet to bet on whether the goggles-as-computer category will or won’t take off. But, unlike my deep skepticism around the incoherence of the metaverse, the complete lack of brand trust surrounding Meta, and the less-than-great Quest hardware, what Apple is doing suggests that if anyone can get this category right, it will.  

2. When Taking No Risk is The Biggest Risk of All.

tl;dr: What is risky work anyway?

I was reading a post on LinkedIn the other day about whether we should or should not present “risky” work to our clients, and it made me think of two client experiences I had a few years ago.

The first was for a foreign bank operating in Asia. It had recently launched a savings product focused on retirees, and the executives in charge were stunned that they hadn’t achieved “our fair share” of the market. In fact, they hadn’t attracted a single customer. Without diving too deeply into the details, the diagnosis was that they’d launched a derivative me-too product into a market it wasn’t favored to succeed within for various reasons, but mostly because its branch network favored urban downtown locations close to where people work rather than where they live. And retired people, by definition, won’t be commuting to work.

The second was working with a well-known global corporation that found itself a bit down on its luck. It had a long-tenured advertising agency, so I arranged lunch with the agency team to get the lowdown. I remember walking away afterward, shaking my head and feeling utterly stunned at their lack of ambition for their client. As far as they were concerned, this was a dead company walking; they didn’t believe it had anything even remotely approaching an appetite for interesting work, and it didn’t matter anyway because it didn’t have a future. Suffice it to say, there were zero amazing advertising ideas, or any ideas, if I’m honest, being prepared to help move this brand out of its funk. (In the years since it has significantly turned itself around, so not so dead after all. And I think the agency was fired along the way, so, yeah).

In both cases, these were examples where not taking any risk was the biggest risk of all.

Which, of course, begs the question. What is risky work? And what if we tend to fundamentally mistake what is or is not risky? What if the formulaic, expected, small c-conservative work is, in fact, the riskiest? What if fitting in with what’s expected and copying what everyone else is doing, far from de-risking, actually adds risk?

I’m a huge proponent of being ambitious on behalf of your clients. To seek out what it will take for them to win and to be unafraid of bringing novel, different, challenging, and…gasp…“risky” ideas to the table if you believe it has the real potential to move the needle, even if it might be hard to back that up with precise data. After all, it’s a hypothesis, and there are many ways to prove or disprove a hypothesis.

This is why I tell clients that if they work with me, the work will not be data-driven. It’ll be hypothesis-driven and data-informed. Why? because all too often, we use the term “data-driven” to mean “do exactly what everyone else is doing.” After all, doing what everyone else is doing represents a singularly definitive source of data to base our own decisions on, even if it might prove utterly wrong in practice.

Now, don’t get me wrong. This doesn’t mean we hold our clients to ransom. This isn’t about walking into a room with a completely uninformed, “bold” opinion the client is more likely to view as “insane” and then stating, “Buy this or else.” That’s unlikely to get you anywhere but fired.

Instead, this is about showing options and ranges. To express what a middle-of-the-road approach would be, which lowers the pulse, before explaining why you think it probably isn’t right, and then sharing “riskier” approaches that you believe to be more appropriate backed up with a clear rationale for why.

I’ll tell you right now that even if they don’t buy it, clients always appreciate it when you don’t pigeonhole them and place artificial limits on what’s possible for them before they’ve even had a chance to tell you what their limits are.

3. Don’t Let The Door Hit Your Ass On The Way Out.

tl;dr: Chris Licht out at CNN. Employees rejoice.

I don’t have any comparison data handy, but if I had to estimate, I’d guess that CNN is one of the world’s best-known media brands and probably a top 3 news media brand globally.

And it’s been going through a torrid time lately, as illustrated by this profile article that almost certainly precipitated the demise of now-former CEO and Chairman Chris Licht.

To understand why, we need to look at two business dynamics. The first is that TV News is a tough business to be in right now. The second is that parent company Warner Bros. Discovery has the unenviable task of getting out from under the huge debt load it inherited as a part of the deal it signed to acquire CNN parent, WarnerMedia from AT&T.

In practical terms, this places a considerable squeeze on the business since changing industry dynamics are crimping revenues at exactly the same time the parent company needs to find enough free cash to pay back its debt.

If you’re a cable news network, you make money predominantly from two sources. First, from the advertising revenues you command based on your audience size and viewer demographics. Second, from the carriage fees cable TV providers negotiate to pay in return for carrying your network. As more consumers cut the cord and quit cable entirely, both revenue sources are in decline, and the commodity rates paid by digital advertising online and via streaming aren’t enough to make up the difference. And if the web is any guide, it may never be.

As a practical matter, the highest carriage fee paid to any news network is paid to Fox News. This makes sense, as it’s also the most viewed news network and has the distinct advantage in the cord-cutting stakes of appealing to the least likely cohort to cut the cord, namely old people. The median Fox News viewer being somewhere around 69 years old.

Below this in viewer terms, CNN has been duking it out for 2nd place with MSNBC for years, yet has more recently found itself floundering around in 3rd as MSNBC positions itself more aggressively as the progressive alternative to Fox News conservatism.

Following the acquisition by Discovery, Christ Licht was tapped to run CNN, get the viewership numbers up, and get CNN to a place where it could contribute free cash to pay down that parent company debt.

But he failed.

It appears this was a trifecta failure of strategy, leadership, and execution. Let’s take each in turn.

First, on strategy, his stated goal was to turn CNN back to its roots as a “neutral arbiter of truth.” And while some view this as an impossible task in the polarized and fractured political landscape we live in, I’m not sure I entirely agree. While the two dominant political parties in the US are far apart ideologically, philosophically, and in policy terms, that doesn’t wholly reflect the views of the populace as a whole. As the Economist is fond of pointing out, Americans are significantly closer together on the issues than party alone would suggest, which is one reason the fastest-growing political affiliation in the country is no affiliation. So, while I get the “untapped market” reasoning for this strategic choice, and I’m not going to say neutrality is impossible based on the data, I will say that, at a minimum, it’s a complicated strategy to pull off in our current political landscape, especially considering that CNN had previously spent four years as the liberal “fake news” punching bag for the Trump administration.

Second, Mr. Licht seems to have been an abject failure as a leader. Based on the Atlantic piece that precipitated his downfall, he failed across multiple dimensions, but possibly the most critical was that he seemed unhealthily obsessed with his predecessor, Jeff Zucker, and unable to pass up any opportunity to criticize what went on in the past. The problem? He was also criticizing the actions of the people that now worked for him and whom he needed to execute the strategic pivot. Clearly, not realizing that every second you spend criticizing the past is an opportunity missed to inspire people with your vision for the future. I may not know much about corporate leadership, but I can confidently state that those I’ve watched successfully lead a business through considerable change invariably do so with an almost messianic focus on the future and almost zero time wasted re-litigating the past.

Third, execution. And this is almost certainly what really got Chris Licht fired. Warner Bros Discovery would’ve allowed any amount of dodgy strategy and poor leadership to fly as long as the audience was growing and the dollars were flowing. I don’t fundamentally think they care whether those dollars are right-leaning, left-leaning, or neutral as long as they’re there. So when the execution of a complex strategy was so poor that the network now finds itself floundering and the revenue contribution from CNN is under real under pressure, the axe had to fall.

In simple terms, the net result of these failures is that people with more liberal political leanings viewed the obvious and inept clumsiness of the pivot to neutral as not being a pivot to neutral at all but a rightward lurch toward Fox News-lite, while people with more conservative political leanings continued to view CNN as radioactive, meaning Chris Licht’s lasting legacy is the neat trick of turning off, well, everyone as audience numbers slid ever lower.

So, how do you fix this? Well, the idea that somehow viewers of Fox News are ever going to watch CNN is a pipe dream, no matter how enticing that Fox News carriage fee and unlikely-to-cut-the-cord demographic might look. They don’t want neutral; they want something else. When Tucker Carlson was fired from Fox, his audience didn’t turn to CNN; it went to even more politically conservative news networks like Newsmax and One America News Network. So, almost certainly, that avenue is a dead end unless CNN hires Tucker Carlson and fully pivots rightward.

This leaves two options:

The first is to take the neutrality strategy and execute more effectively. If you’re going to be about facts, be about facts. But don’t think that putting conspiracy theorists and election deniers on the air makes you neutral because it doesn’t. You can’t give equal weight to lies and the truth and then refer to that as neutrality. It doesn’t work that way. If you give credence to lies, then by definition, you aren’t neutral.

So, to find a way of making the neutrality strategy work, CNN would need to find a way of presenting facts as facts, lies as lies, and of hard questioning everyone from every side of the political aisle in the process. Having grown up in the UK, I have a picture of a network like CNN becoming more like Newsnight used to be. Love him or hate him (and there’s plenty not to like), Jeremy Paxman never let any politician of any party off lightly. He grilled them all.

If America needs anything from a news network right now, it needs a news network willing to ask the hard questions of its politicians rather than acting as their on-air cheerleaders.

Second, CNN ditches the neutrality strategy entirely, pivots left, and dukes it out with MSNBC to be the preferred network for the politically progressive. But that will be far from easy, too, since you’re effectively duking it out for half the total audience in a declining market against a network that already owns that space, while five minutes ago, CNN was giving free rein for Donald Trump to do as he pleases.

And, of course, all of this will happen against a backdrop of continued business model pressure, as the real 800lb gorilla in the room isn’t whether CNN should position itself as right, left or neutral, but how to get the business out from under the weight of an ever declining cable TV environment.

I’ll be honest I don’t envy whoever gets put in permanent charge. Future success will be a game of needle-threading. Yet it’s hard not to wish for CNN to do well because I think the world is a better place with a functioning CNN in it. And under Licht, it clearly wasn’t.

Ultimately, I’m not sure the financial status of Warner Bros Discovery will afford CNN the time and investment it needs to turn itself around. This is why the most likely outcome is their cutting bait and selling it.

Volume 138: Bud Light Unites The Nation.

May 11th, 2023

1. Bud Light Unites The Nation.

tl;dr: AB InBev creates the Cocaine Bear of business case studies.

K. In case you’re not in the US or have been living under a rock for the past month, here’s what happened in a nutshell:

Bud Light, the nation’s most popular beer brand, sent an Instagram influencer a celebratory can of beer with her face printed on it as a gift. Yay! The influencer showed this off to her ten million followers. Win! The influencer is trans. Oooh! In a desperate attempt at relevance, Kid Rock shot cases of Bud Light with a rifle and posted it. Bah! Right-wing media and talking heads became performatively outraged. Aaaah! Bud Light sales declined as a segment of beer buyers switched to other brands. Aaargh! Anheuser Busch management freaked out. The Sky Is Falling! Eeek! And put the marketers in charge on gardening leave. Wut? Guaranteed To Fix Everything. Not!!! And the CEO released the most bizarre statement in history as a response. Now We’re Making Everything Much, Much, Worse. Wheee!!!!

I’m guessing this response was a panicked and ultimately vain attempt to appease the can-shooting brigade while somehow trying not to piss off the non-can-shooters, which would’ve been some seriously impossible pretzel ju-jitsu if they’d pulled it off. But, of course, they didn’t.

So, where are we now? A bunch of right-leaning people got pissed at Bud Light and boycotted it, and now a bunch of left-leaning people are pissed at Anheuser Busch’s utterly inept response to the right being pissed, so they’re boycotting it too. And as a result of pissing everyone off, sales are slipping ever further, and it’s bleeding through to other AB InBev brands, which is extending the news cycle, and…

…I have to tip my cap to Anheuser Busch and its incompetent cowardice in the face of fire. I literally thought it was impossible to unite the opposing political factions of this country, but they’ve absolutely managed it. Meanwhile, MillerCoors is laughing all the way to the bank.

What’s the moral of this tale? Well, some would say that we live in such polarized times that brands must manage their every move with great care. Because no matter how tiny the probability of such a small act blowing up into a culture-war fracas, the possibility is always there. So you’d better not upset anyone…

…but, I call bullshit on that. The Internet is brimming with people looking for any excuse for a performative boycott on all sides of the political spectrum. It rarely lasts for more than a moment because we’re like societal goldfish with 7-second attention spans. This means the worst thing you can do is reflexively react the way AB did and extend the news cycle unnecessarily.

Nike didn’t react when people were cutting its logos out of their socks (funny story, I once stood in line behind a lobster-red man at a lobster shack in Maine, and it took me ages to figure out why his socks had big holes in them), Keurig didn’t react when people were smashing its machines with hammers, and I don’t see Home Depot or Yeungling much caring either. The only one that’s had to care is Disney, and they’re suing. The strategy that seems to work best, generally, seems to be one of sticking to your guns and letting the crazy pass.

Reflexively reacting leads to nothing but pain, both short and long-term. Short-term, it keeps you in the news cycle exactly when you don’t want to be anywhere near it. Long term, marketers more broadly become ever more small-c conservative, ever more worried about offending someone, anyone, and ever concerned that the entirety of their actions should be little more than unnoticeable milquetoast because they’d much rather have a job than not.

There’s no doubt that we live in politically volatile times. Things we might consider entirely innocent, like sending someone a can of beer with her face on it, can be politically weaponized at any moment to fuel the continued profitability of the outrage economy. So, it’s not what we do that matters so much as how we respond.

This is why, even though they seem entirely unrelated, the collapse of SVB and this mini-crisis at AB have much in common. How you communicate in response to a crisis matters much in our current environment. And, so far, corporations are consistently being found wanting. The common thread doesn’t appear to be that they can’t communicate; it’s that the default position is one of cowardice. The answer cannot be cowardice; it must be leadership.

Ultimately, the lesson here shouldn’t be about being careful to whom you send a can of beer. (Although, sadly, I suspect this is exactly how many brands will react) It’s actually about how you respond to such unanticipated crises with leadership and maturity when they inevitably happen to your brand.

So, congratulations AB InBev on creating the Cocaine Bear of business case studies. It literally couldn’t have acted any dumber.

2. “Only A Small, Biased Part of Our Lives Are Online.”

tl;dr: Is it wrong that I’m looking forward to a book on metrics?

Prof. Jenni Romaniuk, in case you haven’t heard of her, is a part of that merry band of Australian marketing scientists at the Ehrenberg Bass Institute. For some reason, I always picture it being a bit like Hogwarts for marketers (except with a good fishing lake) and professors that look like Dumbledore and McGonnigal. I really should get out more.

She often writes about brands and marketing, much of which is probably worth your time to at least skim, if not read, cover to cover.

Anyway, in advance of her latest book on metrics, she’s been on the talking head circuit, which is how I picked up my headline quote. It was meant in the context of whether we can measure everything we need about a brand’s health from online observation and commentary, but it seemed so apropos to life in general, especially in light of the above story, that I couldn’t resist using it here.

On the subject of metrics, I’m inordinately delighted to see Prof. Romaniuk tackling this topic in a book, even if I feel deeply uncool admitting it, and I’ll probably make sure and walk out of the store with it firmly wrapped in a brown paper bag when I buy it.

It’s a subject I get asked about fairly often, and I have to admit that my knowledge always feels lacking. Not that I don’t know what goes into a typical brand health tracker, brand equity study, or similar set of longitudinal analyses, but just that I always doubt that they’re particularly useful, insightful, or actionable.

From the Q&A in the article linked above, her point about smaller and larger brands needing to control for relative scale when interpreting brand health metrics rings particularly true for me. With really large brands in particular, I can’t tell you how often I’ve had that discombobulating moment where the brand health tracker seems to say everything is just fine and dandy, but there’s clearly something not right in the business. I deeply suspect that brand health analyses where scale isn’t controlled for tend to directly correlate with big brands behaving as conservatively as they often do. The why is that they aren’t seeing anything in their brand health data telling them there’s a burning platform forcing them to be bolder, so they focus more on not rocking the boat than on pushing the brand harder.

Her observation also amused me that so much of what we see demographically has less to do with old people and young people being fundamentally different and more to do with the fact that if you target one demographic group (e.g., “the youth”) and not another (e.g., “the money”), you shouldn’t expect your brand to resonate among those you haven’t targeted. Mainly because they aren’t seeing you rather than your being intrinsically not for them. So, take that, all you generation-ists. (OK, I admit it; I’m biased. I view generational segmentation as one of the longest cons in marketing, and there are a lot of cons in marketing, folks. There’s almost zero empirical evidence to support its veracity, and it’s stretching the bounds of credulity to believe you can predict someone’s life behavior before they’ve even been born. So I’ll leave it at that.)

Anyhoo. I’m buying the book, brown paper bag, and all, and I will report more on it when I get hold of a copy next month. But, in all honestly, it’ll probably be more of a review of the dust jacket, as it’s a rare business book where I get beyond the first chapter. And metrics…zzzzzz.

If you’re equally as perverse as I am and take an unhealthy interest in brand health metrics, I suggest you get a copy too. Equally, if you don’t have an unhealthy interest but need better metrics to shock your organization into action…well, you know what to do, Amazon, credit card, etc.

PS. I get nothing if you buy this book. Prof. Romaniuk doesn’t even know I exist.

Volume 137: Apex Scavenger.

May 4th, 2023

1. Chilly Out There? Look After Yourself.

tl;dr: Some thoughts on tough times.

For the first time in a long time, I’ve had conversations with multiple people in the agency and consulting worlds about how tough it’s suddenly become out there. New business drying up, freelance opportunities going away, clients being super-hesitant to engage, and negotiating much harder on price when they do

Objectively, it’s not hard to see why. We’ve shifted from a zero-interest rate economic cycle, where growth was pursued at all costs, to a high-interest rate cycle, where growth is out, and profitability is in. As a result, entire categories like DTC have fallen off a cliff in just a few months. Again, objectively, the reason is simple. When interest rates are at zero, investors are willing to play a long game, subsidizing fast-growing loss-makers, potentially for years, because they aren’t making any money on their money anyway. However, when interest rates tick up as fast as they have, capital flows to safer sources of return instead. When you can get a 5% return at zero risk, the laws of compound interest place a much higher burden on the expected return from a risky investment that might take many years to pay off, if it pays off at all.

This is hitting design-led shops particularly hard, because two unrelated, yet negative, financial forces are now intersecting:

First, design as a commercial activity saw hockey-stick growth in the past ten to fifteen years. Over this period, it shifted from something rare and differentiating to something common, table stakes and commodified (sorry, designers, but it’s true). As a result, it’s hard to find any business out there that isn’t at least competent on the design front, which was previously far from true. This matters, because of the implications. In business, when something is perceived to be a value-adding differentiator, it gets investment dollars based on the anticipation of excess return. Then competition realizes what you’re doing, and they copy with their investment dollars, because they’re afraid of being left behind. Over time, what was an added value differentiator becomes a commodity - everyone now has it, so it’s no longer a source of competitive advantage. When this happens, the financial stance of the corporation shifts from an activity to be invested in to an activity to be managed for maximum efficiency. In other words, the priority shifts from maximising what’s possible, to minimizing what it costs to be “good enough.”

This is where design is today. It’s gone through a full 15 year cycle from an investment made to differentiate and create value, to a core activity that needs to be managed for maximum efficiency. This shift is also what makes design vulnerable to AI driven disruption, because machines are cheaper than people.

Second, a non-trivial chunk of the money flowing into tech, startups, and DTC brands (in particular) ended up in the pockets of design-led shops - branding, product design, digital design, experience design, advertising, etc. So, as these pools of client funds dried up, we’re left with less business to go round.

So, we have two downward financial forces intersecting. The first, is a shift from design as an investment activity with big budgets attached, to design as a business activity to be managed for maximum efficiency with constrained budgets (cost out, offshoring, automation, etc) The second, is a major drying up of the revenue pools external design agencies had become largely reliant upon.

The reason this all feels so painful, is that in the boom times, when the opposite forces were in play - corporate investment and VC dollars flooding into design - the number of design-led agencies and consultancies exploded. So many starting that it’s impossible to wrap your head around it. I’m more likely to say I’ve never heard of such and such an agency when asked about them than I ever was. And I don’t think that’s because I’m getting old; it’s just because there are now so many.

Because of the frothy nature of how the market was operating - I don’t know a design agency that hasn’t done a 7 figure exploratory design project for Google - it was easy to set these businesses up and be successful. Get your work out on Instagram, leverage a few connections, land a high-profile project or two, and you were in business.

For anyone who hasn’t been through an economic downturn before, and many of you haven’t, since the last one was 2008/9, the frothy market looked normal rather than abnormal, enticing many into thinking this would always be. Only it wasn’t. Now things are distinctly chilly.

Here’s the truth. As discombobulating as this change undoubtedly is, the sky isn’t falling. This isn’t the end of design or branding as a commercial activity. (Not yet anyway, a structural change driven by AI does look like it’ll be a fast follower, though) It does, however, look like a significant cyclical downturn that may lead to a smaller overall market on the other side. And in cyclical downturns, people lose their jobs, businesses fail, and things seem impossibly grim.

I’ve experienced this kind of arctic winter before, in 2008/9. It burned me out and pushed me toward some pretty significant life changes. And while I’ve previously provided advice to agencies about staying healthy as a business (Scroll to No.3), I’d like to take some time to focus on you. I want you to learn from all the crap I got wrong, so you don’t have to. Here goes:

It’s not your fault
It wasn’t my fault that my biggest client in 2008 was late to the sub-prime party and then decided to get the drunkest. But it sure felt that way after it collapsed and we had to lay people off. Unless you’re a sociopath, how can you not feel at fault when people who trust you and work for you are losing their jobs? I beat myself up every which way from Sunday about what I could or should have done differently. I blew a disc in my back, ate stuff I shouldn’t have eaten, drank waaaay too much booze, and was angry at everyone around me because I was even angrier at myself. But blaming yourself gets you nowhere. It just makes everything worse. Try to keep things in context. It’s not your fault if macroeconomic factors have changed. It’s not your fault if clients are taking forever to make decisions. And for those who might lose their jobs, it’s not your fault that your employer no longer has the revenue to pay your salary.

Be hard on yourself, sure. But don’t be so brutally hard on yourself when things outwith your control happen. Mourn, sure. But you need to move forward, and blaming yourself just acts like a ball and chain, dragging you ever backward. You can’t change the past, only your future.

Work isn’t the only thing that matters
If you’re like me, you suffer an addiction to client attention. My wife refers to it as “client crack.” It’s that feeling you get when you win a pitch, and they tell you how brilliant you are, or you crack a problem, and they laud you for it, or when you have a great meeting and walk out feeling ten feet tall. I probably didn’t get enough attention as a child.

The opposite of client attention is what happens in tough times. You stop winning pitches, often for the funkiest of reasons. (I once lost a pitch, which we desperately needed, to Landor, of all agencies, because we didn’t demonstrate how to embroider a logo on a hat. It was cold comfort when the CEO emailed me to say he’d rather have worked with us but felt obliged to follow his team’s lead), clients stop telling you how brilliant you are because they’re dealing with their own crap, and what used to be easy conversations about follow-on projects become tense negotiations over money.

Tough times, more than any other time, are when you need other outlets and other sources of self-worth. So focus on your family, start a hobby, walk and enjoy the flowers, exercise, start a book club, go to poker night. It doesn’t matter. All that matters is that when work feels unfair, everything else puts life in perspective.

It’s OK not to want to get out of bed in the morning
There are some days when the last thing I want to do is get out of bed. It all just seems too much. Too overwhelming. Even the most trivial of tasks are a massive cliff looming over me, impossible to scale. It’s at these times that I go dark and stop responding to emails (sorry, you all know who you are. It’s not you, it’s me), phone in Off Kilter, and find it impossible to find the necessary focus to do even the smallest amount of work, taking days to do things I know can be done in hours, which makes it all worse. And if this can happen out of the blue when things are going well, it gets infinitely worse when things aren’t.

But, even if I don’t want to get out of bed, I still do. And I’ve learned to accept that feeling that way is OK. Just knowing that it will pass and being OK with it when it happens is the one thing that makes it pass more quickly.

However, if you’re under deadline and have to get stuff done, you can sometimes trick yourself into a different mode. For example, during the financial crisis, I had a client who was far from OK. Thin, haggard, haunted-looking even. But when asked if he had time to talk or to think about an idea someone had, he had a single response. “For you, I have infinite energy.” This statement's impact on people always struck me, so I use it myself and on myself. If you tell yourself you have infinite energy, even when you don’t, it makes you feel like you at least have some energy. And sometimes, that’s all you need.

Sometimes assholes aren’t
There are genuine assholes in all walks of life. There’s the aggressive asshole who turns everything into a fight. There’s the Machiavellian asshole that’s always playing an angle. There’s the I’m-so-brilliant asshole that always has to be the smartest person in the room. There’s the sociopathic asshole who has no limits or boundaries. There’s the arrogant asshole that’s always right, even when patently wrong. Unfortunately, agencies attract more than their fair share, and if you find yourself surrounded by such people, I’d advise you to do everything in your power to get out. They won’t change; it’ll just be hell for you.

However, there are also people where the stress of tough times makes them act like assholes, even when they aren’t. Respond with empathy if someone treats you in a manner that seems out of character. Ask them if things are OK. Find out what’s going on, and accept that just because someone blew up at you doesn’t necessarily mean they’re upset with you. In tough times, when nerves are frayed, we need to be more open with each other and not less. And if you’re the one doing the blowing up, remember that sorry is a powerful word, and be ready to wield it. And be unafraid to reflect and explain honestly why you acted the way you did, even if it’s embarrassing. It doesn’t make you look weak; it makes you strong. You can’t change the past, but I’ve found that you can put credit back into the bank.

Focus on what you’re really good at, and don’t be precious
Boom times are full of blaggers. Agencies, consultancies, you name it, who think they can blag their way through selling stuff they aren’t very good at and everything will be fine. And, yeah, sure, that can be true for a while, but when things take a turn for the worse, the market tends to bifurcate along pretty clear lines - those that have real perceived quality and those that are cheap. Of course, clients ideally want both but are generally happy to choose one or the other, depending on their situation. The blaggers, on the other hand, tend to be found out.

This goes for people too. When tough times happen, it’s essential to be clear about what you’re good at and why it’s valuable and to knuckle down and work hard at it. Are you good at new business? Great. Be the best new business person. This is your moment because tough times sort the wheat from the new business chaff. Don’t be the chaff. Good at arranging meetings? Arrange better meetings than anyone else. Good at client management? Manage the crap out of those relationships. You get the gist.

It’s easy to think that utilization dictates the lion’s share of who stays and who goes when layoffs happen, but let’s be honest. That’s only a fraction of the equation. When things are lean, everyone’s utilization is down. It won’t dictate why one person stays and another goes. Here’s what’s more important:

• Are you really good at something, and is it so valuable that your employer doesn’t want to lose it?

• Are you cheap, keen, smart, and have the energy to get on with stuff so your employer doesn’t want to let you go?

• For more senior people, are you good at winning and running client projects without hand-holding? Because let’s be clear, agencies have to pitch their way out of lean times.

• Are you low maintenance? When times are tough, it’s all hands to the new business pumps. There’s no time for high maintenance, no time for people who aren’t flexible, and no time for people who moan about working on, say, a boring plumbing company when that boring plumber is the only thing keeping the doors open. So be smart.

• Do you have a good relationship with your boss and your colleagues? Yeah, I know it shouldn’t matter, but it does. So make sure you do. You don’t have to be buddies, but you need to be viewed as someone who can be trusted to get stuff done and take the weight off others’ shoulders.

• Are you up for it? Yeah, it might sound silly, but in lean times you need people who have the energy to move forward, and that need runs across the whole business from top to bottom. It doesn’t matter how junior you are; keep your energy up. Be there to get stuff done, and don’t get sucked into the doom-mongering, even if the decisions you see around you don’t make much sense. (Do, however, get your resume out there if decisions that make no sense are being made. Better to be in charge of your destiny than not). Energy vampires might not be the first on the chopping block, but they invariably get chopped. Don’t be one.

• Finally, if you are let go, try not to burn bridges on the way out. Yes, it might be unfair. Yes, it might be capricious, and perhaps you hated working there anyway. But you never know where people will end up, what will happen next, and when you might need a reference. No point burning bridges for no gain just because it makes you feel better for a fleeting moment. (Not to say you shouldn’t pursue legal avenues if something egregiously wrong went down. I’m talking in general).

Anyway, tough times are tough. Often things happen that seem arbitrary, capricious, and unfair. And often, that’s because they are. Don’t let it get you down. Move on. Remember that not everything is your fault and that much of what happens is outwith your control. And it will get better. Usually within a year of a downturn beginning economic growth trends back upward.

2. Apex Scavenger…and Prime Bank?

tl;dr: JPM Chase swallows corpse of First Republic.

Over the years, I’ve found American corporate leaders at the top of the food chain to hold a self-image as the apex predators of the business world. Help them with a presentation, and before you can gently redirect them, they’ll invariably demand imagery of rampaging tigers, roaring lions, fighter jets, missiles in flight, aircraft carriers, explosions, and occasionally, in a feat of total non-irony, a gorilla. As an aside, I always find that funny because while we like to talk about 800lb gorillas in business, real gorillas are basically vegan pacifists. So, while a warplane breaking the sound barrier isn’t exactly subtle, at least it isn’t unintentionally amusing.

However, if you’re a banking behemoth called JP Morgan Chase, you look more like an apex scavenger than an apex predator. The reason is simple. Once a US bank reaches 10% of national deposits, it’s not allowed to grow beyond that by acquisition. It can still seek to win customers the old-fashioned way - you know, through smart marketing, superior products, stronger brand, better pricing - that kind of thing. But they’re forbidden from engaging in the dopamine hit of buying a competitor and absorbing its customer deposits…except under some very specific circumstances.

Namely, that the bank you’re absorbing has failed, and the alternative is for the FDIC to take it over, break it up, and sell off the piece parts. Which is what happened to Silicon Valley Bank.

However, unlike Silicon Valley Bank, the FDIC hawking the still-warm corpse of First Republic represented a tasty bite for JP Morgan Chase, strong as First Republic was among wealthy customers in New York and San Francisco and fattened up with FDIC enticements. So, instead of being broken into pieces or swallowed by another behemoth, it was fed, like a dainty little canape, into the gaping maw of the nation’s largest hyena. (Although I’m pretty sure Jamie Dimon is more of a lion than a hyena guy in the self-image front, even if hyena might be more accurate, all things said).

It’s unclear whether we’re yet out of the woods on the banking crisis front. The markets think not, and my gut tells me it might be the beginning rather than the end of what’s to come - commercial real estate being a bomb still waiting to go off. But one thing is for sure, the bailout of the financial system in 2008/9 created a long-term structural advantage for the so-called “systemically important financial institutions,” also known as “too big to fail” banks, that is now becoming very apparent.

Essentially, we created a two-speed system. Nineteen behemoths are held to slightly higher regulatory standards in return for an explicit government guarantee that they’ll never fail. And 4,000+ others where only $250,000 worth of depositor funds are guaranteed. And even if the vast majority of deposits are below that number, it hasn’t stopped a mass outflow of deposits from smaller, riskier banks to those explicitly backstopped by the power of the US federal government. My guess is that in the chaos of the 2008/9 financial crisis, nobody considered a future where a combination of social media rumor mill on steroids and the frictionless movement of money via apps on your smartphone would lead to multi-billion dollar bank runs occurring at breathtaking speed, upon only the merest hint of weakness.

In case you’re wondering, the price we pay for a bank being too big to fail is that none of them - JPM Chase, Wells Fargo, Citi, BofA - pay us a dime in interest on our deposits, even as interest rates have spiked, while their loan rates get ever more expensive. So in return for government-guaranteed safety, we get…less than nothing while they bank superprofits. Meanwhile, smaller competitors have to use higher interest rates on deposits and lower interest on loans as an enticement just to keep their existing customers, crippling small bank profitability and growth in the process. This likely isn’t sustainable. So look for either an explicit guarantee of all deposits if the government wants a thriving system of regional banks or a chaotic and continued roll-up of failed institutions into the behemoths if it does not. (And don’t forget that for all their public pronouncements, it’s in the best interests of behemoths like JPM Chase that a few more of the tastier regional banks fail so they can gobble them up and get even fatter. So that’s what they’ll secretly be lobbying for in darkened, cigar-smoke-filled rooms where nobody can see).

The problem for the economy as a whole, when we see mass outflows of deposits from smaller regional banks into the behemoths, is that dropping deposits puts a hard crimp on lending, especially in the communities these smaller banks tend to serve, with the possibility that we may see a major credit crunch. Some say it’s already started, especially in risky areas like car loans.

Why is this concerning? Well, if you’re the Federal Reserve and only care about inflation and damn the other economic costs, it isn’t. Well, not yet, anyway. But for everyone else: when the financial system catches a cold, the rest of the economy tends to get sick, sometimes very sick indeed. And things tend to go badly when businesses, particularly small businesses, find it hard or impossible to access credit. So, if you’re in an agency worried about a distinctly chilly wind blowing on the new business front, look to the financial system for how much worse it might get and when things might start improving.

The other story that’s beginning to play out, which is somewhat interesting, is that every bank that’s collapsed so far has had KPMG as its auditor. Oops. This certainly isn’t a good look if your job is to guarantee the state of your client’s financial picture to investors, and follows a pattern of so-called “big 4” auditors being found wanting recently (Wirecard, anyone?). It’s unclear right now whether this is just happenstance, incompetence, or perhaps a conflict of interest between the audit side of the business and the faster-growing and much more profitable tax and advisory sides. After the embarrassing EY split that wasn’t (very fast primer: at the height of stimulus-funded exuberance, EY planned to split its advisory and audit businesses in a greed-fueled orgy that would’ve made the advisory partners extremely wealthy; however, the split collapsed as the economic environment changed, and the audit partners realized they’d be left holding nothing but an empty bag). So, KPMG specifically, and the big four more generally, is a story to watch if you’re so inclined.

However, it isn’t all doom and gloom out there. Big moves are being initiated. In partnership with Goldman Sachs, Apple is now offering a high-interest savings product. (Unfortunately, being mainly used to promote its failing credit card, which is…dumb) Anyway, Apple getting into the banking business is a no-brainer. Apple owns the most profitable channel in business history, the iPhone, and it’s trivially easy for them to add savings products atop the existing convenience of Apply Pay. Even better, Apple is vastly more trusted than any bank. Add in the fact that banking is a vast category and that Apple is already so big that only the largest categories it isn’t already in can make a dent growth-wise, and you can see what’s going on here. Look for them to get much more aggressive as the banking world suffers more pain. As for Goldman Sachs, it’s on trickier turf. Based on recent organizational changes, it’s pretty clear Goldman has given up on continuing to subsidize its direct-to-consumer bank, Marcus, in any meaningful way. Instead, doubling down on a white-label relationship with Apple for growth. The problem, however, is that white labeling anything tends to put you at a disadvantage. If this banking endeavor is successful for Apple, look for it to aggressively re-negotiate the contract, put the back office servicing up for competitive bid, and potentially buy a bank and take the whole thing in-house. The power is in owning the customer relationship, not the back-office administration. That’s a commodity, and plenty of banks would happily undercut Goldman to become a preferred partner to Apple.

I’m only surprised that Amazon hasn’t moved aggressively into the banking game…yet, anyway. Combine regional bank weaknesses and big bank lack of competitiveness on the interest rate front with Amazon’s scale, vast trove of consumer data, technology chops, deep well of trust, and history of price competitiveness…and Prime Bank has got to be imminent.

Volume 137: Apex Scavenger.

May 4th, 2023

1. Chilly Out There? Look After Yourself.

tl;dr: Some thoughts on tough times.

For the first time in a long time, I’ve had conversations with multiple people in the agency and consulting worlds about how tough it’s suddenly become out there. New business drying up, freelance opportunities going away, clients being super-hesitant to engage, and negotiating much harder on price when they do

Objectively, it’s not hard to see why. We’ve shifted from a zero-interest rate economic cycle, where growth was pursued at all costs, to a high-interest rate cycle, where growth is out, and profitability is in. As a result, entire categories like DTC have fallen off a cliff in just a few months. Again, objectively, the reason is simple. When interest rates are at zero, investors are willing to play a long game, subsidizing fast-growing loss-makers, potentially for years, because they aren’t making any money on their money anyway. However, when interest rates tick up as fast as they have, capital flows to safer sources of return instead. When you can get a 5% return at zero risk, the laws of compound interest place a much higher burden on the expected return from a risky investment that might take many years to pay off, if it pays off at all.

This is hitting design-led shops particularly hard, because two unrelated, yet negative, financial forces are now intersecting:

First, design as a commercial activity saw hockey-stick growth in the past ten to fifteen years. Over this period, it shifted from something rare and differentiating to something common, table stakes and commodified (sorry, designers, but it’s true). As a result, it’s hard to find any business out there that isn’t at least competent on the design front, which was previously far from true. This matters, because of the implications. In business, when something is perceived to be a value-adding differentiator, it gets investment dollars based on the anticipation of excess return. Then competition realizes what you’re doing, and they copy with their investment dollars, because they’re afraid of being left behind. Over time, what was an added value differentiator becomes a commodity - everyone now has it, so it’s no longer a source of competitive advantage. When this happens, the financial stance of the corporation shifts from an activity to be invested in to an activity to be managed for maximum efficiency. In other words, the priority shifts from maximising what’s possible, to minimizing what it costs to be “good enough.”

This is where design is today. It’s gone through a full 15 year cycle from an investment made to differentiate and create value, to a core activity that needs to be managed for maximum efficiency. This shift is also what makes design vulnerable to AI driven disruption, because machines are cheaper than people.

Second, a non-trivial chunk of the money flowing into tech, startups, and DTC brands (in particular) ended up in the pockets of design-led shops - branding, product design, digital design, experience design, advertising, etc. So, as these pools of client funds dried up, we’re left with less business to go round.

So, we have two downward financial forces intersecting. The first, is a shift from design as an investment activity with big budgets attached, to design as a business activity to be managed for maximum efficiency with constrained budgets (cost out, offshoring, automation, etc) The second, is a major drying up of the revenue pools external design agencies had become largely reliant upon.

The reason this all feels so painful, is that in the boom times, when the opposite forces were in play - corporate investment and VC dollars flooding into design - the number of design-led agencies and consultancies exploded. So many starting that it’s impossible to wrap your head around it. I’m more likely to say I’ve never heard of such and such an agency when asked about them than I ever was. And I don’t think that’s because I’m getting old; it’s just because there are now so many.

Because of the frothy nature of how the market was operating - I don’t know a design agency that hasn’t done a 7 figure exploratory design project for Google - it was easy to set these businesses up and be successful. Get your work out on Instagram, leverage a few connections, land a high-profile project or two, and you were in business.

For anyone who hasn’t been through an economic downturn before, and many of you haven’t, since the last one was 2008/9, the frothy market looked normal rather than abnormal, enticing many into thinking this would always be. Only it wasn’t. Now things are distinctly chilly.

Here’s the truth. As discombobulating as this change undoubtedly is, the sky isn’t falling. This isn’t the end of design or branding as a commercial activity. (Not yet anyway, a structural change driven by AI does look like it’ll be a fast follower, though) It does, however, look like a significant cyclical downturn that may lead to a smaller overall market on the other side. And in cyclical downturns, people lose their jobs, businesses fail, and things seem impossibly grim.

I’ve experienced this kind of arctic winter before, in 2008/9. It burned me out and pushed me toward some pretty significant life changes. And while I’ve previously provided advice to agencies about staying healthy as a business (Scroll to No.3), I’d like to take some time to focus on you. I want you to learn from all the crap I got wrong, so you don’t have to. Here goes:

It’s not your fault
It wasn’t my fault that my biggest client in 2008 was late to the sub-prime party and then decided to get the drunkest. But it sure felt that way after it collapsed and we had to lay people off. Unless you’re a sociopath, how can you not feel at fault when people who trust you and work for you are losing their jobs? I beat myself up every which way from Sunday about what I could or should have done differently. I blew a disc in my back, ate stuff I shouldn’t have eaten, drank waaaay too much booze, and was angry at everyone around me because I was even angrier at myself. But blaming yourself gets you nowhere. It just makes everything worse. Try to keep things in context. It’s not your fault if macroeconomic factors have changed. It’s not your fault if clients are taking forever to make decisions. And for those who might lose their jobs, it’s not your fault that your employer no longer has the revenue to pay your salary.

Be hard on yourself, sure. But don’t be so brutally hard on yourself when things outwith your control happen. Mourn, sure. But you need to move forward, and blaming yourself just acts like a ball and chain, dragging you ever backward. You can’t change the past, only your future.

Work isn’t the only thing that matters
If you’re like me, you suffer an addiction to client attention. My wife refers to it as “client crack.” It’s that feeling you get when you win a pitch, and they tell you how brilliant you are, or you crack a problem, and they laud you for it, or when you have a great meeting and walk out feeling ten feet tall. I probably didn’t get enough attention as a child.

The opposite of client attention is what happens in tough times. You stop winning pitches, often for the funkiest of reasons. (I once lost a pitch, which we desperately needed, to Landor, of all agencies, because we didn’t demonstrate how to embroider a logo on a hat. It was cold comfort when the CEO emailed me to say he’d rather have worked with us but felt obliged to follow his team’s lead), clients stop telling you how brilliant you are because they’re dealing with their own crap, and what used to be easy conversations about follow-on projects become tense negotiations over money.

Tough times, more than any other time, are when you need other outlets and other sources of self-worth. So focus on your family, start a hobby, walk and enjoy the flowers, exercise, start a book club, go to poker night. It doesn’t matter. All that matters is that when work feels unfair, everything else puts life in perspective.

It’s OK not to want to get out of bed in the morning
There are some days when the last thing I want to do is get out of bed. It all just seems too much. Too overwhelming. Even the most trivial of tasks are a massive cliff looming over me, impossible to scale. It’s at these times that I go dark and stop responding to emails (sorry, you all know who you are. It’s not you, it’s me), phone in Off Kilter, and find it impossible to find the necessary focus to do even the smallest amount of work, taking days to do things I know can be done in hours, which makes it all worse. And if this can happen out of the blue when things are going well, it gets infinitely worse when things aren’t.

But, even if I don’t want to get out of bed, I still do. And I’ve learned to accept that feeling that way is OK. Just knowing that it will pass and being OK with it when it happens is the one thing that makes it pass more quickly.

However, if you’re under deadline and have to get stuff done, you can sometimes trick yourself into a different mode. For example, during the financial crisis, I had a client who was far from OK. Thin, haggard, haunted-looking even. But when asked if he had time to talk or to think about an idea someone had, he had a single response. “For you, I have infinite energy.” This statement's impact on people always struck me, so I use it myself and on myself. If you tell yourself you have infinite energy, even when you don’t, it makes you feel like you at least have some energy. And sometimes, that’s all you need.

Sometimes assholes aren’t
There are genuine assholes in all walks of life. There’s the aggressive asshole who turns everything into a fight. There’s the Machiavellian asshole that’s always playing an angle. There’s the I’m-so-brilliant asshole that always has to be the smartest person in the room. There’s the sociopathic asshole who has no limits or boundaries. There’s the arrogant asshole that’s always right, even when patently wrong. Unfortunately, agencies attract more than their fair share, and if you find yourself surrounded by such people, I’d advise you to do everything in your power to get out. They won’t change; it’ll just be hell for you.

However, there are also people where the stress of tough times makes them act like assholes, even when they aren’t. Respond with empathy if someone treats you in a manner that seems out of character. Ask them if things are OK. Find out what’s going on, and accept that just because someone blew up at you doesn’t necessarily mean they’re upset with you. In tough times, when nerves are frayed, we need to be more open with each other and not less. And if you’re the one doing the blowing up, remember that sorry is a powerful word, and be ready to wield it. And be unafraid to reflect and explain honestly why you acted the way you did, even if it’s embarrassing. It doesn’t make you look weak; it makes you strong. You can’t change the past, but I’ve found that you can put credit back into the bank.

Focus on what you’re really good at, and don’t be precious
Boom times are full of blaggers. Agencies, consultancies, you name it, who think they can blag their way through selling stuff they aren’t very good at and everything will be fine. And, yeah, sure, that can be true for a while, but when things take a turn for the worse, the market tends to bifurcate along pretty clear lines - those that have real perceived quality and those that are cheap. Of course, clients ideally want both but are generally happy to choose one or the other, depending on their situation. The blaggers, on the other hand, tend to be found out.

This goes for people too. When tough times happen, it’s essential to be clear about what you’re good at and why it’s valuable and to knuckle down and work hard at it. Are you good at new business? Great. Be the best new business person. This is your moment because tough times sort the wheat from the new business chaff. Don’t be the chaff. Good at arranging meetings? Arrange better meetings than anyone else. Good at client management? Manage the crap out of those relationships. You get the gist.

It’s easy to think that utilization dictates the lion’s share of who stays and who goes when layoffs happen, but let’s be honest. That’s only a fraction of the equation. When things are lean, everyone’s utilization is down. It won’t dictate why one person stays and another goes. Here’s what’s more important:

• Are you really good at something, and is it so valuable that your employer doesn’t want to lose it?

• Are you cheap, keen, smart, and have the energy to get on with stuff so your employer doesn’t want to let you go?

• For more senior people, are you good at winning and running client projects without hand-holding? Because let’s be clear, agencies have to pitch their way out of lean times.

• Are you low maintenance? When times are tough, it’s all hands to the new business pumps. There’s no time for high maintenance, no time for people who aren’t flexible, and no time for people who moan about working on, say, a boring plumbing company when that boring plumber is the only thing keeping the doors open. So be smart.

• Do you have a good relationship with your boss and your colleagues? Yeah, I know it shouldn’t matter, but it does. So make sure you do. You don’t have to be buddies, but you need to be viewed as someone who can be trusted to get stuff done and take the weight off others’ shoulders.

• Are you up for it? Yeah, it might sound silly, but in lean times you need people who have the energy to move forward, and that need runs across the whole business from top to bottom. It doesn’t matter how junior you are; keep your energy up. Be there to get stuff done, and don’t get sucked into the doom-mongering, even if the decisions you see around you don’t make much sense. (Do, however, get your resume out there if decisions that make no sense are being made. Better to be in charge of your destiny than not). Energy vampires might not be the first on the chopping block, but they invariably get chopped. Don’t be one.

• Finally, if you are let go, try not to burn bridges on the way out. Yes, it might be unfair. Yes, it might be capricious, and perhaps you hated working there anyway. But you never know where people will end up, what will happen next, and when you might need a reference. No point burning bridges for no gain just because it makes you feel better for a fleeting moment. (Not to say you shouldn’t pursue legal avenues if something egregiously wrong went down. I’m talking in general).

Anyway, tough times are tough. Often things happen that seem arbitrary, capricious, and unfair. And often, that’s because they are. Don’t let it get you down. Move on. Remember that not everything is your fault and that much of what happens is outwith your control. And it will get better. Usually within a year of a downturn beginning economic growth trends back upward.

2. Apex Scavenger…and Prime Bank?

tl;dr: JPM Chase swallows corpse of First Republic.

Over the years, I’ve found American corporate leaders at the top of the food chain to hold a self-image as the apex predators of the business world. Help them with a presentation, and before you can gently redirect them, they’ll invariably demand imagery of rampaging tigers, roaring lions, fighter jets, missiles in flight, aircraft carriers, explosions, and occasionally, in a feat of total non-irony, a gorilla. As an aside, I always find that funny because while we like to talk about 800lb gorillas in business, real gorillas are basically vegan pacifists. So, while a warplane breaking the sound barrier isn’t exactly subtle, at least it isn’t unintentionally amusing.

However, if you’re a banking behemoth called JP Morgan Chase, you look more like an apex scavenger than an apex predator. The reason is simple. Once a US bank reaches 10% of national deposits, it’s not allowed to grow beyond that by acquisition. It can still seek to win customers the old-fashioned way - you know, through smart marketing, superior products, stronger brand, better pricing - that kind of thing. But they’re forbidden from engaging in the dopamine hit of buying a competitor and absorbing its customer deposits…except under some very specific circumstances.

Namely, that the bank you’re absorbing has failed, and the alternative is for the FDIC to take it over, break it up, and sell off the piece parts. Which is what happened to Silicon Valley Bank.

However, unlike Silicon Valley Bank, the FDIC hawking the still-warm corpse of First Republic represented a tasty bite for JP Morgan Chase, strong as First Republic was among wealthy customers in New York and San Francisco and fattened up with FDIC enticements. So, instead of being broken into pieces or swallowed by another behemoth, it was fed, like a dainty little canape, into the gaping maw of the nation’s largest hyena. (Although I’m pretty sure Jamie Dimon is more of a lion than a hyena guy in the self-image front, even if hyena might be more accurate, all things said).

It’s unclear whether we’re yet out of the woods on the banking crisis front. The markets think not, and my gut tells me it might be the beginning rather than the end of what’s to come - commercial real estate being a bomb still waiting to go off. But one thing is for sure, the bailout of the financial system in 2008/9 created a long-term structural advantage for the so-called “systemically important financial institutions,” also known as “too big to fail” banks, that is now becoming very apparent.

Essentially, we created a two-speed system. Nineteen behemoths are held to slightly higher regulatory standards in return for an explicit government guarantee that they’ll never fail. And 4,000+ others where only $250,000 worth of depositor funds are guaranteed. And even if the vast majority of deposits are below that number, it hasn’t stopped a mass outflow of deposits from smaller, riskier banks to those explicitly backstopped by the power of the US federal government. My guess is that in the chaos of the 2008/9 financial crisis, nobody considered a future where a combination of social media rumor mill on steroids and the frictionless movement of money via apps on your smartphone would lead to multi-billion dollar bank runs occurring at breathtaking speed, upon only the merest hint of weakness.

In case you’re wondering, the price we pay for a bank being too big to fail is that none of them - JPM Chase, Wells Fargo, Citi, BofA - pay us a dime in interest on our deposits, even as interest rates have spiked, while their loan rates get ever more expensive. So in return for government-guaranteed safety, we get…less than nothing while they bank superprofits. Meanwhile, smaller competitors have to use higher interest rates on deposits and lower interest on loans as an enticement just to keep their existing customers, crippling small bank profitability and growth in the process. This likely isn’t sustainable. So look for either an explicit guarantee of all deposits if the government wants a thriving system of regional banks or a chaotic and continued roll-up of failed institutions into the behemoths if it does not. (And don’t forget that for all their public pronouncements, it’s in the best interests of behemoths like JPM Chase that a few more of the tastier regional banks fail so they can gobble them up and get even fatter. So that’s what they’ll secretly be lobbying for in darkened, cigar-smoke-filled rooms where nobody can see).

The problem for the economy as a whole, when we see mass outflows of deposits from smaller regional banks into the behemoths, is that dropping deposits puts a hard crimp on lending, especially in the communities these smaller banks tend to serve, with the possibility that we may see a major credit crunch. Some say it’s already started, especially in risky areas like car loans.

Why is this concerning? Well, if you’re the Federal Reserve and only care about inflation and damn the other economic costs, it isn’t. Well, not yet, anyway. But for everyone else: when the financial system catches a cold, the rest of the economy tends to get sick, sometimes very sick indeed. And things tend to go badly when businesses, particularly small businesses, find it hard or impossible to access credit. So, if you’re in an agency worried about a distinctly chilly wind blowing on the new business front, look to the financial system for how much worse it might get and when things might start improving.

The other story that’s beginning to play out, which is somewhat interesting, is that every bank that’s collapsed so far has had KPMG as its auditor. Oops. This certainly isn’t a good look if your job is to guarantee the state of your client’s financial picture to investors, and follows a pattern of so-called “big 4” auditors being found wanting recently (Wirecard, anyone?). It’s unclear right now whether this is just happenstance, incompetence, or perhaps a conflict of interest between the audit side of the business and the faster-growing and much more profitable tax and advisory sides. After the embarrassing EY split that wasn’t (very fast primer: at the height of stimulus-funded exuberance, EY planned to split its advisory and audit businesses in a greed-fueled orgy that would’ve made the advisory partners extremely wealthy; however, the split collapsed as the economic environment changed, and the audit partners realized they’d be left holding nothing but an empty bag). So, KPMG specifically, and the big four more generally, is a story to watch if you’re so inclined.

However, it isn’t all doom and gloom out there. Big moves are being initiated. In partnership with Goldman Sachs, Apple is now offering a high-interest savings product. (Unfortunately, being mainly used to promote its failing credit card, which is…dumb) Anyway, Apple getting into the banking business is a no-brainer. Apple owns the most profitable channel in business history, the iPhone, and it’s trivially easy for them to add savings products atop the existing convenience of Apply Pay. Even better, Apple is vastly more trusted than any bank. Add in the fact that banking is a vast category and that Apple is already so big that only the largest categories it isn’t already in can make a dent growth-wise, and you can see what’s going on here. Look for them to get much more aggressive as the banking world suffers more pain. As for Goldman Sachs, it’s on trickier turf. Based on recent organizational changes, it’s pretty clear Goldman has given up on continuing to subsidize its direct-to-consumer bank, Marcus, in any meaningful way. Instead, doubling down on a white-label relationship with Apple for growth. The problem, however, is that white labeling anything tends to put you at a disadvantage. If this banking endeavor is successful for Apple, look for it to aggressively re-negotiate the contract, put the back office servicing up for competitive bid, and potentially buy a bank and take the whole thing in-house. The power is in owning the customer relationship, not the back-office administration. That’s a commodity, and plenty of banks would happily undercut Goldman to become a preferred partner to Apple.

I’m only surprised that Amazon hasn’t moved aggressively into the banking game…yet, anyway. Combine regional bank weaknesses and big bank lack of competitiveness on the interest rate front with Amazon’s scale, vast trove of consumer data, technology chops, deep well of trust, and history of price competitiveness…and Prime Bank has got to be imminent.

Special Edition: Tall Tales.

May 2nd, 2023

I wrote this ages ago. Before Off Kilter was even a glimmer in my eye. I had no idea what to do with it then, so it just sat on my hard drive, gathering dust. Anyway, I recently found it, and it made me chuckle to reread it, so I figured, why not update it a little and share it with you all? My apologies for such a self-indulgent nostalgia fest. Regular service shall resume Thursday.

PS. The links are silly rather than educational.

Hemorrhoid Toothpaste & Other Tall Tales.

Work in any truly creative environment for a decent enough length of time, and you’ll walk away armed with enough stories to last a lifetime.

For me, this was the period from 2000-2011 when I worked at Wolff Olins, where wild and wildly inflated stories were the cultural currency, told and re-told with an ever-increasing array of embellishments and narrative flourishes to the point where fact and fiction became impossible to separate.

The first Wolff Olins story I experienced for myself was at the 2001: A Space Odyssey-themed holiday party I attended two days after joining. At 3 am, the ECD lit up the dancefloor, busting his moves and waving his trousers around his head…no underwear on. Nobody even batted an eyelid, busy as they were having red wine shot into their mouths from 10 feet away by two German consultants with Super-Soakers. Which doesn’t sound all that wild until I tell you the room; floors, walls, ceilings, and all was Space Odyssey white. The place looked like an abattoir by the time they were done.

Then there was the tale I was told of a death-defying high-speed trip down the French Autoroute with an elderly Wally Olins driving his Porsche to its limits (British car, so steering wheel on the wrong side to make it even more fear-inducing) while screaming instructions for an upcoming pitch at his passenger and colleague, Nigel because Wally had left his hearing aid at home. Then during the pitch in Paris, screaming at the client that they were asking questions so stupid that only an idiot would answer them…before instructing Nigel to answer.

Or the consultant asked to cut his holiday short to fly in and pitch a Swiss bank, who duly turned up in a Brioni suit that he then expensed. Reasoning, not totally unreasonably, that nobody would’ve wanted him turning up in his flip-flops and a Hawaiian shirt. However, spending $8,000 on a suit might reasonably be considered unreasonable.

Or, one of my personal favorites: the time a new business guy took it upon himself to fly to Tokyo from New York to present work he’d had nothing to do with creating, proceeded to get wildly, belligerently, drunk, deeply offend a major Japanese partner - causing a months-long ruckus at the holding company level - before accidentally brushing his teeth with hemorrhoid cream…and didn’t get fired.

Who knows how true these are? They’re just a tiny sampling of the stories told, most of which I cannot re-tell in good company. But the story I’m about to share is true and without embellishment. It happened within the first few years of my being there, and you could not make it up.

We’d prepped the pitch. It was for one of the world’s foremost sports-apparel brands that now found itself a bit down on its luck. We were partnering with McKinsey because some big business strategy questions needed answering in addition to the brand component.

We were ready—the combined team had assembled in New York, and the narrative was down. Super simplified, it went like this: Nike is about winning. Adidas is about performance. You should be about sex.

Now, I’m going to go out on a limb here and say that I’m pretty confident this is the only time McKinsey has ever been in a room pitching an American corporate client on the merits of quantitatively analyzing the relative value of sex as a brand positioning. But that’s exactly what they were about to do. First, though, we had to fly to Boston.

Now, had I known then what I know now, I would’ve known that, unlike New York, there’s nothing at all sexy about Boston. But I didn’t, so I had the complete confidence of a naive 20-something-year-old…

…until we got to the airport and hailed The Worst Cab in America.

Now, the cab itself was innocent enough. The problem was a driver with a single mode of driving—foot to the floor on either the gas pedal or brake. A steady speed achieved only by rapidly lurching from one to the other. You know this cab driver. You’ve driven with him too.

Picture the scene. It’s February in Boston. The snow is lying thick on the ground, and it’s about 10 degrees Fahrenheit. I’m in the front seat; in the back, a Wolff Olins creative director sits in the middle, flanked by our short-tempered Scottish Chairman on one side (Picture Logan Roy from Succession, and you won’t be far off, and yes, the link is to him cursing) with a Supersuit McKinsey partner on the other. The creative director’s laptop is open, and they’re working on last-minute tweaks to the deck.

All I can hear from the front is shouting along the following lines “More f’ing Tate! (a big Wolff Olins case study at the time) “More quantitative data!” “More Tate!” “More quantitative data!” and so on, until the creative director interrupts the flow about 20 minutes in. “Stop the cab…I’m going to throw up.”

And throw up, he did. Spectacularly. Multiple times. Luckily at the side of the road and not in the cab.

He then proceeded to wave us on. “I’m going to walk,” he said.

Now, walking wasn’t exactly an option. It was bitterly cold; we were miles from the client offices, there was no sidewalk, and his winter ensemble, while incredibly stylish, was far from appropriate for the weather. But he was committed to not getting back into The Worst Cab in America, flanked by two contrasting type-A personalities who’d both be screaming at him.

So wave us on, he did. At which point I heard the fateful words I’d been dreading, in that Logan Roy of a voice: “Paul, get your f’ing arse back here. We need somebody to finish this f’ing deck.” Clearly, neither McKinsey partners nor Wolff Olin’s chairmen had any clue how to use PowerPoint. So I was up.

So, now I’m in the back feeling like I’ll throw up at any minute. Our creative director, who has already thrown up, is briskly walking up the road waving his arms and doing meditation exercises to stop himself from throwing up again while beginning to suffer the effects of hypothermia and, quite possibly, frostbite. Our cab driver is crawling alongside him, doing very swift taps on the gas, then brakes, then gas again while a long line of cars builds up, all leaning on their horns and aggressively attempting illegal overtaking maneuvers (Hey, they don’t call Massachusetts drivers Massholes for nothing). All the while, I’m being barked at from both sides, “More f’ing Tate!” “More quantitative data!” and so on.

Eventually, everyone got into the cab, and we somehow made it to the client offices without further incident, where we were greeted by one of the most impressive lobbies I’d ever seen. A cavernous space flanked by a wall of flatscreens running their latest ad campaign on one side, a merchandise store swankier than anything you’d see on 5th Avenue on the other, and a full-sized basketball court way off in the distance ahead. It was impressive, but I barely had time to notice as I was on a mission.

Our last-minute changes to the pitch deck meant a new leave-behind had to be created, the Mac was at 3% battery, and we were back in the dark ages when you had to burn a CD rather than use a thumb drive. So I had to find power. And I had to find it now.

I searched that huge lobby every which way until; eventually, I spotted it—a power strip hidden behind the wall of screens. I hurried over, randomly pulled the first plug I saw, jammed in my laptop power supply…and the entire wall of screens died just as the client team came out to greet us. Somehow, that one plug I’d pulled was responsible for them all. I was mortified. Oh shit.

What to do? Well, I did the only thing I could think of: smile politely and shake hands hello while nudging the laptop out of sight with my foot and guiltily mumbling, “Looks like you might need an electrician,” gesturing at the now blank wall of screens.

Long story short, we didn’t win the pitch.

What struck me the most about it was a client introducing himself as “Q, Wharton MBA.” I was so taken aback that I almost responded, “Paul, Gucci suit,” because I happened to be wearing one at the time. I remember thinking it odd that he then spent the entire pitch engrossed in his BlackBerry, not looking at us or our presentation once. He certainly didn’t ask any questions. In hindsight, it was a telling sign.

As I mentioned, we didn’t win the pitch. But it wasn’t for the reasons you might think. Most of the room liked the pitch, sex, and all. Despite all the taxi trauma, we did a great job presenting, and a distinct faction favored both the suggested approach and our combined team. But our friend Q, Wharton MBA, had a different agenda. He had another agency waiting in the wings; we were just there to warm his colleagues up to the idea that this work was needed. Worse? The leader of that agency was the person who introduced us to the opportunity in the first place. So it was all a big fat waste of time orchestrated by a pair of what I might politely refer to as…the ethically challenged.

I have no idea what happened to Q, Wharton MBA. I never saw nor heard of him again. But a few years later, that agency leader? I met him for the first and only time in a different context. A client wanted us to interview him and get his opinion on something, so I was duly dispatched across SoHo to his swanky offices. He personally greeted me and my colleague upon arrival. We were then taken by his assistant to a rather delightful roof deck where we drank tea and waited, and waited, and waited, and waited…Eventually, asking the assistant, who’d stayed with us the whole time, if he’d be coming soon. Only to be told that he wouldn’t be coming soon; in fact, he wouldn’t be coming at all. But we could interview her if we liked. So, not knowing what else to do, we did. And then we left.

Of all the douchebags I’ve ever met in a business that attracts them like flies, he’s the one I remember most vividly.

But, sometimes, stuff catches up with you. A couple of years later, he did some abysmally arrogant work that ended up being value-destroying and very publically embarrassing for a major client. So bad, in fact, that his agency became toxic and collapsed because of it. But not before he was fired and sued by his holding company owners. Karma, of a sort, I guess.

And while I’d rather have won that pitch, at least I got a good story out of it.

Volume 136: When Strategies Aren’t.

April 20th, 2023

When Strategies Aren’t.

tl;dr: Third in the strategy trifecta.

In an entirely unplanned accident, I discussed brand architecture a couple of editions ago, specifically the challenge of the accidental portfolio, while last time, I attempted to articulate what I think are the five hallmarks of strategy (Thank you, Jonathan, for pointing out that there’s probably a 6th, which is that strategies typically need a challenge to be effective).

In an attempt to be complete, and just because three feels like a rounder number than two, even though it’s an odd number, I thought I might opine for a second on strategies that aren’t, in fact, strategies.

Having a strategy that’s not a strategy is much more common than you might think. And having a poorly articulated variant is really common.

One of the dirty little secrets of the “discovery” phase of any project, or whatever we might call it, is that we often find ourselves undertaking a Sherlock Holmes-like deductive process of deciphering the client’s business strategy before we can even think about a brand strategy to complement it. Sometimes it’s articulated as one thing but turns out to be another. Sometimes it isn’t articulated at all, and we need to add definition. And sometimes, it’s so clumsily articulated that we must first figure out how to simplify and clarify before moving on. And unfortunately, sometimes, the stated business strategy isn’t a strategy at all.

Through my years of experience, I’ve learned how to spot certain rhetorical tricks executives use to disguise a lack of strategy, so here they are. I hope you find them helpful.

1. The “more is more” strategy that isn’t a strategy.

   In sales-driven organizations, it’s not uncommon to be told there’s a clear strategy, only to find it’s a post-rationalization of chaotically independent behavior by different functions. I refer to this as the “more is more” approach because it’s almost always built on a rationale that more products are better, more solutions, more experiences, more brands, more segments, etc. So essentially, more is more, even when it might patently be less.
   
   I once had a client like this who told me they were pursuing a “spectrum strategy,” which, at first glance, sounded impressive. However, in digging in, I found that it really meant they had a bloated portfolio filled with every possible product a client in their category might want (and more than a few they didn’t), even though this business was a distant no.4 in market share, and where the market viewed the vast majority of their products as non-competitive. Ouch. Spectrum was simply a post-rationalization; in reality, there was no clear idea of where and how they intended to win, and zero discipline or governance regarding product development.

   
   In the wild, spotting the “more is more” non-strategy strategy can be hard because salespeople are particularly good at…selling. Look out for product and brand proliferation without clear direction, and then ask how the organization prioritizes decision-making and where and how in the market they intend to win. Then ask how competitive their products are relative to the market leader. Get wishy-washy answers, and you’re likely dealing with a sales-driven more-is-more approach.

2. The “agile” strategy that isn’t a strategy.

   This version of the non-strategy strategy took off in the last ten to fifteen years. It’s when a company substitutes the language of agile project management - test and learn, iteration, scrum, MVP, sprints, stand-ups, etc. - for the language of strategy. A common example is “agile marketing,” used as an exclamation of marketing strategy without further context.
   
   The thing is, agile isn’t a strategy because it doesn’t tell you what to do. At best, it tells you how to do it. Depending on definitions, it’s more like a project management methodology or, as the purists would say, a mindset and set of principles developers use to operate efficiently and sustainably. This is not intended to undermine or dismiss the undoubted power of an agile approach to software development; it’s just to state that agile cannot, in and of itself, be a strategy.
   
   The classic hallmark of an organization that mistakes “agile” as a strategy tends to be one where people run like hamsters at a million miles an hour, constantly iterating, testing, learning, and innovating, and yet no one can articulate the overall direction of travel, where the organization is going, or why, and what the expected outcomes are. As a result, this becomes a non-strategy built on faith. There’s no empirical evidence to prove the belief, but there’s an unshakable faith that if they can just be agile enough, they’ll win.
   
   Ironically, I tend to find these organizations strategically inflexible. Generally speaking, such an inordinate amount of time, money, and energy is wasted developing, testing, and then shipping tiny incremental improvements that the organization rarely has the necessary agility to either get ahead of or respond to big strategic shifts in their markets.

3. The “be no.1” strategy that isn’t a strategy.

   This one is as old as the hills. It’s where targets, goals, KPIs, metrics, etc., are mistaken for a strategy. How many people in business have been told the strategy is to increase sales by X% or cut costs by Y% without any sense of how they’re expected to achieve this or any clear strategic rationale around the trade-offs involved? Again, this isn’t a strategy because it provides no clarity, no direction of travel, and gives nothing to aid trade-off-based decision-making; it’s just “hit a number.”
   
   Typically, this strategy that isn’t a strategy is seductive because it can be effective short-term in cutting costs, increasing sales, driving discipline, creating efficiency, or what have you. Unfortunately, it also has a bad habit of rapidly metastasizing into virulent cancer as unrealistic pressures to hit numerical goals drive people to, sometimes catastrophically, game the metric, which becomes the point of what they do rather than the measure of it. And when short-term goals masquerade as a strategy, the long-term interests of the business typically take a back seat.
   
   I deliberately mention “be no.1” here because it’s a classic example of management ego. CEOs love to be the biggest in their respective markets, which to them equates to being no.1. The problem is that customers rarely care about whether the company is the biggest - their view of no.1 is often quite different.
   
   The most egregious example of this target-driven non-strategy strategy I’ve witnessed was while consulting with GE years ago, just after former CEO Jack Welch, a vastly overrated business leader, retired. Under his watch, he stated that GE had to be “no.1 or no.2 in any market or get out.” He intended for GE to play at scale, but the organization interpreted it differently. Instead of competing hard to win in big markets, GE atomized itself over the years, narrowing its category definitions to make sure they were always “no.1 or no.2.” This is why, as a young, starry-eyed and naive consultant, I got to work on one of the most complex brand architecture challenges in history, where literally thousands of mini-GEs competed against each other and confused the heck out of everyone. But, hey, “GE 5MW Wind Turbines N. California” was no.1 in 5-megawatt wind turbines in Northern California. So there was that.

4. The “culture eats strategy for breakfast” strategy that isn’t a strategy.

   OK, this one might be a bit controversial among some of you, but like pretty much every binary truism in business, first crafted as a soundbite for an article, the idea that culture somehow trumps strategy can be deeply destructive when misinterpreted.
   
   Here’s the thing. Strategy and culture are complementary rather than oppositional. One does not replace the other. Culture guides how people within an organization behave, think, and treat each other. Strategy dictates the direction of travel and how the business intends to prioritize the application of its scarce resources. (Ironically, I’d argue that focusing on building a strong culture is, in fact, a strategic choice rather than a random event). Get both singing in harmony, and you have the recipe for greatness. Let them get too far out of balance, and it’s more likely to tear you apart. This is what is meant by the quote; a strategy that runs counter to the culture will fail, not because it’s a bad strategy at face value, but because culturally, it will not be permitted to succeed.
   
   In organizations that take “culture eats strategy for breakfast” too literally, there can be a dangerous idea that there’s no need for a strategy at all. That the strength of the culture will automagically figure it all out. This is rarely/never the case. More likely, you’ll end up with a bloated and inefficient organization, where people consistently pull in different directions while thinking they’re doing the right thing, with few, if any, governance mechanisms for pulling it back together because…culture.
   
   I once had a client that prioritized culture so highly and believed the truism that “culture eats strategy for breakfast” so deeply that they couldn’t understand why the business failed, even when it was obviously failing. As an outside advisor, I tore my hair out at a leadership team that couldn’t agree on the simplest of strategic priorities, endlessly debating and constantly leaping off on crazy tangents, even when to paraphrase a different client; they didn’t just have low hanging fruit, they had blazing melons on the ground. But, hey, a load of people loved working there right up until they didn’t.
   
   Here’s my take. If you genuinely value your culture and your people, you owe it to them to develop a clear guiding strategy of how you’re going to win in your market that is complementary to that culture. Don’t leave it to chance, and don’t fall into the trap of taking a destructive truism literally.

5. The “reactive strategy” that’s not a strategy.

   OK. So I wanted to limit myself to five, making it hard to choose which to finish. Should it be the “out-execute” strategy that isn’t a strategy? Or perhaps the “brand” (when you don’t have a brand yet) strategy that isn’t a strategy? However, I chose to discount both because they’re typically limited to the startup world, so they’re less universally applicable than the other four.
   
   However, the reactive strategy that isn’t a strategy is broadly applicable.
   
   Before getting into what it means to be reactive, it’s first essential to distinguish between being responsive and being reactive because they’re two very different things. Every organization that has a clear strategy also needs to be responsive - the military cliche that “no plan survives first contact with the enemy” is just as valid in business as it is in war; swap “strategy” for “plan” and “enemy” for “market.” As a result, strategically smart organizations constantly respond to changes around them and tweak accordingly. But, and this is a hugely important but, being responsive is very different from being reactive.
   
   While a strategically responsive organization makes constant course corrections based on market observations, the overall direction of travel tends to change only rarely. Reactive organizations, by contrast, tend to suffer from institutional whiplash as they lurch from one direction to the next.
   
   I can’t tell you how often I’ve worked with clients who demand instant reactions to competitor moves almost instantly, yet fail to understand that what they demand to be done in a weekend, the competitor has likely been working on for months. Worse, they also fail to recognize that they’re now permanently stuck playing catchup by being so tactically reactive because the competition isn’t standing still and is already moving forward.
   
   I once worked with a client trying to exit a period of highly reactive leadership. What a mess. In the previous 18 months, it had announced three major changes in strategic direction. At one point, shifting 180 degrees in a couple of months, first stating that it would be 100% focused on small businesses, only to walk that back by stating a 100% focus on enterprise buyers instead. To put this in perspective, this meant two oppositional strategic directions were being asked of the organization in the same quarter! How on earth was anyone meant to keep that straight? Well, simply put, they couldn’t.
   
   The challenge of the reactive strategy that isn’t a strategy isn’t just that strategic whiplash is exhausting and confusing to both the organization and the market, but that, for the sake of sanity and continuity, the organization eventually starts ignoring the edicts from the top, which does little but render any meaningful change in the future that much harder.

So, you might be left wondering, if non-strategy strategies are so common in business, then what is going on? If I had a good answer, I’d probably be sitting on a beach somewhere slugging back Mai-Tai’s rather than writing this newsletter. But here are a few observations:

First, organizations that are weak strategically tend to be very inward facing. They are more interested in what they think than what the customer thinks and more interested in their own internal machinations than the competition. Often these organizations are already large, and their institutional momentum so great that it takes a long time for the performance of the business to slow to the point that an actual strategy becomes a blinding necessity. Second, it’s not uncommon for an organization to have power dynamics, which means it’s easier and smoother to allow a certain amount of strategic ambiguity to flourish. Avoiding the conflict of telling powerful people they need to re-prioritize, or God forbid, take a completely different tack for the greater good. After all, if the numbers are good enough, why rock the boat? And, finally, it’s also a sad reality that strategy as a business concept isn’t necessarily valued, even among the people at the very top, especially when financial engineering is often more attractive than actual engineering. This has led to a whole generation of leaders where strategic capabilities aren’t what got them to the top in the first place, nor is what they’re valued for.

Volume 135: The Five Hallmarks of Strategy.

April 20th, 2023

1. The Five Hallmarks of Strategy.

tl;dr: Reflecting on my own field of endeavor.

Since I’m in the midst of a couple of meaty strategy projects, I figured I might reflect a little on the subject of brand strategy.

In some ways, it’s a strange subject to talk about because while an inordinate number of people self-identify as strategists (I refuse to use the term), strategy as a concept remains fuzzy for many.

Part of the problem, I think, is that unlike design, which is an understood craft with a set of baseline principles, rules, and a common language, brand strategy remains the Wild West of whatever people want it to be. As a result, anyone can claim to be a strategist irrespective of background, experience, or education, and there seems to be little in the way of shared language, principles, or rules.

And while this can be liberating, it also creates the conditions for snake-oil sellers, confidence tricksters, box tickers, and the abjectly naive to proliferate, not to mention the holding company poo-bahs who’ll happily append “strategist” to any job title so they can charge $100+ per hour more for the exact same services.

So, what are we really dealing with?

Well, I think strategy has five hallmarks that act as a pretty good guide.

1. Strategy deals solely with the future.
   The focus of strategy is to help shape what we will do, not what we are doing or have done previously. Of all the many thousands of words expended on the concept, this is perhaps the most important to remember because it makes it unique as a business function. It’s also why CEOs get paid the big bucks because investors base today’s corporate valuation on expectations of its future performance. This means leadership is expected to set a strategy that will enable the business to at least live up to and, ideally, outperform these expectations.

2. Strategy is about risk and probabilities, not guarantees.
   Because strategy deals solely with the future and because the future is fundamentally unknowable, strategy’s primary goal is to increase the likelihood of future success rather than guarantee it, which means we must form an analysis of probabilities and risk rather than think in guarantees. This matters because there are rarely obvious black-and-white answers to strategic questions. Instead, strategy, by definition, lives in the ambiguous world of grey-area. At its heart, strategy always asks fuzzy questions of the risk you’re willing to accept relative to an estimated probability of success. This is why people uncomfortable with ambiguity and shades of grey rarely deliver compelling strategies.

3. Strategy is a creative act dependent upon the imagination.
   When we think about strategy, we often think about McKinsey consultants, data, analysis, etc. And while strategic analysis benefits greatly from a deeply analytical approach, it’s a necessary but not sufficient condition for strategy formulation. By contrast, strategy formulation depends more on creativity and imagination. It requires us to imagine sometimes radically different future states, hold competing visions of this future in our heads simultaneously, and work backward toward the pathways to getting there. Nevertheless, rational, analytical, data-driven strategy formulation is popular, not because it’s correct, but because empiricizing something as fuzzy, ambiguous, and unknowable as the future makes it seem clearer, more controllable, and more guaranteed, and thus more buyable.

4. Strategy enables hard choices
   To quote a former business school professor:
   “Strategy is resource allocation. If we had infinite resources, we’d have no need for strategy. We’d just try everything and double down on what works. But since nobody has infinite resources, we must prioritize, and this act of prioritization is strategy.”
   The critical element here is that strategy not only guides what we will do but also what we won’t. And sometimes, what we don’t do is vastly more important than what we do, do. And, while the choices to be made might be hard, the strategic guidance that enables these choices must be clear, simple, and direct. Strategies that are too complex and that lack clarity and simplicity cannot, by definition, be good guides of choice.

5. Strategy is systemic in nature.
   Finally, because strategy provides direction and helps dictate organizational priorities and choices, it is systemic in nature. As a result, delivery against strategy rarely applies to only a single function within an organization, instead depending more on the interplay of different groups working together in concert toward a common intent rather than pulling in different directions.

Now, what’s notably missing from the above is a specific focus on brand strategy (this course is garbage, BTW, don’t waste your money on it), brand purpose (distinctly mixed results in practice), “Why” (dangerous claptrap) any discussion of distinct frameworks (too many to list), or any of the boringly asinine dancing-on-the-head-of-a-pin arguments so common in our field, like the fight over “planned” versus “emergent” strategy. (Like most things, it isn’t a binary choice; you need a little of both). That’s because these hallmarks apply to all forms of strategy, irrespective of the specific application.

When we lose sight of these hallmarks, perhaps because we’ve become too focused on filling in a framework, applying a model, being dogmatic about a belief we’ve formed, or simply because we don’t know about them, we lose sight of what it means to be strategic. But, on the other hand, if we constantly step back and use these hallmarks to question ourselves, we can help ensure we stay on track. For example:

1. Am I focusing solely on the future, or am I being dragged into short-term, backward-looking arguments?

2. Am I building up a picture of the risks and probabilities of success? Does my analysis hold up to scrutiny? Do I know where the grey areas are, and am I comfortable with them?

3. Have I applied my imagination and creativity to this task? Have I asked tough enough questions about the strategies being pursued by others? Am I pushing past the obvious? (And if you’re unsure of the obvious, ask ChatGPT to create a strategic recommendation based on your inputs. It’ll handily give you the completely run-of-the-mill answer you’ll now know to avoid).

4. Does my recommendation provide the necessary clarity and simplicity to enable future choice-making by others? Will it help people navigate tough decisions where there might be competing priorities?

5. Are my recommendations systemic in nature? Have I paid enough attention to the cross-functional implications?

If I were to summarize situations I commonly see in the branding world where people lose sight of the five hallmarks of strategy, I’d say the following as a massive over-generalization (my apologies for that):

1. Strategists at larger branding consultancies can tend toward being over-frameworked and under-thought. Meaning they spend too much time and energy filling in frameworks and following process steps to hit a deliverable list rather than applying their imagination to solving a tough strategic problem. Their decks are comprehensive and appear rigorous but scratch the surface, and it’s all very predictable.
   
   If you think this might be you, take a step back from your models and frameworks and analyses for a bit and go for a walk, go to a museum, go to an art gallery, step in front of a whiteboard, whatever it takes to put yourself in a position where you can think, create, and imagine. Inspire yourself to get back to basics and then jump past the obvious.

2. Strategists at smaller branding consultancies can tend toward delivering tone rather than strategy. Meaning they expend much time and energy in delivering creative inspiration to their design colleagues rather than providing meaningful business guidance to their clients. Their decks have lots of pictures and look pretty but say very little.
   
   If you think this might be you, then you probably need to get more rigorous in your analysis, focus your thinking on what the business needs rather than what your design colleagues want, and focus on the delivery of a strategy that simplifies systemic choices beyond what color, font, imagery, or neat message-line to use.

Anyway, that’s it. Hopefully, you might find this of some assistance.

2. From Bard to Bedrock.

tl;dr: Microsoft & Google seek gold, while Amazon sells shovels.

Please bear with me for a second. I’m sorry, I’m going to talk about AI for a bit. Yes, yes, I know. We’re at the peak of the hype cycle, and it’s the last thing anyone wants to read about. But there are some really interesting strategic moves worth paying attention to.

First things first, there’s an arms race afoot. AI, specifically Large Language Models (LLMs), isn’t just the next big thing in tech; it’s the current big thing. And, while we don’t yet know all the implications, the one thing we do know is that it’s a very big deal in $$ terms, and big players are making big moves accordingly. (As an aside, all the money pouring into AI startups right now, even as the rest of the VC landscape turns distinctly frigid, is likely to drag San Francisco and Silicon Valley more generally out of its post-COVID, post-everything-bubble funk, which is a good thing).

In a 2019 act of strategic spread-betting, Microsoft invested heavily in OpenAI. This was a strategic investment in the sense that Microsoft couldn’t know exactly what would happen some years later, but it wanted to buy an option on the future just in case LLMs lived up to their potential. I call this strategic spread-betting rather than strategic foresight because companies like Microsoft tend to make many such investments. Some payoff, many don’t. In this case, investing in OpenAI was a smart move. But don’t be fooled by survivor bias into thinking this was a profoundly Nostradamus-like act. In these situations, the bigger payoff comes from being a smart spread-better, not from narrowly targeted predictions.

Anyway, Microsoft has used this investment in OpenAI to begin aggressively embedding LLM capabilities across its portfolio of offerings, which means it’s pursuing a product leadership strategy aimed at defensively reinforcing product leadership where it already has it (Office, Github) and offensively creating product leadership where it doesn’t (Bing). By using OpenAI technology to enhance its Office and Github offerings, it defends itself against the competition while effectively maintaining leadership. And by introducing LLM capabilities into the Bing search product, it gets to claim leadership in a business category it’s previously been a distant second in. Add this up, and it means that for the first time in a long time, Microsoft is putting real pressure on Google…

… This means Google is now under much pressure to respond quickly while finding itself distinctly behind the eight-ball. This is notable because until now, Google has operated with the complacency of believing itself to be the leader in LLM R&D without feeling the need to commercialize it aggressively. That complacency now looks to be a strategic error. For Google, the strategic challenge is twofold. First, because it chose to develop LLM technology in-house rather than make a strategic investment the way Microsoft did, it now feels forced to have a product in the wild to compete with ChatGPT, which it called Bard. Unfortunately, because this was a forced choice rather than a considered act, it’s a poor product and launched like a damp squib. Much work will need to be done to catch the early mover momentum OpenAI has now built up, and it may never get there. Second, Google has been loathe to introduce LLM technology to search because it will cannibalize the cash cow of search advertising. But, again, Microsoft enhancing Bing with LLM forces Google to respond. Just last week, it was reported that Samsung might switch the default search on its devices from Google to Bing, which is an existential threat to Google should others do the same.

The net, net is that by investing years in advance in OpenAI and by now embedding OpenAI technology across its product portfolio, Microsoft has forced Google into a reactionary position it doesn’t want to be in. As a result, nothing Google has done with LLM commercially to date looks strategic. While this may change, businesses forced into reactionary positions rarely wind up winning an arms race for the future.

So, what about that other tech behemoth, Amazon, or more specifically, its massive cloud computing business, AWS?

Unlike Google, which has felt compelled to react directly to the Microsoft/OpenAI challenge, AWS has decided to move in a completely different direction. One that at first glance seems much closer to its history, and that might also turn out to be a very smart strategic move.

To use an analogy, while Microsoft/OpenAI and Google are panning for gold at the beginning of a gold rush, AWS, through the introduction of Bedrock, has decided to sell picks and shovels to the prospectors. And that’s very much in keeping with its history and strategy.

To understand AWS, you first need to return to the earliest days of cloud computing, which it pioneered. By applying a “swipe your credit card” e-commerce mentality to computing infrastructure, AWS initially attracted small players like Netflix that scaled on its platform, which then led to enterprise buyers paying attention to a new and different infrastructure model, which fast forward to today has led to AWS becoming the 800lb gorilla in cloud computing. As a result, AWS has long been more about what it enables others to do than what it is.

So, in much the same way that AWS provided flexible and scalable cloud computing infrastructure that enabled the formation of new businesses and applications, it now seeks to offer a flexible and scalable means for companies to develop their own LLM-enhanced applications. Rather than building its own ChatGPT, Bard competitor, or specific applications using LLM, AWS looks more focused on using its massive cloud scale advantage to become the default platform upon which businesses get to build their own. In simple terms, as more prospectors seek gold in the hills alongside Microsoft/OpenAI and Google, AWS won’t be up there searching alongside them; instead, it’s setting up shop at the foot of the mountain, happily selling picks and shovels.

So, where does that leave us? Right now, it looks like Microsoft and AWS have distinct strategies around LLM technology. Each making strategic trade-offs and bets it believes will best suit its own unique capabilities and business needs.

And Google is flailing.

Volume 134: The Accidental Portfolio.

April 6th, 2023

The Accidental Portfolio.

tl;dr: Geeking out on brand architecture. Yes, I am that boring.

Sorry, there was no Off Kilter last week; things have been a little busy on the work front, which is good for me and less good for the state of this newsletter. As a result, this single-issue edition is driven by things I’ve been working on rather than something I’ve been paying attention to in the world.

I’ve had very similar conversations with different clients around brand architecture in the past couple of weeks. (Meaning how a company’s brands are organized, rather than the advertising version of this term, which is more akin to a messaging hierarchy). It’s one of the most misunderstood aspects of our work, with potentially disastrous business consequences.

I think one reason is that we tend to look at the frameworks - branded house (AKA master or monolithically-branded), sub-branded, endorsed, and house of brands (AKA portfolio), through an academic rather than a business lens. Often focusing on what looks neat on a PowerPoint slide rather than what will best enable the success of the business. In reality, different architectures impact the business differently, have differing implications vis a vis the financial and management resources required to build and manage them, and tend to align to specific business models and go-to-market approaches.

For example, a branded house/master/monolithic brand architecture, which elevates a single brand across a potentially wide range of product types, tends to suit environments where you’re cross-selling multiple products to a single customer, and require brand scale to compete, and is especially useful where you’re assembling multiple products or services to create customer-centric solutions. This is why it tends to be so prevalent in B2B environments, where the flexibility to mix and match matters.

To give a practical example, I once consulted for GE, which had made 350+ acquisitions in Europe, none of which had been integrated brand-wise. In talking to one of its business leaders, he described how they’d struggled to meet an RFP request for a continent-wide client solution because it meant cobbling together products from 20 different national-level brands to do so, which led to their losing the bid because the prospective client questioned their ability to deliver.

This is an excellent example of a portfolio architecture (albeit accidental) being the opposite of what was optimal for the business. And it’s a common error.

I genuinely believe the accidental portfolio is a singular architecture challenge and a direct reason why corporations like GE, which might have massive operational scale, often make the mistake of being sub-scale at a brand level.

P&G is often cited as the definitive example of a portfolio architecture, but the nature of why this works and the discipline of managing it is widely and wildly misunderstood. P&G isn’t individually branding products; it’s building category-level brands with significant financial and managerial resources behind them. For example, oral health is a $50bn category globally. To compete, P&G has a tiny number of brands, primarily Crest and Oral-B, that cover hundreds of product SKUs across an array of countries. This is why you have multiple variants of Crest toothpaste, mouthwash, tooth-whitener, and Oral-B toothbrushes.

This works because it’s establishing brand scale in clearly defined categories large enough and profitable enough to justify the investment in a dedicated brand, or two. So, while P&G as a corporation may technically operate as a house of brands, at a category level it’s much more akin to a branded house architecture (AKA master-branded/monolithic).

By contrast, there are three common variants of what I call the accidental portfolio:

Acquisition driven, a la the GE example above. Ego-driven, which plagues technology companies. And the deluded portfolio, which is common among so-called “legacy” brands.

The acquisition-driven portfolio is fairly self-explanatory, so I won’t focus on it here. The other two, however, are worth investigating further.

1. The Ego-Driven Portfolio.
   Most modern technology companies have highly distributed operating models oriented around product teams. These product teams like to think they’re special (don’t we all), and as such, each deserves its own brand. Without robust and centralized brand management at a business leadership level, there’s no countervailing force, so they get what they want. Each product receiving a brand name, logo, positioning, etc., and a product marketer or team of product marketers to manage it. These products then go to market primarily via activation-driven, performance marketing tactics. In B2B environments, this might be labeled “account-based marketing” or “lead gen,” but it amounts to the same thing. Notably, while each product group might think it has a brand, the outside world rarely agrees. This is because it’s easy to spin up a name and a logo, a positioning, and a set of marketing tactics, while building a brand remains difficult, expensive, and time-consuming. I refer to this as labeling rather than branding because all you’re doing is slapping labels on things.
   
   Over time, as the business grows, it rapidly adds more products, developing an increasingly complex and fragmented brand portfolio that begins to overlap and then fall all over on itself. And while the business overall might have massive operational scale, it now finds itself with a multitude of sub-scale pseudo brands, offering few of the benefits a real brand provides.
   
   Product brand proliferation then continues because individual product growth tends to stall out (very similar to what happens to startups, where you see strong growth from a small base, but then an over-reliance on activation tactics hits a wall of diminishing returns), so the organization responds by spinning up even more product level brands…which kicks the can down the road a bit, while introducing incredible levels of additional complexity to the portfolio, which in turn makes it hard to attract exactly the kind of large, high-value, multi-product relationships that scale should enable.
   
   Furthermore, in addition to a confounding wall of complexity that no customer can fathom (One of the direct reasons systems integration consulting even exists), it’s also horrendously inefficient. While each product team thinks it’s performing well relative to its measurement dashboards, at a macro level, it’s a appalling waste of resources.
   
   This matters because while the total marketing spend might be huge, it’s fragmented nature means it’s delivering none of the benefits of building a brand at a scale. One of the concepts lost in the shift to activation-focused advertising is that brand spend can be a massive competitive advantage in and of itself. All other things being equal, brands that can outspend the competition tend to suck the oxygen out of the room and dominate the narrative. This is why the fragmented approach to marketing spend we see among technology companies, far from optimal, can actually be competitive advantage destroying.
   
   All up, this is the literal poster child for the concept that what got us where we are won’t get us where we’re going.
   
   If we compare this to the P&G approach to oral health I gave above, it’s the equivalent of branding every single product SKU individually with a different brand name, logo, etc., without any investment in building these individual brands. Imagine walking into your local drugstore to find every single version, pack size, etc., of every oral health product from P&G not branded Crest or Oral B at all but instead individually labeled, each with its own name, logo, and packaging, none of which you’ve heard of before. Chances are you’re buying a Colgate product instead.
   
   The challenge of fixing this problem is one of ego and a lack of brand management as a senior level discipline. It’s exceptionally difficult to reign in brand chaos within an organization that prides itself on its distributed operating model once the architecture has already fragmented. Especially if the organization lacks an understanding of the financial and management resources necessary to build a strong brand, let alone hundreds. Equally, no product team ever willingly gave up its toys and self-identity, and often these teams have much power internally.
   
   A notable exception to this rule is Satya Nadella-era Microsoft, which while far from perfect, has spent years shifting its architecture toward a category-level model. A massive shift from the chaos factory that existed when I consulted with them years ago, forced upon it by the decline of Windows as a competitive force.
   

2. The Deluded Portfolio

   The other version of the accidental portfolio that is oh-so-common is what I’d refer to as the deluded portfolio. This is common in large organizations that already have brand scale yet now find themselves with concerns around innovation, new product introduction, and, often, a lack of appeal to younger customers.
   
   Here, you’ll commonly hear the refrain that they want to drive new growth by “innovating like a startup,” which usually means spitting out a smorgasbord of new and separately branded offerings, often in parallel, and all in the category the existing brand already serves.

   
   Now, this “innovate like a startup” mentality is fine if you mean to replicate the good parts of startups - speed, agility, creativity, risk-taking, flexibility, customer centricity, willingness to fail and learn, etc. But it’s much less fine when it also means replicating the bad parts of startups - namely, that nobody has ever heard of you, you have zero brand scale, few resources to play with, and no customers.
   
   Here, a common mistake is to view the existing brand that brings scale, resources, customers, salience, and trust as a “legacy brand.” Creating the conceit that it’s of the past rather than the future. In reality, relevance problems are often more likely to be product problems than a brand problem alone. The brand only lacking relevance because it doesn’t have the innovative products customers are looking for, not because there’s something intrinsically terrible about it.
   
   This means you’re rarely solving the real problem by pushing all your innovative new thinking into a portfolio of small, sub-scale, separately branded entities. Worse, besides robbing the so-called “legacy” brand of its destiny, you’re now attempting to grow a portfolio of separately branded offerings that lack any of the benefits of brand scale in a category the parent is usually already in, creating a double whammy of problems.
   
   Again, if I compare this to the P&G example, it would be the equivalent of freezing all Crest and Oral B product innovation at a single moment in time, and only releasing new oral health innovations under an array of previously unheard-of brand names. As a result, Crest and Oral-B would slowly decline as the offerings became increasingly outdated, while the constant whirlwind of new brand introductions exhaust the organization's financial capacity without establishing any comparable brand scale; heads, tails, it doesn't matter. You lose.
   
   Now, while I understand that it’s often hard to innovate within a large organization for many reasons, that doesn’t mean you can’t think through the lens of brand leverage when creating new and innovative offerings; they rarely require new brands. I’d argue that, more often than not, they shouldn’t. Once they have scale, brands are incredibly resilient, so they can almost certainly handle the introduction of a few innovative new offerings especially when these innovations might be more valuable in delivering the constant renewal that every brand needs rather than sitting off in a corner somewhere where few even notice.

Before I finish, I must say that in the wild, brand architectures tend to be complex things, require challenging trade-offs, and are never perfect nor easy to manage. And while this piece has been long, I’m only scratching the surface. Truthfully, there’s often considerable nuance at play, a delicate balancing act across internal and external demands and legacy and future concerns. Added to this, it’s not at all uncommon to find multiple architecture models at play within a single corporation. And that’s fine.

The key is to think about this through a business lens rather than a PowerPoint lens. We’re not just trying to align names and logos for the sake of it. We’re not just creating neat nomenclatures and hierarchies. Instead, we need to think of brand architecture as an enabler of the business strategy and consider the impact different architectures will have in enabling business models, the likelihood of competitive success, and the ability to meet real business challenges.

Thank you for bearing with me for this long. I promise to be more ranting and less lecturing next time.

Volume 134: The Accidental Portfolio.

April 6th, 2023

The Accidental Portfolio.

tl;dr: Geeking out on brand architecture. Yes, I am that boring.

Sorry, there was no Off Kilter last week; things have been a little busy on the work front, which is good for me and less good for the state of this newsletter. As a result, this single-issue edition is driven by things I’ve been working on rather than something I’ve been paying attention to in the world.

I’ve had very similar conversations with different clients around brand architecture in the past couple of weeks. (Meaning how a company’s brands are organized, rather than the advertising version of this term, which is more akin to a messaging hierarchy). It’s one of the most misunderstood aspects of our work, with potentially disastrous business consequences.

I think one reason is that we tend to look at the frameworks - branded house (AKA master or monolithically-branded), sub-branded, endorsed, and house of brands (AKA portfolio), through an academic rather than a business lens. Often focusing on what looks neat on a PowerPoint slide rather than what will best enable the success of the business. In reality, different architectures impact the business differently, have differing implications vis a vis the financial and management resources required to build and manage them, and tend to align to specific business models and go-to-market approaches.

For example, a branded house/master/monolithic brand architecture, which elevates a single brand across a potentially wide range of product types, tends to suit environments where you’re cross-selling multiple products to a single customer, and require brand scale to compete, and is especially useful where you’re assembling multiple products or services to create customer-centric solutions. This is why it tends to be so prevalent in B2B environments, where the flexibility to mix and match matters.

To give a practical example, I once consulted for GE, which had made 350+ acquisitions in Europe, none of which had been integrated brand-wise. In talking to one of its business leaders, he described how they’d struggled to meet an RFP request for a continent-wide client solution because it meant cobbling together products from 20 different national-level brands to do so, which led to their losing the bid because the prospective client questioned their ability to deliver.

This is an excellent example of a portfolio architecture (albeit accidental) being the opposite of what was optimal for the business. And it’s a common error.

I genuinely believe the accidental portfolio is a singular architecture challenge and a direct reason why corporations like GE, which might have massive operational scale, often make the mistake of being sub-scale at a brand level.

P&G is often cited as the definitive example of a portfolio architecture, but the nature of why this works and the discipline of managing it is widely and wildly misunderstood. P&G isn’t individually branding products; it’s building category-level brands with significant financial and managerial resources behind them. For example, oral health is a $50bn category globally. To compete, P&G has a tiny number of brands, primarily Crest and Oral-B, that cover hundreds of product SKUs across an array of countries. This is why you have multiple variants of Crest toothpaste, mouthwash, tooth-whitener, and Oral-B toothbrushes.

This works because it’s establishing brand scale in clearly defined categories large enough and profitable enough to justify the investment in a dedicated brand, or two. So, while P&G as a corporation may technically operate as a house of brands, at a category level it’s much more akin to a branded house architecture (AKA master-branded/monolithic).

By contrast, there are three common variants of what I call the accidental portfolio:

Acquisition driven, a la the GE example above. Ego-driven, which plagues technology companies. And the deluded portfolio, which is common among so-called “legacy” brands.

The acquisition-driven portfolio is fairly self-explanatory, so I won’t focus on it here. The other two, however, are worth investigating further.

1. The Ego-Driven Portfolio.
   Most modern technology companies have highly distributed operating models oriented around product teams. These product teams like to think they’re special (don’t we all), and as such, each deserves its own brand. Without robust and centralized brand management at a business leadership level, there’s no countervailing force, so they get what they want. Each product receiving a brand name, logo, positioning, etc., and a product marketer or team of product marketers to manage it. These products then go to market primarily via activation-driven, performance marketing tactics. In B2B environments, this might be labeled “account-based marketing” or “lead gen,” but it amounts to the same thing. Notably, while each product group might think it has a brand, the outside world rarely agrees. This is because it’s easy to spin up a name and a logo, a positioning, and a set of marketing tactics, while building a brand remains difficult, expensive, and time-consuming. I refer to this as labeling rather than branding because all you’re doing is slapping labels on things.
   
   Over time, as the business grows, it rapidly adds more products, developing an increasingly complex and fragmented brand portfolio that begins to overlap and then fall all over on itself. And while the business overall might have massive operational scale, it now finds itself with a multitude of sub-scale pseudo brands, offering few of the benefits a real brand provides.
   
   Product brand proliferation then continues because individual product growth tends to stall out (very similar to what happens to startups, where you see strong growth from a small base, but then an over-reliance on activation tactics hits a wall of diminishing returns), so the organization responds by spinning up even more product level brands…which kicks the can down the road a bit, while introducing incredible levels of additional complexity to the portfolio, which in turn makes it hard to attract exactly the kind of large, high-value, multi-product relationships that scale should enable.
   
   Furthermore, in addition to a confounding wall of complexity that no customer can fathom (One of the direct reasons systems integration consulting even exists), it’s also horrendously inefficient. While each product team thinks it’s performing well relative to its measurement dashboards, at a macro level, it’s a appalling waste of resources.
   
   This matters because while the total marketing spend might be huge, it’s fragmented nature means it’s delivering none of the benefits of building a brand at a scale. One of the concepts lost in the shift to activation-focused advertising is that brand spend can be a massive competitive advantage in and of itself. All other things being equal, brands that can outspend the competition tend to suck the oxygen out of the room and dominate the narrative. This is why the fragmented approach to marketing spend we see among technology companies, far from optimal, can actually be competitive advantage destroying.
   
   All up, this is the literal poster child for the concept that what got us where we are won’t get us where we’re going.
   
   If we compare this to the P&G approach to oral health I gave above, it’s the equivalent of branding every single product SKU individually with a different brand name, logo, etc., without any investment in building these individual brands. Imagine walking into your local drugstore to find every single version, pack size, etc., of every oral health product from P&G not branded Crest or Oral B at all but instead individually labeled, each with its own name, logo, and packaging, none of which you’ve heard of before. Chances are you’re buying a Colgate product instead.
   
   The challenge of fixing this problem is one of ego and a lack of brand management as a senior level discipline. It’s exceptionally difficult to reign in brand chaos within an organization that prides itself on its distributed operating model once the architecture has already fragmented. Especially if the organization lacks an understanding of the financial and management resources necessary to build a strong brand, let alone hundreds. Equally, no product team ever willingly gave up its toys and self-identity, and often these teams have much power internally.
   
   A notable exception to this rule is Satya Nadella-era Microsoft, which while far from perfect, has spent years shifting its architecture toward a category-level model. A massive shift from the chaos factory that existed when I consulted with them years ago, forced upon it by the decline of Windows as a competitive force.
   

2. The Deluded Portfolio

   The other version of the accidental portfolio that is oh-so-common is what I’d refer to as the deluded portfolio. This is common in large organizations that already have brand scale yet now find themselves with concerns around innovation, new product introduction, and, often, a lack of appeal to younger customers.
   
   Here, you’ll commonly hear the refrain that they want to drive new growth by “innovating like a startup,” which usually means spitting out a smorgasbord of new and separately branded offerings, often in parallel, and all in the category the existing brand already serves.

   
   Now, this “innovate like a startup” mentality is fine if you mean to replicate the good parts of startups - speed, agility, creativity, risk-taking, flexibility, customer centricity, willingness to fail and learn, etc. But it’s much less fine when it also means replicating the bad parts of startups - namely, that nobody has ever heard of you, you have zero brand scale, few resources to play with, and no customers.
   
   Here, a common mistake is to view the existing brand that brings scale, resources, customers, salience, and trust as a “legacy brand.” Creating the conceit that it’s of the past rather than the future. In reality, relevance problems are often more likely to be product problems than a brand problem alone. The brand only lacking relevance because it doesn’t have the innovative products customers are looking for, not because there’s something intrinsically terrible about it.
   
   This means you’re rarely solving the real problem by pushing all your innovative new thinking into a portfolio of small, sub-scale, separately branded entities. Worse, besides robbing the so-called “legacy” brand of its destiny, you’re now attempting to grow a portfolio of separately branded offerings that lack any of the benefits of brand scale in a category the parent is usually already in, creating a double whammy of problems.
   
   Again, if I compare this to the P&G example, it would be the equivalent of freezing all Crest and Oral B product innovation at a single moment in time, and only releasing new oral health innovations under an array of previously unheard-of brand names. As a result, Crest and Oral-B would slowly decline as the offerings became increasingly outdated, while the constant whirlwind of new brand introductions exhaust the organization's financial capacity without establishing any comparable brand scale; heads, tails, it doesn't matter. You lose.
   
   Now, while I understand that it’s often hard to innovate within a large organization for many reasons, that doesn’t mean you can’t think through the lens of brand leverage when creating new and innovative offerings; they rarely require new brands. I’d argue that, more often than not, they shouldn’t. Once they have scale, brands are incredibly resilient, so they can almost certainly handle the introduction of a few innovative new offerings especially when these innovations might be more valuable in delivering the constant renewal that every brand needs rather than sitting off in a corner somewhere where few even notice.

Before I finish, I must say that in the wild, brand architectures tend to be complex things, require challenging trade-offs, and are never perfect nor easy to manage. And while this piece has been long, I’m only scratching the surface. Truthfully, there’s often considerable nuance at play, a delicate balancing act across internal and external demands and legacy and future concerns. Added to this, it’s not at all uncommon to find multiple architecture models at play within a single corporation. And that’s fine.

The key is to think about this through a business lens rather than a PowerPoint lens. We’re not just trying to align names and logos for the sake of it. We’re not just creating neat nomenclatures and hierarchies. Instead, we need to think of brand architecture as an enabler of the business strategy and consider the impact different architectures will have in enabling business models, the likelihood of competitive success, and the ability to meet real business challenges.

Thank you for bearing with me for this long. I promise to be more ranting and less lecturing next time.

Volume 133: The Most New York Thing Ever.

March 24th, 2023

The Most New York Thing Ever.

tl;dr: We ❤️ NYC is latest in a long line of bad NYC identities.

“I was always a New Yorker; I just didn’t know it until I got here” is a line famously attributed to John Lennon that perfectly encapsulates my own feelings for the city, from the moment I moved there in 2004. And, having lived in the city for 13 years before (temporarily) moving out to the ‘burbs (the hell of NYC schools is real) and having worked on the NYC brand back in the day, I feel that I have a dog in the hunt on things NYC related.

So, while I’ll leave it to others to discuss the design merits (or complete lack thereof) related to the new “We ❤️ NYC” identity, and its appalling campaign executions, I have some thoughts I’d like to share.

Before we move on, though, I must admit that I originally wrote something far different and vastly more cutting about it, which is why this Off Kilter is shortened and arriving late this week, but I realized that whatever I may think of the design, there is a real person who designed it who’s taking rather a lot of flak right now, and such criticism shouldn’t be personalized.

A big part of me feels that anyone delivering a PG-13 homage to Milton Glaser’s Taxi Driver, who also feels inclined to spout dumb shit about Helvetica being the beating heart of New York City because it’s on the subway signs (Sorry, it’s also the most overused, generic and commodified typeface on earth, which is not at all conceptually representative of the most diverse city on earth), should be prepared for what’s coming.

However, another part of me feels this is a huge part of why the design world is so stultifyingly boring and creatively constipated. Not because people are incapable of having different, unexpected, and challenging design ideas, but because they’re too scared to put their head above the parapet only to be shot at by the keyboard warriors on Twitter and the comments section of Brand New. And newsletter writers like me.

We must also acknowledge that this is just the latest in a long line of bad identities swirling around New York City and New York State. Does anyone remember the logo for the 2012 Olympic bid? Or the New York Marathon? Or the godawful application of the NYC logo to the taxi cabs? So, rather than blame the designer alone, we must also point a giant finger at the political dysfunction that’s defined New York for as long as it’s existed. It’s notable that for this project to happen at all, it required a smorgasbord of city and state entities that never agreed on anything before, to agree on this. Including the New York State Department of Economic Development, the state agency that owns the “I ❤️ NY” trademark, which it has traditionally protected jealously. This project was almost certainly doomed to mediocrity from the start, irrespective of who did the work.

Weirdly, that makes the new logo one of the most New York things ever.

But, rather than get stuck on the nuances of the design, I want to talk about why, admirable as a campaign in praise of New York City might be, the whole thing conceptually missed the mark before any designer even touched it.

First things first, New Yorkers don’t love New York. We love to hate it. It’s a cruel mistress. It’s expensive; it’s dirty; it’s competitive; it’s pushy; it moves fast; it’s crammed in on top of itself, and the rats are bigger than dogs. There’s always somebody younger and hungrier seeking to make their mark, sometimes at your expense. The term “a New York minute” is no accident, and plenty of people really do have two business breakfasts before 8am. It’s also sexy, sophisticated, elegant, arty, powerful…and, and, and. It’s the most diverse city on earth, the gateway to the US for generations of immigrants, and it likes to think of itself as the center of the known universe. Well, Brooklyn is, anyway.

But one thing New York never does is coddle you. If you need coddling, go somewhere else.

So, whenever a group of New Yorkers are in the same room together, the city will always be a primary topic of conversation. And rarely in a good way. We love to moan about it. We wear the challenge of living there like a badge on our sleeves. It’s the one place where people who never fit in anywhere else feel at home, and we revel in our ability to stick it out when others can’t. The thing that connects us across generations, incomes, races, sexual preferences, religions, professions, genders, and countries of origin, you name it, is our relationship to the very city itself.

So, what do you think will happen when you tell a bunch of New Yorkers to love the city? Well. Simply put, you misread the room. Tell a bunch of New Yorkers that “We ❤️ NYC,” and the immediate reaction will be exactly what happened: violent opposition at your having the temerity to tell us what to think. No matter how much we may actually love it.

For a time, years ago, I lived in Dumbo, which unfortunately became little more than a bedroom community for Wall Street. Gentrification meaning it no longer felt like the Brooklyn I love. So we moved to Downtown Brooklyn. Upon picking up the keys to our new apartment, I headed down Fulton Mall at around 7.30 am, power-walking past a guy in a leather jacket as he loudly hawked up and then spat on the street about 6” from my shoe. Without thinking, I loudly exclaimed, “For f’s sake,” without pausing. There was silence for perhaps 3,4,5 seconds as I continued on before a torrent of abuse, cursing, and accusations of what I get up to with other men, and my mother erupted from behind me. I just grinned and thought to myself, “Yes! I’m back in Brooklyn. I have missed you so.”

This, the rats, the pressure, the smell, and the grit. This is the New York that I love. And it will never be encapsulated by “We ❤️ NYC,” even if that mark had been brilliantly designed, because the very idea of it is so desperately, conceptually, wrong.

Volume 132: VC Flash Mob Collapses Bank.

March 16th, 2023

1. VC Flash Mob Collapses Bank.

tl;dr: First bank run of the social media era notable for its speed.

I probably view the collapse of Silicon Valley Bank (SVB) with more empathy than most. In 2008, when it collapsed, Washington Mutual (WaMu) went from being our largest client on Thursday to no longer existing on Friday. It was shocking and forced us to make painful layoffs, but that’s nothing compared to the people we worked with at the bank who not only lost their jobs but had their retirement savings eviscerated as the WaMu stock in their 401Ks went to zero. So, no matter what your thoughts may be on what went down and who might be to blame, please reserve a moment of empathy for the (non-exec) employees and business partners who, through no fault of their own, have likely been wiped out by this event.

As for banking crises in the US overall, it’s a simple tale. When regulation is lax, and there’s little government oversight, banks take big risks to maximize profits, and bank collapses are the inevitable consequence. When the government regulates more heavily and oversight tightens in response, banks become less profitable and more boring…and collapses don’t happen. This has played out consistently for over 100 years, so we have plenty of evidence to support the case. However, banks will always lobby for deregulation because the pull of profit is strong. Meanwhile, the pull of political donations has rendered banking deregulation one of the few bipartisan issues supported by both parties, irrespective of the known and predictable consequences. (Ironically, the 2018 deregulation that contributed to the collapse of SVB was called the Crapo Bill. Aptly named)

By now, there have been plenty of analyses of what happened and what went wrong, but to better understand the future implications, we might want to separate “what got the bank into trouble” and “what killed the bank.”

What got the bank into trouble was either underestimating or ignoring risk. Specifically, there appear to have been two major risks in play:

1. Customer concentration risk: SVB’s success as a brand in attracting startup and technology company deposits was risky because this is a connected, homogenous group, subject to herdlike behavior, exacerbated by the fact these deposits were particularly subject to flight, as they overwhelmingly exceeded the insurance limit provided by the FDIC. Doubling deposits between 2020 and 2021 as the everything bubble peaked amplified this risk.

2. Interest rate and duration risk: Think of a bank as a two-sided market for money. Perfection is a diverse array of depositors giving you cash exactly matching a diverse set of customers you can then lend it to. SVB, by contrast, had a concentrated glut of depositor cash far in excess of the loans it could write itself. So, in search of profit, it went out and used about half its depositor cash to buy long-duration government-backed securities (government debt). This paid an average of 1.6%, which is OK when interest rates are zero, but is very much not OK when rates rise to 4.5%.

As the tech economy darkened and interest rates rose, these two areas of risk combined to put the bank in trouble. Put simply, cash-burning startups needed to draw down on their deposits to pay for the cost of operations, while new deposit inflows slowed to a trickle as VC funding dried up. This meant a consistent outflow of deposits, which the bank was increasingly struggling to meet because it had locked up so much depositor cash in long-dated securities. Worse, because interest rates had gone up, the value of these securities was going down (Nobody is going to buy an old loan paying 1.6% when they can buy a new one paying 4.5% instead. As a result, if the old loan is sold, it has to be sold at a discount to make it equivalent).

Realizing its situation, SVB decided to free up depositor cash by selling a portion of its long-dated securities, which meant eating a loss because it had to sell for less than it had paid. To cover the cost of this now-realized loss, the bank arranged for Goldman Sachs to help it raise capital by selling $2.25bn in equity.

While all of the above reeks of hubris and terrible risk management (SVB went eight months last year without a Chief Risk Officer, and internal recommendations in 2020 to shift from long-duration bonds to short to mitigate interest and duration risk were refused because it would’ve meant reducing profits), it really shouldn’t have been an extinction-level event. In many ways, it this is just so far, so normal, for how banks typically patch over their bad decisions.

No, what almost certainly killed this bank wasn’t that it got into trouble but its abject and utterly inept approach to communicating its situation. In the same way that it went eight months without a Chief Risk Officer, it had nobody at the executive level responsible for communications.

So, with that in mind, let’s look at what happened next.

The bank did nothing to communicate what was happening to its depositors, even though it knew it had a highly concentrated depositor base that was especially subject to both flight (90%-ish uninsured deposits) and herd behavior influenced by a very small number of VCs who’d handed out the money that was now parked at SVB.

Instead, it tried to announce quietly to the financial markets that it had taken a loss and was now conducting an equity raise. (Notably, this is only to be found on their Investor relations page, there is no mention at all in their “newsroom”) Hoping, I guess, that the news would be limited to institutional investors and that the raise would be complete before anyone took notice.

Worse, they did this at the same time that Silvergate, a bank focused on the startup-adjacent world of crypto, had just collapsed into oblivion, which meant both VCs and startup founders were notably jittery.

Then, people online, including an influential fintech newsletter widely read by VCs, picked up on what was happening and started publishing breathless pieces on SVB taking losses, sitting on even greater unrealized losses (not necessarily a problem if you can hold the securities for long enough for interest rates to drop and their value to rise), and raising capital to cover these losses…and, surprised by this news, VCs panicked.

While the reality is likely not as neat as I portray it here, we know that news of the loss and capital raise spread ferociously, fed by the fuel of a complete communication vacuum from SVB, which led to it wholly losing control of the narrative. As a result, by the time it issued the most damning of “everything is stable and sound” statements, the bank was already toast because…

…The VCs had been instructing portfolio companies to review their relationships with SVB, which rapidly leaked into the Twittersphere, causing panic among deposit holders because they needed to make payroll, and the FDIC only insures $250k of depositor funds.

As a result, we saw the fastest bank run in human history and the first (but likely not the last) to be algorithmically accelerated via social media. To put this in context, when it failed in 2008, WaMu faced withdrawals of $16.7bn over two weeks. When it failed this month, $43bn exited SVB in just two days.

It’s truly incredible to consider that a flash mob of maybe 20 or so panicked VCs, algorithmically accelerated on Twitter, led to the largest, fastest withdrawal of depositor cash in banking history.

Had the bank realized that actions communicate at least as loudly, and often more loudly, than words, it would likely be alive today. Had it had an even halfway competent communications leader in the C-suite, it likely would be alive today. (Of course, if it hadn’t made the dumbest of dumb bets against interest rates rising, it would definitely still be alive today, so there is that)

Anyway, what an even halfway competent communication leader would have realized is that you can’t do this at the same time Silvergate was collapsing, that you can’t do this without proactive VC-focused outreach because of how influential they are with your depositor base, and that you probably shouldn’t announce a loss and a capital raise at the same time, but instead spread them out and give people a chance to process and figure out what’s going on first.

So, yeah. Bad decisions were made on the risk management side for sure, but guess what? Companies make bad decisions all the time. What almost certainly killed this bank - or at least made it fail so spectacularly quickly - was a complete failure to read the room and to understand and manage the realities of the modern communication environment, especially with a deeply connected, concentrated, and herdlike depositor base that is highly influenced by a very small number of VCs.

If I were a regulator, it’s not the lousy risk management decisions I’d be most concerned about right now. No, I’d be shitting a brick at the risk of algorithmically accelerated panic besetting a financial system that cannot exist without a foundation of confidence and trust. (And yes, bad actors - likely nation states - are almost certainly in the process of planting the seeds of such distrust even as we speak).

If I were a bank CEO, I’d be looking at who is responsible for communications at my bank. And if I don’t have a strong C-level communication leader who understands the nature of algorithmic acceleration and social media panic, I’d be hiring one immediately. And I’d spend almost any amount of money to get someone who knows what they’re doing. Why? Because the future viability of my business might depend on it.

2. Buh-bye, Beauty.

tl;dr: Not all easy businesses are good businesses.

One of the things tech firms have been smart about is attempting to build businesses where there’s a “moat” that prevents competition from eating their lunch. I suspect this mostly started as a survival mechanism, for without a moat, the tech world operates through a version of Moore’s law - twice as fast, at half the price, every 18 months. In other words, without something to make it difficult, competition will rapidly commodify what you’re selling, which means you need to prevent yourself from being competed out of existence.

At the opposite end of the spectrum, some businesses have such low barriers to entry that pretty much anyone can get into them. At the height of DTC hubris, the online sale of mattresses was one such, with some 175 online mattress retailers in the US at one point (although there are probably many fewer these days).

As the everything bubble peaked, it became sexy to think there was an easy hack that would give low barrier-to-entry businesses something akin to a moat, and that was celebrity sponsorship and ownership. It wasn’t exactly a subtle or nuanced strategy but rather an attempt at financially exploiting celebrity fame in a world where celebrities increasingly capture our attention.

This famously occurred with NFTs (where a few celebs now find themselves in legal jeopardy) and booze.

However, beauty, especially cosmetics, remains the OG low-cost-of-entry, easy-to-exploit celebrity category. Rihanna explicitly using her own cosmetics brand, Fenty, during her Super Bowl performance was no fluke. After all, its $2.8bn valuation, not music, represents the vast majority of her net worth. So, as Fenty and a couple of other celebrity beauty brands became successful, it led to over 50 launching in just the last three years.

I don’t know if you’ve ever noticed on the way from Manhattan to Newark airport in New Jersey, but you’re driving through ground zero for the celebrity cosmetics industry. A not particularly well-kept secret is that most of the seemingly different and magical beauty products in your medicine cabinet come from the same few factories, sold private-label to the brand owner, with the same ingredients, other than perhaps a little fragrance and color.

But just because a business is easy to start doesn’t mean it’ll be particularly cost-effective to run, as the celebrity beauty complex is now finding out, and brands that popped up are just as quickly dying off.

It would be easy to say this is because all the capital sloshing through the system flowed elsewhere as interest rates rose, but there’s also the inevitable issue of consumer fatigue. When things are new, they’re novel, and we pay attention to them as such. This is why we saw a few early successes in celebrity beauty and booze businesses. However, as the novelty wears off and new celebrity brands pour into these categories, we tune them out. It becomes harder to capture our attention because there are so many of them, and they, in effect, become commodified (and that moat you thought you had starts to look very different).

Put simply, if you apply star power to a category where celebrities are notable for their absence, you can cut through, be novel, and achieve success. However, try this same trick in a category already dripping in celebrity star power, and you disappear. It’s no longer novel; it’s just yet more noise for us to tune out. And when we’re in the mode of tuning out the noise, we’re far more likely as consumers to start asking questions about what we’re being asked to buy, which, in this case, led directly to social media influencers shifting from a stance of peddling celebrity products to reviewing and critiquing them for quality and value.

With this in mind, I tip my hat to Ryan Reynolds, who went from Aviation Gin to Mint Mobile. I suspect he realized celebrity booze had reached saturation point when he sold Aviation while cell phones was lucrative open territory.

So, what’s the moral of this tale? Well, celebrity alone isn’t likely enough in categories anyone can enter, especially if there are already loads of them there. Second, product quality still matters. And third, that celebrity endorsement and ownership do not divorce you from having to do the hard yards of tapping into and then continuing to adapt as consumer tastes change.

Because while beauty may be easy to get into, it’s damn hard to succeed in because our tastes are fickle.

2. The Invisible Hand of Algorithms.

tl;dr: Decisions made on our behalf might not be what we’d choose.

I don’t always feel good about the Off Kilter editions that go out. Sometimes I’ve been too busy to do a good job; sometimes, there haven’t been interesting enough things happening to inspire me; and sometimes, it’s just because I’m feeling down and phone it in.

But last week wasn’t one of those weeks. I felt great about it. So color me surprised when I logged in and found almost 100 people had unsubscribed (for context, I usually see 1-5 or so). My first thought was, wow, I must’ve accidentally touched a nerve and really pissed some people off. It was a sinking pit in the stomach; oh shit, what have I done moment.

But, as I looked closer, I realized these unsubscribes happened precisely one minute after the newsletter was sent. Finding this more than a little suspicious, I did a little research and found there are corporate security algorithms that auto-unsubscribe newsletters it suspects of being junk mail or phishing.

Taking another look, the only thing I could think of is that I used the Icelandic symbol in Halli Thorliefsson’s name and linked to a website in Icelandic, which the machines probably couldn’t read, and so deemed it suspicious enough to hit the unsubscribe button.

So, to confirm my suspicions, I emailed the unsubscribers and asked them if they’d meant to. About 2/3 wrote back saying they had no idea they’d been unsubscribed and to add them back.

So I did. Hello again 👋

As I reflected, it got me thinking about the invisible hand of algorithms shaping our lives and making decisions on our behalf, especially as the rapid rise in generative AI promises an equally rapid increase in the algorithmic shaping of society.

Now, I’m no Luddite. This isn’t an anti-algorithm screed. On the contrary, they’re essential to our modern world. Without spam filtering algorithms, email would be unusable. Without algorithmic filtering, social media would be an even worse cesspit than it already is. Without ride-matching algorithms, nobody could take an Uber. Without recommendation algorithms, Netflix might improve discoverability (I kid, I kid).

But there’s also a dark side to all of this. When algorithms invisibly make decisions on our behalf, they might not be making the decisions we ourselves would choose. Worse, they might not be making the decisions their creators intended either. Because algorithms are often designed to learn and optimize for certain characteristics, they tend to drift over time. For example, the Facebook recommendation algorithm was never intended to push people toward extremism. Still, it does so because by optimizing for engagement, it learned that extremism causes certain groups to be very active on the platform, thus increasing the opportunities to serve them ads.

Equally, we often hear about the horrors of algorithmically mediated recruitment, where the algorithms filtering job applications consistently eliminate great applicants before any human gets to see their resume. Or scheduling algorithms that push part-time retail and fast-food employees into inhumane work schedules. Or sentencing algorithms in the criminal justice system that are demonstrably racist.

I once attended a conference where some people in a breakout session advocated the auditing of algorithms. Their case being that, in the same way we audit corporations to prove their accounting is accurate and true, we should require outside auditors to check algorithms to confirm they’re doing what they’re supposed to be doing and aren’t causing any harm.

After last week, it made me think there needs to be a reckoning about this stuff. It’s bigger than whether the tech monopolists are too big or too censorious; it’s fundamentally a question of human agency, how we know which decisions we’re ceding to algorithms, and to then ensure these algorithms are working in our best interests rather than invisibly against them. So, not a very big challenge then. Haha.

Oh, and if I accidentally re-subscribed you and you wanted to stay unsubscribed. I’m sorry. Please hit the button below, and I’ll leave you be.

Volume 131: Return to You-Know-What Mountain.

March 9th, 2023

1. Return To Bullshit Mountain.

tl;dr: McKinsey at it again.

I have an odd relationship with McKinsey. When I did my MBA, I twice applied twice for a job there because I viewed it as the world’s most prestigious management consultancy. The kind of resume endorsement from which you could write your own ticket. They never replied to the first, and the rejection letter to the second arrived a full two years after I sent it. (I must admit to having giggled upon receipt).

However, I still viewed it as elite, inhaling its thought leadership content, and finding the partners I met to be a universally savvy and sophisticated bunch.

However, as scandal after scandal tarnished the luster (notably, McKinsey’s culpability in the opioid crisis, which is nothing less than evil, and the lightest of slaps on the wrist it received pathetic), I also find myself increasingly looking in askance at the sales support brochures disguised as thought leadership it now peddles in areas where I have expertise. In the past, describing the firm as having put the “Cherry Atop Bullshit Mountain” with this ridiculous piece on “Performance Branding.”

So, with bullshit mountain in mind, I thought I might take a moment to debunk their latest flirtation with the utterly nonsensical, which is the statement that the “Community Flywheel” is a “Better Way to Build A Brand.”

First, I must first note that I originally saw the community flywheel a couple of years ago from Zoe Scaman. And while McKinsey has carefully included references throughout its article, the person it appears to have blatantly ripped off is notable by her absence. So I figured I might at least rectify that here.

I don’t have enough room to walk through the entire article line by line, so I’m going to limit myself to this primary Godawful monstrosity of a framework:

Let’s start with the most obvious stuff first. The term era explicitly suggests that mass media was replaced by personalization, which is about to be replaced by community. This is bullshit.

Mass media still exists; personalization did not replace it, and what’s actually happening is that marketers have started to realize they need more of it alongside personalization to fill both the top and bottom of the marketing funnel (I know the funnel concept is an abstraction, but it’s a handy one).

Second, if all that mass media solved for was reach, then brands like Disney, Nike, Coke, Apple, Guinness, or, well, gee, any brand older than the internet, couldn’t have been very effective. But, again, this is bullshit because, clearly, they were effective. Very.

In fact, I’d argue that the idea the biggest problem in advertising is ineffectiveness, captured so neatly by the so-called Wanamaker problem that “50% of my advertising is wasted, I just don’t know which half” has proven to be one of the most value destructive ideas in marketing.

Anyway, mass media was and remains effective. What challenged it wasn’t being mass but that audiences fragmented, rendering it less mass as a result. This is why the few remaining mass audience events - the Super Bowl, The World Cup, etc - remain so expensive. They aren’t just expanding reach; they’re moving the merch too.

So, the idea that we moved wholesale from mass media via data and targeting to personalized marketing to solve for effectiveness is yet more bullshit.

What actually happened is that the fragmentation of audiences and the rise of the internet led to the emergence of surveillance capitalism, where data and targeting were used to identify high-value prospects from within large, fragmented audiences, with an intent to reach the people most likely to be in the market to purchase at that moment. This didn’t solve for effectiveness at all, as many econometricians will tell you. Instead, it solved for attribution, which we accepted as a proxy for effectiveness. Only now we know it wasn’t a very good proxy.

Worse and quite telling is that no brand was ever built through personalization. Ever. And if McKinsey really is the smartest cat in the room, they should know this basic fact. And the fact that they don’t seem to know it should taint everything else they have to say on the subject.

The truth is that brands are and have always been social objects. The efficiency of creating shared mental and physical availability and a shared set of memory structures is what builds brands. At a minimum, building a brand one person at a time would be prohibitively complex, slow, and expensive. And even if it wasn’t, social signaling cues must be shared to be meaningful. For example, if you drive a car nobody has heard of, it says nothing. However, a Porsche 911 signals something very different compared to a Toyota Camry. These social cues, so critical to how and why we buy, don’t happen via personalization; they occur in spite of it.

And this brings me neatly to the community flywheel thing. First, I'll leave what “solving for influence” means to you because I’m damn sure I have no clue. But if it’s as nonsensical as solving for reach and solving for effectiveness, then it doesn’t matter because it’ll be bullshit.

Second, the term “context” should give us a major clue as to McKinsey’s real agenda here. Probably the most significant change impacting marketers over the next few years will be the patchwork of new privacy legislation they face, which along with the shift to a cookieless web and Apple’s introduction of consumer consent to tracking, risks upending the targeting-driven approach they’ve invested so heavily in, and become so addicted to. As a result, there’s a good chance marketers will be forced to rip and replace significant portions of their advertising ecosystems. And who should be there to tell them what to invest in next…why McKinsey, of course.

That’s right; this is much less about there being a better way to build a brand via community and much more about McKinsey sensing major fees ahead because tracking is only getting harder.

As to the community flywheel itself, like all the best lies, there’s a nugget of truth in there. Here’s my take FWIW. It isn’t replacing mass media or personalization any time soon, but it will augment it for some. Some brands will focus heavily on community because it makes sense; for others, it won’t. This isn’t an era-level shift; it’s a set of tools and techniques that will work for some brands some of the time but not all brands all of the time.

Zoe Scaman, who I think came up with the idea, and whom McKinsey appears to have ripped off, primarily seems to work in “entertainment and fandom.” In other words, categories where a community approach to marketing makes sense because vibrant and vocal communities already exist. In fact, I’d go so far as to say you’d be crazy not to.

But many, perhaps most, categories don’t lend themselves to this kind of participation. I have no interest in being a part of a clean dishes community to spark my purchase of Dawn dish soap. Nor have I any interest in joining an insurance community where Geico car insurance can wow me with its participation. Just taking a simple step back for a second tells you this can’t be a revolution of a similar scale to mass media or even a personalization-level shift because not enough of us care enough about the bulk of the products and brands we buy to participate in communities dedicated to them. And it’s stunningly arrogant for brands to think we will.

The more I think about it, the more I think this is mostly just old wine in new bottles. Back in the day, there wasn’t any tracking data, so we used context to guide media choices. For example, when advertising on TV, marketers relied on the show to tell them about the likely audience. When we started tracking consumers, we no longer cared about the show because we could target the audience directly. So, as tracking becomes harder, context, by definition, must re-emerge. Only this time, for some brands, online communities will serve the same purpose that a TV show or a magazine used to.

2. Inflation, Premiumization, Differentiation, Costs.

tl;dr: Connecting a few economic dots.

One of the fascinating artifacts of the supply chain issues many businesses have faced isn’t just the inflation it caused but the air cover it gave businesses to raise prices in ways they probably couldn’t before. Entire categories raising prices together, almost like an informal cartel (I’m not suggesting they’re illegally colluding to fix prices; just that we’re in an opportunistic moment relative to society-wide economic expectations).

We see this on earnings calls, with CEOs bragging about their ability to increase margins by lifting prices more than costs—a side-effect highlighted by the NYTimes being that premiumization is gentrifying the economy.

Premiumization can have many causes, but in this case, it started with simple economic value maximization in the face of supply chain shortages. If you’re a car manufacturer with a limited supply of computer chips, where do you put them? Into your cheapest, lowest margin models? Or into high-margin, fully optioned, and more expensive vehicles? Clearly, if you believe you can sell them, you’ll release the latter to your dealers before the former. From there, the monkey see-monkey do of business kicked in, and other industries that haven’t necessarily faced the same supply pressures realized they might be able to get away with the higher margin premium trick too, and now we are where we are.

And where we are is a weird place. Interest rate rises have made some industries, like mortgages, grind to a standstill while others continue unabated. Perhaps most worrying for our economic future is that we’re seeing record levels of credit card and buy now, pay later debt. This suggests that a potentially significant percentage of the economic resilience we see might be illusory. Funded, as it seems to be, on credit.

So, what happens when the fat lady sings, and the piper eventually has to be paid? Will all of these businesses that have been so happy to raise prices be as adept at lowering them as demand softens?

Probably not.

Now, I could dive into the usual recession marketing playbook stuff, but I won’t because this recent article by Roger Martin is much more interesting.

In it, he discusses the need for differentiators in any category (which is what premiumization aims to be) to also be conscious of their costs because a superior cost position allied to a differentiated and more desirable product is what provides maximum strategic flexibility. A simple example might be the iPhone, the differentiation leader in smartphones. Here, Apple has vastly more price flexibility than others it competes against, not only because its prices are higher but because its margins are higher because it’s been good at keeping costs under control, even as it raised prices over the past few years.

This means that if the economy turns South and demand softens, Apple has more capacity to lower prices to sustain demand than competitors because competitors lack the margin flexibility to do so.

It’s a fascinating reminder of the importance of cost management, even if your strategy isn’t to be the price leader in a category. Combining the undoubted value of a differentiated and desirable proposition with a low cost of doing business to provide maximum flexibility.

One of the most interesting observations in the article is that being well-branded does not in and of itself mean a differentiated position. This is so bang-on. If all your brand achieves is to be narrowly preferred relative to unknown and/or similarly priced competitors, it isn’t all that differentiated. As a result, you will be exposed the moment a brand in your category that commands a price premium chooses to drop prices to match yours.

I can’t tell you how often I’ve seen this play out in practice. In any industry, there’s usually room for one price leader and no more than a handful of premium differentiators. These businesses garner all of the strategic flexibility and, as a result, dictate the playing field for everyone else.

So, what does all this mean for us? Simple. If the economy turns downward, cost leaders will do well. The premium differentiators with the best cost position will have the flexibility to drop prices while retaining margin. And everyone else that seems to be doing great today because of a rising tide of prices across categories will be squeezed. And those with the weakest balance sheets won’t be around to see the inevitable upturn.

3. Talent Repellent.

tl;dr: Space Karen mocks former employee, outs him as disabled.

This week I became furious on someone else’s behalf. It’s not an uncommon situation for me, to be honest. As I age, I find myself developing a burning sense of injustice on others’ behalf fairly regularly.

So, I hummed, and I hawed about whether to write this because it involves Space Karen, whom I’d previously vowed not to write about anymore because the only power I have relative to him is:

A. not buying his cars (which I won’t. Probably a good thing, as the steering wheels fall off, wtf) and B. not giving him any more attention, even though my reach is minimal.

However, I find it very hard to let this one go. I could care less about Space Karen’s politics. He’s hardly the first billionaire to be seduced by the prospect of ever-lower taxes. I find the adolescent conspiracy theorizing more tedious than dangerous (although here, I may be naive) and the desperate need for attention to be a sign of a personality disorder that, while annoying and silly, doesn’t affect me much. And, while the car-crash-in-slow-motion that Twitter has become on his watch is somewhat heartbreaking, it’s only a product, and they’re ten a penny. And now that he’s broken it and wasted all that money in the process, I have no doubt a replacement will fill the void eventually.

No, what’s burning me right now is the outright cruelty and disregard with which he treats the human beings over whom he has power, namely his employees. At the beginning of the pandemic, AirBnB laid people off with dignity, and others followed suit. Even Mark Zuckerberg found it in himself to act with humility, decency, and generosity as he laid off thousands from Meta.

And then there’s Space Karen. Who has somehow managed to drop the floor entirely from under what’s expected of employers, which in the US is an already low bar, culminating this week in a very public feud with the founder of design studio, Ueno, Halli Þorleifsson.

Before this, I knew nothing about Mr. Þorleifsson other than he founded Ueno in Iceland, which he and his team were able to grow to the point that it was working with almost every major tech company before being sold to Twitter. And while I have in the past highlighted Ueno as a poster child for the boringness of the Helvetica in Pastels movement, just because I don’t like the work doesn’t mean I can’t tip my hat to anyone taking a design agency from nothing to highly influential across some of the worlds most valuable corporations. And the fact that this started as far away from silicon valley as Iceland only makes it a more impressive feat.

Anyway, after Space Karen outed Mr. Þorleifsson as being disabled, we now know that not only did he build a globally influential design studio before trading it in for a shot at transforming Twitter, but he did so while battling a lifelong affliction, muscular dystrophy. We then find out that he was named Iceland’s person of the year in 2022 for his work to improve physical access for the disabled and that he requested the sale of Ueno go through as salary rather than a capital gain so that he could pay a higher rate of tax. Feeling, as he did, that he owed something to the country that has supported him for his entire life through its social safety net.

After initially asking for something as basic as a clarification of his employment status after not knowing for nine days after his access to internal systems was cut off, Mr. Þorleifsson was viciously mocked and character assassinated by Space Karen. I must admit to having the highest admiration for the thoughtful, considered, and dignified responses to this mockery because I could not have. The contrast in dialog serving to eviscerate the man-child who views himself as the world’s greatest influencer, meme maker, or whatever the hell he thinks he is. Belatedly, Space Karen insincerely apologized. I’m guessing only after someone informed him that the remaining value of the Ueno acquisition would have to be paid out upon termination, and I’m sure, after some very heated conversations with lawyers about legal jeopardy vis-a-vis Californian workplace discrimination laws. The read between the lines being that he now owes Mr. Þorleifsson a considerable sum of money, which could become vastly greater should he choose to sue.

And that’s why I ultimately decided that I should write about this. Not because it meant giving Space Karen the attention he most decidedly does not deserve but because not writing would mean denying Mr. Þorleifsson the credit he absolutely does for managing such an emotionally fraught situation with as much dignity as he did. (If any of you reading this know him, please pass on my regards and wishes for good health, good fortune, and happiness for him and his family.)

The contrast is stark. On the one hand, a man with the superpower of fame and extreme wealth, who could do and be anything he wants and yet chooses to be little more than a cruel adolescent troll who’s become so toxic he has bodyguards follow him to the bathroom lest someone attack him on the crapper. And Halli Þorleifsson, a man who, in the face of his inevitable physical degeneration, operates with dignity and generosity.

A contrast that says everything about the people we should be lauding and those whom, simply, we should not.

Volume 130: A YouTube Strategy Lesson.

March 2nd, 2023

1. End of An Era: A YouTube Strategy Lesson.

tl;dr: Susan Wojcicki retires from YouTube. Seriously impressive.

A superior strategy, you know, the full-fat business strategy stuff, as opposed to the fat-free version so often peddled by us brand strategy professionals, is one of the hardest things in the world to describe before the fact and one of the easiest after.

It truly has the quality of “I don’t know what it is, but I’ll know it when I see it (in hindsight).” Not that this stops oodles of talking heads, conference speakers, book authors, and newsletter monkeys like me from attempting to. And, let’s face it, there are screeds of academics and consultants who’ve turned the goal of defining a superior strategy into a full-time career.

But, in truth, the thing about great strategies is that they’re only really identifiable in hindsight. They need to deliver on their promise for us to see what was happening. We also need to see what might have happened had they pursued a different strategy. 

If you’ve read the book Good Strategy, Bad Strategy (and you should), it makes some wonderful “in hindsight” observations. My favorite is the thought process that went into the iPod, which led directly to the iPhone, which transformed Apple from imminently bankrupt to the dominant global corporation it is today.

Here, so the story goes, when Steve Jobs returned to Apple, the first thing he did was cut the product portfolio by 70% and exit businesses where he didn’t think Apple could win. Why? So that he could focus management attention and financial resources on finding the next big thing. He didn’t yet know what this was, but he knew from experience that technology tends to operate in cycles, where being early to the party can reap big rewards. So he watched and waited, and what emerged was miniaturization.

Specifically, the miniaturization of the hard drive, which led to the MP3 player, a category Apple subsequently dominated with the iPod, which became the iPhone, and well…you know the rest.

Now, I’m deliberately paraphrasing here, but the strategic intent was clear:

• Get out of businesses where we can’t win.

• Focus resources on finding the next big thing.

• Go all in on winning the emerging market that is subsequently identified.

And this is the rub. Truly great strategies are often profoundly transformative and exceptionally simple to explain. Unlike the screeds of content marketing masquerading as “thought leadership,” we like to pen on the subject.

This brings me neatly to Susan Wojcicki and the transformative strategy she put in place at YouTube that led to it becoming one of Silicon Valley’s most prodigious profit engines. (Not to say there isn’t legitimate criticism of YouTube on her watch, but making money isn’t one of them, and that’s what I want to focus on here).

When Susan started as CEO of YouTube in 2014, it was a profoundly different business operating in a very different competitive context. To illustrate, let’s look at three data points:

1. Netflix was a very different proposition. It had largely shifted emphasis from DVD by mail to online streaming, but its streaming portfolio was immature and pretty anemic. A huge stock-price runup in 2013 made others sit up and pay attention, and it looked ripe for the taking: its content library was weak, original production hadn’t really kicked in yet, and it was two years from expanding into non-English speaking countries.

2. In 2013, in response to the valuation opportunity afforded by streaming content, Amazon launched Prime Video as a direct effort to add a Netflix-like valuation atop that of Amazon, betting on its massive Prime subscriber base to spike usage.

3. In 2014, there were more video impressions on Facebook than on YouTube, and a view was fast forming that Facebook would be the king of social video, not YouTube.

As a result, YouTube, like Amazon, was taking a largely copycat strategy designed to attack Netflix directly, launching YouTube Red (Note the obvious competitive target in the name) as a subscription-driven alternative anchored by professionally produced original programming. A mission it largely failed at since today’s renamed successor, YouTube Premium, still only has 30m subscribers.

A huge challenge with this approach is that unimaginative copycat strategies like this tend to be competitive buzzsaws. It’s not that an unimaginative strategy will always fail; it’s that it’s often costly to win with. And, while YouTube may have found success down this path, what we now know about the sheer cost of original programming may have rendered any success somewhat moot, not to mention the fact that, as mentioned above, YouTube Premium only has 30m subscribers, against Netflix’s 230m, or YouTube’s prodigious 2bn users.

However, YouTube Red wouldn’t be the primary strategy for long, as Wojcicki had a very different business vision. Just like Steve Jobs strategically exited businesses he didn’t think Apple could win in, she chose a contrarian path to the conventional wisdom and chose to exit original content and instead place the weight of YouTube behind discovery algorithms and the “creators” who would deliver content that YouTube would then monetize with ads. Today, due to the success of this strategy, it seems utterly obvious. But it was far from obvious at a time when Hollywood production values were primarily viewed as the only path forward.

And boy, was this strategy successful. The YouTube of 2023 will generate roughly $30bn worth of revenue for parent company Google, which is almost exactly that of Netflix. The big difference? YouTube is vastly more profitable since it outsources the cost of content to its creator community. This is why estimates are that if YouTube were a publicly traded corporation rather than a division of Google, it would be worth between $180bn and $300bn, some 30%-100% more than Netflix at the time of writing.

So, yes. Susan Wojcicki. One of Silicon Valley’s most astute business people and former leader of a historically significant profit powerhouse. And she did it by pursuing a simple, contrarian, and profoundly transformative strategy.

We should all be impressed. She’s vastly more accomplished than the typical Silicon Valley attention seeker.

We’ve never met. But well done. I’m looking forward to seeing what you do next, and if you choose to hang out on the beach for the rest of your days, that’s cool too. It’s not like you have much left to prove.

2. Return to The Office Straightaway. And I Mean Immediately. No Exceptions.

tl;dr: Reflections on the return to office movement.

Of all the long-run societal changes caused by the pandemic, changes in how office work gets done might be one of the most profound. Over three years, we went from the vast majority of office work happening in offices to all of it being done remotely to where we are today, a bizarre mish-mash of some work happening remotely and some at the office. And, increasingly, corporations are dictating that workers who are happy and productive working remotely must now return to the office or risk losing their jobs.

What strikes me as odd are the tired arguments for this diktat. Senior executives almost universally cite collaboration, innovation, and culture building as the key reasons for this large-scale mobilization of their people back to…cubicle farms.

What’s particularly worrying is that I cannot find any meaningful evidence that isn’t sponsored by a commercial real estate company, to support the idea that we’re more collaborative or innovative in the office or even that there’s a meaningful improvement in culture. And plenty of evidence to suggest that office workers don’t want to return to the office, primarily but not exclusively, because it means a return to the soul-sucking reality of multi-hour commutes. And, I’d hazard a guess that for many, it’s because their employer was never very collaborative or innovative in the first place and doesn’t have a very distinctive culture, which means working from home provided a rather pleasant alternative.

So, what’s really going on? Well, if I were to hazard a guess, I’d say three underlying factors are driving this move:

1. Cynical CEOs are using back-to-office mandates to drive layoffs by proxy. Attrition serving the same goal as layoffs but without the cost of severance. So don’t be surprised if corporations follow today’s back-to-office mandates in the future by telling people to do more work remotely as they move to reduce real-estate costs rather than headcount.

2. Senior executives of a certain age are pining for a return to their status as minor deities. Worshipped by a steady stream of supplicants coming to their offices, seeking the executive’s blessing on some thing or another. Being waited on hand and foot by their executive assistants and hero-worshipped by the worker bees as they strut around the office, lords of all they survey. Being in charge is a drug, and you don’t get that same hit from Zoom or god help you, Teams.

3. Corporations are generally terrible at people management, and the shift to remote work has highlighted how bad this management really is. But rather than address it by reflecting and then thoughtfully developing new skills and disciplines, executives would rather ignore it and cover it up by insisting everyone return to the office instead.

I have no empirical evidence to support my supposition, so please take this with a hefty dose of salt, but I deeply suspect that bullet number 3 is a significant reason we are where we are.

Last year, I was part of a project with a large employer focused on the future of work. As we did our research, one of the most profound interviews we conducted was with the CEO of a company that’s always worked remotely, preceding the pandemic by several years.

During our call, the CEO was very direct about their actions, where they’d made mistakes, and what they’d figured out. And being ex-military, he wasn’t in the business of sugarcoating.

His perspective on the primary difference between an office environment and working remotely was twofold:

1. Culture in office environments doesn’t exist because of management action; it exists in spite of management inaction. Human beings in close proximity naturally forming cultural bonds. In a remote environment, these bonds don’t form by osmosis, so they must be managed. This requires a new management discipline focused on culture building, taking the soft side of work into account rather than ignoring it, and having leaders model the behavior they expect of others. It’s not that remote culture is impossible; it’s just a new discipline and management skillset that needs to be explicitly nurtured.

2. Micromanagement is fundamentally incompatible with remote working, which means the people who find the shift to remote work the most difficult are managers rather than workers. This is what he focused on most, pointing out that he’d found remote workers to be overwhelmingly productive, trustworthy, and diligent and that when problems occurred in his company, it was almost always due to a micromanager entering and wasting people’s time. Mainly because they didn’t trust people to get on with the work, instead seeing it as their job to constantly check and ensure that work was happening.

And there you have it. Obviously, some things are better done in person, and some prefer to work in an office environment rather than remotely. But, as I watch the executive classes overwhelmingly demand employees return to the office without exception, I can’t help but reflect on that conversation and think that a large part of the reason is simply poor, unimaginative management and a lack of curiosity about developing new skills, rather than the office being an intrinsically superior place to work.

3. Swapping Helvetica in Pastels For Angular Future Nostalgia.

tl;dr: Nokia, Netflix, Kia, Burberry, etc.

While I wouldn’t go so far as to call it a theme, a topic I’ve dedicated many Off Kilter column inches to is the commoditizing, value-destroying penchant for minimal reductivism in branding. Not just because it’s bland and boring and creatively bankrupt but because it runs contrary to everything the empirical evidence says about how the visual side of branding works, which means that any agency or designer engaging in the practice may as well be standing out on the street lighting their client’s money on fire. (As an aside, it’s shocking how few people in this business have bothered to put into place even the tiniest amount of empirically driven knowledge about how the branding arts create value. It’s not exactly complicated. Just design the brand so that it has distinctive elements that are memorable and can’t easily be copied while making sure that it isn’t mistaken for any other brand. And yet so many continue to fail this simple test).

So, it’s with great joy that 2023 has started with the green shoots of difference, as the pastel-hued reductivism of the past fourteen years has started giving way to something else that, for now, seems to be splitting into two paths. The first, espoused by Burberry and Netflix, reflects a healthy dose of highly crafted nostalgia, and the second, espoused by Kia and now Nokia, looks like abstract angular futurism.

And yet, while it’s delightful to see us move past what will likely go down in history as one of the direst periods in branding, I can’t help but think that it isn’t happening because we realized our error in not delivering sufficient distinctiveness, but rather that we simply got bored with minimalism, which means that what we’re really seeing is a shift toward another fad, or maybe more.

This is a direct reflection of one of the most disappointing aspects of the branding business, which is how risk-averse it tends to be. We’re vastly more comfortable hunting in packs around the fad du jour that gets euphemistically labeled “design trends” to justify the inherent commodification of playing follow the leader rather than seeking to create something truly different, distinctive, and original.

Some of this is due to the hero worship of a few self-anointed tastemakers, where we seek to be like them by copying them. Some is due to a fear of being called out and hauled over the coals by the comments section of Brand New. Some of it is because we don’t know any better, and some of it is simply because it’s easier to sell a fad to a client than it is to persuade them to do something meaningfully different. But, and I think this is important, there is another reason that matters. And that’s the linkage (or not) between strategy and design.

One of the defining factors of our business is that strategy and design operating in any kind of sympathetic, collaborative symbiosis is the exception rather than the rule. In many of the larger branding consultancies, designers and strategy consultants communicate at each other via briefs written by the strategy people and tossed over the wall to the designers (which, frankly, is insane), while in the smaller ones, if they do any strategy at all, it’s of the extremely lightweight variety undertaken by a token strategy consultant or two within an overwhelmingly design-driven culture.

Yet, when we do the work that we do, the strategy typically goes first. The client relationship is, then, built upon the platform created by this initial phase of work, and the people undertaking that work are the people setting the tone for what comes next. If the strategy explicitly makes the case for greater distinctiveness and differentiation, and if it analyses the design trends not as something to replicate but as something to stand aside from, and if it establishes bold and ambitious ideas for the brand, then it sets up a design expectation that isn’t small-c conservative but is instead expansive, and bold, and different.

I remember after I left Wolff Olins, having lunch with the CEO of another branding consulting firm, who asked how we “got away” with selling our clients on such “crazy design.” And to be honest, I was a bit nonplussed and didn’t know how to respond. Finally, I said that we didn’t get away with selling crazy design because nobody thought it was crazy. It was a natural outflow of the expectations set during the strategy phase of work. By the time they were looking at design, our clients would’ve been desperately disappointed to see something by the book and middle of the road because we’d just spent the past few months talking to them about how different and special they were.

So, when I look at brand design circling the drain of fitting in rather than standing out, first via minimalism and now through what looks like the next fad or two, my overwhelming thought is that it truly isn’t about the design.

It’s simply the predictable outcome of lightweight, unambitious, and disconnected approaches to the combination of strategy and design, where there’s no platform of expectations being set and thus no demand for designers to do something bold, and original, and different.

Volume 129: Silicon Sampling

February 24th, 2023

1. Silicon Sampling: Pushing The Boundaries of Research.

tl;dr: New ways to fake your own insights.

Long ago, as we discussed a particular project we were working on, a colleague who’d taken me under his wing proclaimed:

“Never believe the market research you didn’t fake yourself.”

I remember it because it was both funny and, to a large extent, true, not in the sense that there’s a diabolical conspiracy of people wandering around faking research willy-nilly, but because with research, like so much else in business, there’s often a hidden agenda at play. This means that if you’re working with research you didn’t commission yourself, there’s a good chance there’ll be some hidden bias deliberately tilted toward a particular perspective or point of view.

This underlying bias is particularly apparent in research used by consultancies and agencies to support the sale of their own products. Porter Novelli, for example, presents itself as being “built on purpose,” which is why it’s no surprise to see they have research promoting the brand purpose thing, even though we now know that the most commonly shared data points on the subject were largely bullshit. (Or, more accurately, the convenient fruits of a suspect research methodology, but that’s a story for another day).

So, I was most intrigued to learn this week about a new research approach that relies on “silicon sampling” rather than actual people. Essentially, this means asking your questions of a generative AI rather than a sample of the consumer population.

As far as I can tell, you start with an audience definition you want the AI to inhabit and then ask it questions. Today, this primarily focuses on product research, but it’s not hard to see it applied more widely toward market research.

I must admit that I laughed out loud when I first read about this. It seemed so bizarrely science fiction. But then I thought to myself, “not so fast; there’s probably a huge market for this.” Just think of the benefits compared to research of the more traditional variety:

1. Superfast results. You don’t have to design, field, and analyze your research results. You simply ask the AI and get instant feedback. Should you want a more robust research report, I’m sure it could spit that out too.

2. Iterative questioning. You don’t have to wait to ask new questions. With an AI on tap, the whole process can be more iterative and panel-like. However, unlike with a panel, you can easily go back and ask new questions whenever you like in the future, which has interesting implications for longitudinal studies.

3. Cheap. Questioning an AI rather than a sample of human beings will likely rip the bottom out of the research price floor. And if there’s anything we know in business, it’s that most executives will happily accept lower fidelity outcomes if it costs less to get there.

4. Easy. It eliminates your need for a professional research agency or dedicated research employees. Instead, a research-focused AI can augment pretty much anyone across the organization. As for effectiveness, see point 3 above.

This, of course, brings me to the 800lb gorilla in the room and back to my original point. How accurate is this method of research likely to be? Especially when we consider how good generative AI has proven to be at lying. Initially, I figured this would be the dealbreaker. How can you trust the insight from an AI pretending to be, for example, a suburban mom?

And then I reminded myself just how bad most market research is. How few people willingly volunteer to be a research subject (it’s a dirty little secret that there are professional research subjects out there who’ll pretend to be whoever you want them to be in return for a $50 gift card, and they’ve become highly adept at giving researchers exactly the answers they think they want to hear so they’re invited back again next time).

And then I reminded myself that much research isn’t actually conducted with anything more important in mind than covering your own ass. This makes the AI approach even more appealing, as it’ll become even easier and cheaper to generate the answers you want to see.

And finally, I remembered just how little corporations interrogate the data they rely on, especially quantitative. So it almost doesn’t matter how flawed the research methodology is once the data points are spat out. (70% of consumers wishing to do business with brands whose values mirror their own, for example).

So, yeah. I think synthetic research will explode, and quickly.

At large corporations, a tonne of research is already being conducted at high cost. Yet, it’s often of marginal value, and the research groups tend to operate as independent republics rather than truly serving the needs of the business. Here, synthetic research could well be used to drop the cost precipitously, shift the research process closer to the decision maker, and, perhaps most interestingly, embed the “consumer perspective” into ongoing decision-making.

At very small companies, on the other hand, there’s often little or no research being done at all. Startups, in particular, are notorious for solely utilizing behavioral data. Here, I could see material value in using synthetic techniques to increase customer-centricity cheaply.

But, of course, this will do nothing to solve our core problem with all research today. And that is, everyone already has access to the same research and insights as everyone else. This means it’s less important what the research says and more important how you choose to interpret it and which lines you choose to read between.

2. CYA Bowl ZZZZZZZZZ.

tl;dr: Celeb-fest, crypto desert. Boring as watching turnips grow.

Like some of you, the Super Bowl is the one game of (American) Football I watch every year. It’s not that I don’t like the sport as such. On the contrary, this year’s game was quite exciting. It’s just that not having grown up with it, I’m not emotionally vested in any of the teams, and I find the constant interruptions for commercials to take me entirely out of the moment.

However, one of the things the NFL has done so well is to turn these interruptions into a feature rather than a bug when it comes to the Super Bowl, where the ads are almost as discussed as the game itself. And in some years, when the game may have been terminally dull, the ads become the narrative.

As a result, there’s an entire universe of Super Bowl ad commentators seeking to rank them, rate them, and discuss them ad nauseam. If that’s what you’re into, take a look here.

I don’t find Super Bowl ads to be the window into American society that some do, but rather a reflection of the emotional state of marketers and their agencies at the moment the ads were made.

So, if this year is anything to go by, while plenty of money was thrown around, marketers and their agencies were notably risk-averse and inward-looking in their motions. As a result, this wasn’t so much the Super Bowl of advertising as it was the CYA Bowl.

The most notable thing this year wasn’t that brands were trying to stand out and do something different but that they were doing the exact same thing as each other in a desperate attempt to minimize risk. (In the process, running straight into the trap that often the biggest risk is to take no risk at all).

As a result, I’d go so far as to say that this year’s ads were so awful that it’s hard to say who is at greater fault. Did marketers crush creativity under a wall of corporate bureaucracy, or did every ad agency happen to have the same basic idea at the same time that all their clients decided to run with simultaneously?

Because this year was undoubtedly formulaic:

• Hire a celebrity or several.

• Make an ad referencing 1990s pop culture, sometimes relatively obscure ‘90s pop culture.

• Rinse/Repeat.

I suppose it’s good that the Ponzi scheme masquerading as an investment opportunity so active at last year’s Super Bowl was conspicuous by its absence. Last year’s rather desperate attempt to attract millions of new marks having been chastened by the spectacular implosion of FTX, among other things.

I’m not sure there’s ever much that you can read between the lines on vis-a-vis Super Bowl ads. But if this year was saying anything, it wasn’t just saying that 90s celebrity nostalgia is in; it was saying that marketers are extremely risk-averse right now.

For me, I truly don’t get the whole celebrity advertising thing. For years the data has pointed to people remembering the celebrity rather than the brand they were promoting. Made especially apparent this year when GOAT Serena Williams promoted cognac and light beer in the same ad break.

To prove my point, I dare you to remember which cognac and which light beer. And Google searching doesn’t count.

3. Measurement Shmeasurement.

tl;dr: Terminally dull, yet really important.

If you work in or around the branding field, it’s easy to deceive ourselves about how clients make decisions, why brands manifest the way they do, and why what we do matters or doesn’t, as the case may be.

We like to think it’s based on our creativity, superior insight, culture, ideas, strategy, design, experience, and…all sorts of things, really.

But, and it’s a big but, this neatly deflects from the reality that oh-so-often in the marketing field, the tail is wagging the dog.

What do I mean by this? Well, it’s a reflection on the old saying that “what gets measured gets managed” (Or my preferred version, “What’s easily measured gets manipulated, what’s hard to measure gets ignored entirely.”)

And in recent years, measurement, or more specifically, the manipulation of the data we use to target, track, and measure advertising performance, has been the singularly defining feature of the modern approach to marketing. Leading us to a whole generation of marketers who know very little about creativity, insight, or strategy and a lot about things like attribution, campaign ROI, and ROAS.

So, we should all pay attention to how advertising and marketing are measured when a change is mooted. Because if these new measures stick, they’ll wag the dog and directly influence our work.

Here’s an example. While brand and brand building has become sexy again in the past couple of years, it followed a twenty-year dead zone where brands and branding were largely pooh-poohed because what mattered was data and performance marketing and its close cousin, programmatic advertising, which were “proven” to work by attribution models that (entirely coincidentally I’m sure) were provided for free by the corporations with the most to gain from our becoming reliant on them. Notably, Google and Facebook, whose business models we now realize look a lot more like that of a drug dealer than a business partner.

Somewhat amazingly, it’s taken us nearly the entirety of these twenty years to figure out that much of the marketing attribution we’ve come to rely on is, in fact, nonsensical. While attribution models are fast, cheap, and provide the illusion of precision, they’re also horribly inaccurate to the point that they’ll tell you profitable things are unprofitable and vice versa.

So, with this rather long exposition out of the way, I bring you this rather thoughtful article on shifting marketers from attribution to econometric measurement as it becomes harder to track consumer behavior (for various reasons).

I’m going to be honest here for a second. Any change, no matter how necessary or valuable, is going to be an extremely hard lift.

First, it requires a generation of marketers who’ve grown up with an explicit belief in attribution dashboards to admit they were wrong, embrace a whole new approach to measurement, and shift budgets wholesale from things they’re comfortable doing to things they’re uncomfortable doing.

Second, this shift is made doubly hard by the fact that while attribution is fast and cheap and provides the illusion of precision, econometric analysis is slow, expensive, and…fuzzy at best.

Third, marketers are simply addicted to consumer tracking data. I don’t know about you, but I’ve yet to meet a marketer who doesn’t think there will be an imminent workaround vis-a-vis privacy regulation, ad-blocking software, changes to Apple’s privacy rules, and the web going cookieless. Simply put, nobody wants to think that what they’ve become comfortable doing will change. The data, no matter how inaccurately utilized, has become the shared crutch that marketers and their financial overlords simply cannot imagine themselves without because it’s the only shared language they have.

Fourth, and finally, it would require marketers to engage in a major effort toward internal education, where they’d need to educate their peers in finance and the c-suite more broadly on why the fast, cheap, and seemingly precise measurement frameworks they’ve become comfortable with aren’t cutting the mustard and need to be replaced with an alternative that’s slow, expensive and fuzzy. And, I’ll be honest, I don’t think there are many CMOs out there who’d be willing to expend political capital on starting down that path, let alone committing to it.

But yes, there will be some that embrace this shift fully, and I suspect they’ll outperform their peers in the process. Yet, I can’t help but think this will be a niche rather than a wholesale shift.

Volume 128: A Little Different…

February 9th, 2023

A Little Different This Week.

tl;dr: Loads to talk about, but I have Covid. So, different.

It’s the epitome of sod’s law, after weeks of slim pickings, that when I feel utterly spoiled for choice in terms of things to talk about, I should fall foul of Covid for the first time. Fortunately, I seem to have a fairly mild bout, but it does mean a more stream of consciousness Off Kilter as I battle my way through it. Rather than share nothing, I figured I’d give you a quick run-through of things worth discussing—apologies for typos, grammatical quirks, or any loss of personality. I’m not quite myself.

First up, it looks like the Helvetica in Pastels movement is finally getting stomped on as Burberry unveils its retro-new logo, which unlike what came before, is loaded with character and personality. Thank God. Finally. Hallelujah. I’m doing a little happy dance over here. Well, as close to happy as a Scotsman can get, anyway.

I’ve talked so often about the commoditizing effect of monotonous minimalist branding that I was boring even myself, so it’s nice to see a major global brand finally doing something different.

It’s hard to say why all these brands fell down the exact same rabbit hole at the exact same time, but aside from FOMO, I suspect tech firm aspirations had a lot to do with it. Over the past 14 or so years, we’ve lauded tech firms every which way from Sunday. We’ve viewed them as the smartest cats on the block, idolized them as innovators, desired them as clients and employers, and been jealous of their stock market performance. But, now things are changing.

Not only have tech firms shown what they really think of designers by firing them (the link is to a post by Marc Shillum, who is worth following on LinkedIn. I once had lunch with Marc. He turned up in a disheveled tuxedo shirt, minus the tuxedo. I spent the whole time trying to decide if this was a sartorial statement or whether he’d just come straight from some raucous awards afterparty).

Anyway, the facade of tech superiority is finally beginning to crack. In light of its anemic response to ChatGPT, Google was this week described as the IBM of the 21st century. Which probably wasn’t meant as a compliment.

With that in mind, Google belatedly launched; wait for it. “Bard An Experimental Conversational Service Powered by LaMDA.” Yeah, that’s the best name the best minds in tech could come up with. I guess Google must’ve fired all its good naming people too, and just left the engineers to get on with it. More importantly, Bard got shit wrong live on stage at its announcement, and Google’s stock dived 7% as a result. Meanwhile, a few hundred miles North in Seattle, the launch of a new version of Bing enabled by ChatGPT led to a 10X increase in downloads of the Bing app, which I’m guessing means at least ten people downloaded it then.

All told, this is nothing less than an existential threat to Google. Yes, it might have the best AI tech and engineers, but that’s not how it makes gazillions of dollars in profit. Instead, that comes from enshittifying the Google search experience via ads. Shift a meaningful proportion of search traffic to an AI engine answering questions rather than pointing you toward websites, and suddenly all that juicy AdWords profit is threatened.

It will be interesting to see if Google can live up to its carefully crafted image as the world’s pre-eminent innovator while simultaneously dealing with the twin existential threats of search disruption and antitrust action. If the rather pathetic introduction of Bard is any indication, it will struggle.

Thinking of all the newfound tech frostiness toward design, in some ways, this is a good thing because it releases talent into the wild who can go on to do other things. I’m guessing we’ll see a bunch of very talented people ending up in very unexpected places…Like Landor.

Rounding out these observations on tech, I subscribed to the BrXnd newsletter by the rather brilliant Noah Briar. I’m unsure what to make of it, but I laud his efforts to document experimentation around AI and brands. There’s clearly going to be a huge amount of change coming to us all on that front. Within the nuggets in there, I was particularly intrigued by his notion that brand guidelines are simply APIs for humans and that in the future, we’ll likely see a new version where guidelines become literal APIs meant for machines. I’ve felt this to be a logical evolution for a long time, even if it will be pretty revolutionary when it happens.

Stepping back into marketing for a second, some fascinating work has been done around advertising effectiveness. Cutting straight to the chase, new empirical research shows that ads with the largest brand-building effects are just as good at driving short-term sales as short-term activation-focused ads. The neat part is that it doesn’t work in reverse. This means short-term sales activation does nothing to build a brand, whereas longer-term brand-building builds a brand and drives short-term sales too.

This tale will run and run and has huge implications. First, forward-thinking businesses that already believe in brand-building will double down. Second, it’s likely to push fence-sitters into the brand-building camp. And, finally, it’s empirical proof that much of what the tech firms (them again) have been pushing at marketers for the past ten years or so was, in fact, bullshit. Or, perhaps more accurately, an engineer’s fantasy of what advertising should be. Which, it turns out, is something akin to them being drug dealers with marketers as their well-heeled yet unwitting junkies. You see, the net effect of the push to digital sales activation under the guise of “one to one, blah blah” rather than enabling us to efficiently build memorable and effective brands with staying power just made businesses dependent on tech platforms for a continuing fix of short-term sales.

Finally, in a move I cannot fathom the details of because it’s so arcane, retailer Bed Bath & Beyond went from imminent collapse to a novel and weirdly structured $1bn capital injection. As far as people much smarter than I on the topic can decipher, it’s a bailout explicitly designed to profit from BB&Bs status as a meme stock.

It seems that Hudson Bay Capital and its partners are buying $1bn worth of stock in a company that’s currently worth only $300m in a deal designed to become wildly profitable to them should BB&B go on one of the meme-driven rollercoasters it’s been on multiple times in the past few years.

Now, far be it from me to suggest that this incentivizes certain parties to release the bot hordes to pump BB&B on Twitter and Reddit. But, yeah. Don’t be surprised if you see some major boosterism coming.

Just remember. What’s good for a hedge fund bailing out a failing corporation in a novel fashion might not be so good for diamond hand apes on their journey to the moon. So be careful out there.

Volume 127: More Than A Commodity…

February 2nd, 2023

1. More Than a Commodity, Less Than a Social Movement.

tl;dr: What is a brand anyway?

For the longest time, I avoided getting dragged into the “what is a brand” debate. Not only because I’ve yet to find a comprehensive yet simple enough definition I’m comfortable with but also because I didn’t think having a singular definition mattered all that much.

I always felt that the “how” questions were much more important than the what. You know, like, “how do I build a brand?” Or “how do I commercially exploit a brand for profit.” That kind of thing.

But, as the whole debate around purpose swirled in recent years, it became clear that definitions do, in fact, matter—quite a lot, as it turns out.

This latest piece by Helen Edwards is a good thought starter. In it, she uses the example of Unilever and activist investor Nelson Peltz. On the one hand, she points out that if we were to believe Mr. Peltz, then we’d be stuck in commodity land, and there’d likely be no room for a Unilever at all. (Since, arguably, the primary competence of Unilever is in managing brands we’re willing to pay more than commodity prices for). Yet, on the other, she also acknowledges that the marketers over at Unilever (and others) have backed themselves into a very difficult-to-justify corner around the whole purpose thing.

Indeed, every time I look at Unilever, my first reaction is always that it jumped the purpose shark. Hellman’s Mayonnaise; “fighting food waste,” and Lux Soap; “inspiring women to rise above everyday sexist judgments and express their beauty and femininity unapologetically,” feel like a tough brand-sell, to be honest, even to me.

At some level, when looking at Unilever, I can’t help but think of that old saying:

“The seeds of future destruction are sown in the successes of today.”

For Unilever, acquiring Ben & Jerry’s in 2000 and then releasing the Dove Campaign for Real Beauty in 2004 made the purpose angle incredibly enticing. However, it’s only when they tried to roll out what was successful in these two pockets across the whole business, seeking to capture magic in a bottle for the third, fourth, fifth time, that we can see that it doesn’t scale all that linearly.

And, even if Unilever seems to have jumped the purpose shark, I get why they did. There was an actual there, there. Dove really did outperform for quite some time off the back of the Real Beauty narrative. And Ben & Jerry’s remains one of the world’s most successful ice cream brands.

It’s just that as we layer more purpose onto brands, we begin to see that Ben & Jerry’s and Dove were perhaps successful for reasons that had had less to do with a social movement per se and more to do with good old-fashioned branding distinctiveness. When these two brands became successful, their respective purposes were a novelty that helped them stand out within their respective categories. Today, with social purpose running rampant across categories, that’s rarely the case anymore.

This, of course, brings me back to activist investors, Hellman’s Mayonnaise, and Helen Edwards.

I think she’s right to be doubtful about purpose absolutism because there’s very little to support it being the One Strategy To Rule Them All, and she’s also right to call out the commoditizing impact of making soap be about nothing more than personal hygiene and cleanliness.

As is often the case, the answer lies somewhere in the messy middle. Brands have a meaning greater than a commodity and less than a full-blown social movement. And that’s entirely OK. And I don’t think we need to make it any more precise than that, lest we lose whatever it is that makes brands special.

On the purpose side, it seems that the moment every brand has an explicit societal purpose is the moment we stop paying attention. Those brands where it worked seemed to do so at a time when purpose relative to branding was quite novel. Today, the additional meaning driven by purpose is so predictable that we likely won’t even notice, let alone care.

And, if it’s novelty and distinctiveness that we’re really attracted to (and I think it has a big part to play), it suggests the backlash against purpose won’t mean moving toward commodity, utilitarianism, or de-branding. Instead, it will be toward salience-grabbing stunts, the unexpected, the drippingly ironic, and the perfectly out-of-place. Which feels like precisely what we’re seeing. (And will likely see more of at the SuperBowl)

And, to be honest, after years of brands draping themselves in self-righteousness that’s at best tangentially connected to their core business and, at worst, utterly hypocritical, it’ll be a relief to have more brands acting silly and screaming, “look at me” for a change.

2. When Is a Strategy Not Strategic? When a Design Agency Does It.

tl;dr: OK, harsh. But bear with me for a second.

I don’t know about you, but of all the insufferable things on LinkedIn, I find the meme that tries to posit the difference between “marketing” and “branding” the single most annoying. Not just because it’s ridiculous on its face to pretend that everything that might be long-term and strategic should be framed as branding while everything that’s short-term and tactical gets framed as marketing. It’s also that the people doing the pro-brand/anti-marketing meme-ing are also the most likely to tackle branding projects in a fundamentally non-strategic fashion.

I’ve talked before about brand designers having a latent strategic superpower. Well, I’m increasingly of the view that, for many, the keyword in that sentence is latent. The superpower can only activate if you take the time and effort to teach yourself about strategy and how to apply it. You don’t simply get to act like you have a superpower without first putting in the work.

Why do I mention this?

Well, very simply, in the past few months, I’ve found myself pitching against design-focused agencies for strategic jobs, and it’s been eye-opening just how consistently lacking their strategic processes are.

Here’s an example straight from the middle of the bell curve. In recent negotiations with a prospective client, they shared a summary of the approach from a competitor they wanted me to match. (They’d anonymized it first, so I don’t know who it was.) Anyway, it was a strategic process predicated on two “download” workshops with the client team, from which there were to be 16 discreet deliverables (I counted) that would be created, including a positioning statement, idea, key messages, voice, mission, vision, values, purpose, etc.

Yeah, that’s right. They’d provide a soup-to-nuts set of strategic outputs without doing the work to figure out what these strategic outputs should be. Zero market research, no customer interviews, no competitive audit, no looking at customer or tech trends, nothing. Not even asking if there was any recently completed research they could work from. Just two talking sessions with the client team followed by a laundry list of deliverables two weeks later.

To cut a long story short, I won the work after a long discussion about the pros and cons of different approaches and explaining that I wouldn’t do the work at all without engaging the market as a key part of the process.

I mention this because as I prepped to share initial recommendations last week, it struck me how there’s literally no way we could’ve arrived where we did had we not made the effort to engage customers, partners, and prospects in the process. And the reason this job right now looks a lot more like a business transformation, with some pretty fundamental implications, than a messaging exercise is solely because engaging with the market provided so much critical insight.

So, if you’re a client thinking of engaging in brand strategy work, please make sure that you pay attention not just to the strategic outputs your potential partners are proposing but also to the process steps they intend to take to get there and the team they propose to do the work. If there’s zero customer or market input being suggested and nobody with any meaningful strategy experience or education doing the work, then you should be wary. Very wary indeed.

And if you’re an agency that does this kind of work, please ensure you’re doing it correctly. It isn’t rocket science, but strategy is a craft. It’s important to clients’ future success, and it should be treated as more than just an opportunistic add-on that exists primarily to inform design work.

Because if you think a winning strategy will automagically form from two client conversations, then you’re very far wrong. Not only that, you’re being wildly irresponsible with your client’s trust and with their money.

3. Happiness Will Have to Wait...Until You’re 70.

tl;dr: 70-year-olds are like a new generation or something.

Generational segmentation is one of the dumbest ideas in marketing, and it just won’t die. I’ve written about it many times and can boil my thinking down as follows: Yes, people at different life stages will likely have different priorities and consumption behaviors. And, no, a shared date of manufacture doesn’t tell us much about what these are or how cohesive a generational segment might be.

Taken to its most extreme, we see just how utterly daft generational commentary has become. Take “Gen Alpha” (the generational cohort coming through behind Gen Z), where some say we can predict their consumption behavior and preferences with extreme accuracy; even though the eldest member of the cohort is about 12, and many have yet to be born, let alone make a consumption choice. Ahem.

So, with generational segmentation having cockroach-like status as a marketing idea, we shouldn’t be all that surprised to find new data on the lifestyle of 70-year-olds being framed as the equivalent of discovering a “new stage of life.”

The basic narrative goes like this. In the West, people have started retiring in their early to mid-60s and living well into their 80s. This creates a new societal phenomenon of healthy, wealthy, and increasingly happy people in their 70th decade. People who make many consumption choices, often for big-ticket items like cars, vacations, homes, etc., but have largely been ignored by marketers. Up until now. Because now they’re getting a label, “the 70s.” Unfortunately, it doesn’t come with bell bottoms and gig tickets to The Rolling Stones.

I have to say that whoever decided to connect the dots between the changing habits of septuagenarians with generational segments was a genius. How better to get marketers to pay attention to one of the most valuable demographic groups they largely ignore today?

That’s right, all you need to do is take one of the dumbest ideas in marketing (generational segmentation) and connect it to one of the dumbest oversights in marketing (ignoring anyone over age 35) and Bob’s your uncle, as they say.

Now, we’ll see where this nets out overall, but it’s hard not to see it as part of an overwhelming shift toward marketers paying more attention to more mature societal members as society itself ages.

First, we have Economists talking about the effect of an aging society on the workforce (Fun fact, demographic declines in working populations will likely be a bigger societal issue than the number of jobs lost to AI and automation). Then we have Google and Meta talking about shifting to econometric rather than attribution-based measurement (which will be interesting because econometrics tends to more highly value marketing channels more commonly used by the elderly, like linear TV). And, now, we have researchers framing the decade between our 70th and 80th years as if it’s the discovery of a new generation. I think you can see where I’m going here.

So, yeah. Generational segmentation is dumb. But if it can help marketers be smarter with those who have the money and are making big consumption choices with it, then go for it.

I’m just curious about what we call this new generation of happy, go-lucky septuagenarians because “the 70s’ is terminally dull. So I asked ChatGPT. Here are my top five names in no particular order of cliche:

Sunshine Seniors
Brightest Bloomers
Ageless Wonders
Timeless Treasures
Happy 70s

Volume 126: From Genius Premium to...

January 19th, 2023

1. From Genius Premium to An Asshole Tax.

tl;dr: Tesla slashes prices.

Elon Musk was recognized by the Guinness World Records this week for losing more money than any other person in history. His fortune is estimated to have dropped by $180bn-$200bn since mid-2021.

Indeed, as I’ve watched his personal brand disintegrate from Steve-Jobs-like-genius to cruel-narcissistic-whinger, I’ve wondered what the impact would be at Twitter (just about hanging on by its fingertips as costs and revenue are slashed to the bone), and at Tesla, where the brand is more intimately connected to it’s CEO than pretty much any other company on earth. And I guess now we know. The impact on Tesla is a 20% Asshole Tax payable directly to the consumer.

That’s because this is roughly how much Tesla slashed the cost of its cars by, bringing the Model Y from $65k to $53k, which also makes it eligible for federal subsidies, meaning that for some buyers, a Tesla Model Y went from $65k to $45k, overnight.

I can’t tell you how huge a decision this is. Generally speaking, automotive companies do everything in their power to avoid such extreme pricing moves because it has significant 2nd order effects on the used market and creates negative goodwill among existing owners, whose vehicles are now worth a lot less money.

And while there’s been plenty of discussion around the impact of Musk becoming a darling of the far right on Tesla sales, my view has always been that any negativity is probably less about his politics specifically and more the general sense of narcissistic assholery that’s been on display (excuse the language, but I can’t think of a better, more accurate, description). Anecdotally, while my left-leaning friends find Musk universally odious, right-leaning friends and family tell me they like what he’s doing at Twitter vis a vis “free speech,” but not how appallingly he treated the Twitter employees he let go, which is now making them question whether they’d buy a Tesla. (But, to be fair, my right-leaning friends are more likely to aspire to a fume-spewing coal-roller anyway).

And that’s the thing. There’s probably no single act, political or otherwise, from Musk that’s problematic for Tesla sales. Instead, it’s more likely that his general behavior has shifted Tesla from something cool to something, well, not so cool. My guess is that whatever impact Musk is having, it’s primarily manifesting through a lens of consumers choosing to consider other EVs rather than reflexively defaulting to Tesla. And that any broader slowdown in Tesla sales is likely an impossible-to-untangle combination of high-interest rates, softening demand, increasing competition, and loss of reputation due to having a very public asshole as CEO.

So, with that in mind, how should Tesla respond to a cooling market? Well, although I did have a laugh with my headline, dropping prices actually represent a bold strategic move, possibly a canny one. Let’s take a quick look at why.

First, to halt its stock price slide, Tesla, more than any other car manufacturer, has to demonstrate strong unit sales growth. Otherwise, the stock remains vastly over-valued, even after a steep drop from its peak. (Almost certainly, this is why Tesla pulled out some weird Q4 sales shenanigans with Hertz to boost end-of-year sales)

Second, Tesla only has limited levers to pull. Its models are increasingly long-in-the-tooth in what’s become a highly innovative category. Competitors have superior build quality, interior ergonomics, exterior design, and after-sales service. And the cyber-truck, which looks ridiculous, is also ridiculously late to market, where it’ll be the 4th or 5th light truck entrant, even though it was announced years ago. There’s no way I see it eating into F150 Lightning sales anytime soon (assuming you can get an F150 Lightning).

Third, with court cases underway and federal investigations ramping up, it’s likely that Tesla is trying to get ahead of bad news related to its Autopilot and Full Self Driving capabilities. By all accounts, the most likely outcome of these cases doesn’t look good for either Musk or Tesla.

Fourth, even with the above headwinds, Tesla has three advantages over its competition. First, it doesn’t have the same cost pressures because it isn’t managing an internal combustion engine business for decline while at the same time getting an EV business up and running. Second, it has reportedly signed advantageous agreements for raw materials that give it a cost and access advantage. Third, it doesn’t have a dealer network to worry about and thus doesn’t face the same pressure to maintain used prices, even if it is taking a big risk in pissing off existing customers.

Whenever a company decides to set a new price floor in a market, it’s betting that it can change the competitive dynamics, force the competition to react, and either follow suit or accept lower sales because of now “too-high” prices.

And that’s what Tesla is doing here. It’s betting that it can set a new price floor where any decrease in profitability will be more than offset by increases in sales volume while also betting it will gain incremental share rather than benefit solely from “demand pulled forward,” where people who’d have bought a Tesla anyway buy one sooner than they otherwise would’ve. So if Q1 sales spike and then recede in Q2/3, then it’ll have been demand pulled forward. However, if they spike in Q1 and growth stays robust through the rest of the year, then Tesla will have effectively reset the demand curve for its products. And if that happens, then pricing pressure will no doubt be an ongoing feature of the EV market as competitors are forced to follow suit.

It’s by no means guaranteed to be successful and represents a hugely risky strategic choice (a global brand campaign, by contrast, would’ve been much cheaper and potentially similarly effective). But, it’s also apparent that Tesla, maneuvering from a position of weakness, hasn’t left itself with many other choices. It simply has to be a volume leader to justify its stock price. It badly stumbled on the innovation front, allowing its models to get old to the point that it lost the EV PR battle, and it still hasn’t figured out manufacturing quality. And, finally, by having a brand that’s so intimately associated with its CEO, it lacks the independence to survive his shenanigans unscathed. And, all the while, competition has become increasingly fierce.

For consumers, lower prices for EVs are unambiguously good, and we’ll see if other automotive manufacturers follow suit. It’s a bold strategic move, and it’ll be interesting to see if a 20% Asshole Tax payable to the consumer helps overcome any queasiness at driving a MuskMobile. My experience is that people generally get over queasiness pretty quickly once prices get low enough.

It’s certainly an interesting time to be a Tesla stockholder, that’s for sure.

In the meantime, if you’re a used car dealer sitting on a load of expensively purchased Tesla inventory. I’m sorry.

2. Eyebrow Raising.

tl;dr: So, McDonald’s made an ad…

I’m not an advertising guy. Aside from almost taking a job at BBH once, way back when, the ad side of the branding business has never really held much appeal for me.

So, when ad people fall all over themselves to tell us how brilliant a new ad is, I can’t decide whether to watch it and make my own judgment or defer to their greater experience.

So, with that, I bring to you…waggling eyebrows from McDonald’s. Personally, I found it boring, asinine, dull, cloying, instantly forgettable, not-at-all-interesting, and a complete waste of what felt like an hour of my life that I can never get back. A fairly typical McDonald’s ad, then.

However, the folks over in ad-land reckon it’s great. Something, something, eyebrows, something, distinctive assets, something, no burgers, playing with codes, blah, blah, something.

To be honest, it feels like advertising has gotten so bad, so short-termist, so rational, so feature/function-oriented, that anything that isn’t that, no matter how not-particularly-great, is held up as a shining light of what we should all be doing.

Anyway, you decide for yourself. It certainly didn’t make me feel like eating a burger.

Taking a razor to some very annoying eyebrows, on the other hand…

3. Growth Slows. Chief Growth Officers Demanded.

tl;dr: It’s like the storyline of a bad soap opera.

How to spot if the economy is imminently approaching recession? Yup, you guessed it. It has nothing to do with the fabled “inverted yield curve.” Nothing so esoteric. Instead, demand for “Chief Growth Officers” is through the roof. Sigh.

It’s like a bad soap opera. I can picture the boardroom now:

“Demand is off; looks like growth is slowing.”

“Oh, that’s terrible. Whatever shall we do?”

“Well, I’ve heard about companies hiring for a new role. It’s called a Chief Growth Officer.”

“A Chief Growth Officer you say? When we have slowing growth? Why haven’t I heard about this before? That’s BRILLIANT! Yes, BRILLIANT, I say! That’s PRECISELY what we need. I’m so glad I had this AMAZING idea! Get McKinsey in here to write up a job spec, and then go get us one of these new-fangled growth officer thingies, will you.”

So, what is a Chief Growth Officer, you might ask? And how is this role different from marketing, sales, or that other darling role of the moment, Chief Revenue Officer?

Well, I have precisely no clue. If anyone can enlighten me, that would be great. My suspicion is that it’s all basically the same, the only difference being in the title and the lack of baggage it brings with it:

Chief Marketing Officer? “Oooh, I don’t know. We had one once. Didn’t work out. Sounds like the shapes and colors department to me.”

Chief Growth Officer? “Now we’re talking. That sounds perfect. Clear, focused. We need us one of those.”

More broadly, I’ve found that we typically talk ourselves into recessions. As an economic cycle peaks, we utter the R-word in hushed tones. News articles talk about the “inverted yield curve,” and people wait for quarterly employment reports with bated breath. Then previously approved budgets start getting paused, it gets harder to fill headcount, travel restrictions start, and layoffs begin on the margins. And, well, before we know it, all of the sound decisions we’re making at a micro-level to make ourselves a little more responsible start showing up at a macro-level as drop-offs or outright declines in demand. The economy slows, falters, and then you guessed it. We’ve talked ourselves into a recession.

So, yeah, if Chief Growth Officer is a fast-growing role, recession must be imminent.

Volume 126: From Genius Premium to...

January 19th, 2023

1. From Genius Premium to An Asshole Tax.

tl;dr: Tesla slashes prices.

Elon Musk was recognized by the Guinness World Records this week for losing more money than any other person in history. His fortune is estimated to have dropped by $180bn-$200bn since mid-2021.

Indeed, as I’ve watched his personal brand disintegrate from Steve-Jobs-like-genius to cruel-narcissistic-whinger, I’ve wondered what the impact would be at Twitter (just about hanging on by its fingertips as costs and revenue are slashed to the bone), and at Tesla, where the brand is more intimately connected to it’s CEO than pretty much any other company on earth. And I guess now we know. The impact on Tesla is a 20% Asshole Tax payable directly to the consumer.

That’s because this is roughly how much Tesla slashed the cost of its cars by, bringing the Model Y from $65k to $53k, which also makes it eligible for federal subsidies, meaning that for some buyers, a Tesla Model Y went from $65k to $45k, overnight.

I can’t tell you how huge a decision this is. Generally speaking, automotive companies do everything in their power to avoid such extreme pricing moves because it has significant 2nd order effects on the used market and creates negative goodwill among existing owners, whose vehicles are now worth a lot less money.

And while there’s been plenty of discussion around the impact of Musk becoming a darling of the far right on Tesla sales, my view has always been that any negativity is probably less about his politics specifically and more the general sense of narcissistic assholery that’s been on display (excuse the language, but I can’t think of a better, more accurate, description). Anecdotally, while my left-leaning friends find Musk universally odious, right-leaning friends and family tell me they like what he’s doing at Twitter vis a vis “free speech,” but not how appallingly he treated the Twitter employees he let go, which is now making them question whether they’d buy a Tesla. (But, to be fair, my right-leaning friends are more likely to aspire to a fume-spewing coal-roller anyway).

And that’s the thing. There’s probably no single act, political or otherwise, from Musk that’s problematic for Tesla sales. Instead, it’s more likely that his general behavior has shifted Tesla from something cool to something, well, not so cool. My guess is that whatever impact Musk is having, it’s primarily manifesting through a lens of consumers choosing to consider other EVs rather than reflexively defaulting to Tesla. And that any broader slowdown in Tesla sales is likely an impossible-to-untangle combination of high-interest rates, softening demand, increasing competition, and loss of reputation due to having a very public asshole as CEO.

So, with that in mind, how should Tesla respond to a cooling market? Well, although I did have a laugh with my headline, dropping prices actually represent a bold strategic move, possibly a canny one. Let’s take a quick look at why.

First, to halt its stock price slide, Tesla, more than any other car manufacturer, has to demonstrate strong unit sales growth. Otherwise, the stock remains vastly over-valued, even after a steep drop from its peak. (Almost certainly, this is why Tesla pulled out some weird Q4 sales shenanigans with Hertz to boost end-of-year sales)

Second, Tesla only has limited levers to pull. Its models are increasingly long-in-the-tooth in what’s become a highly innovative category. Competitors have superior build quality, interior ergonomics, exterior design, and after-sales service. And the cyber-truck, which looks ridiculous, is also ridiculously late to market, where it’ll be the 4th or 5th light truck entrant, even though it was announced years ago. There’s no way I see it eating into F150 Lightning sales anytime soon (assuming you can get an F150 Lightning).

Third, with court cases underway and federal investigations ramping up, it’s likely that Tesla is trying to get ahead of bad news related to its Autopilot and Full Self Driving capabilities. By all accounts, the most likely outcome of these cases doesn’t look good for either Musk or Tesla.

Fourth, even with the above headwinds, Tesla has three advantages over its competition. First, it doesn’t have the same cost pressures because it isn’t managing an internal combustion engine business for decline while at the same time getting an EV business up and running. Second, it has reportedly signed advantageous agreements for raw materials that give it a cost and access advantage. Third, it doesn’t have a dealer network to worry about and thus doesn’t face the same pressure to maintain used prices, even if it is taking a big risk in pissing off existing customers.

Whenever a company decides to set a new price floor in a market, it’s betting that it can change the competitive dynamics, force the competition to react, and either follow suit or accept lower sales because of now “too-high” prices.

And that’s what Tesla is doing here. It’s betting that it can set a new price floor where any decrease in profitability will be more than offset by increases in sales volume while also betting it will gain incremental share rather than benefit solely from “demand pulled forward,” where people who’d have bought a Tesla anyway buy one sooner than they otherwise would’ve. So if Q1 sales spike and then recede in Q2/3, then it’ll have been demand pulled forward. However, if they spike in Q1 and growth stays robust through the rest of the year, then Tesla will have effectively reset the demand curve for its products. And if that happens, then pricing pressure will no doubt be an ongoing feature of the EV market as competitors are forced to follow suit.

It’s by no means guaranteed to be successful and represents a hugely risky strategic choice (a global brand campaign, by contrast, would’ve been much cheaper and potentially similarly effective). But, it’s also apparent that Tesla, maneuvering from a position of weakness, hasn’t left itself with many other choices. It simply has to be a volume leader to justify its stock price. It badly stumbled on the innovation front, allowing its models to get old to the point that it lost the EV PR battle, and it still hasn’t figured out manufacturing quality. And, finally, by having a brand that’s so intimately associated with its CEO, it lacks the independence to survive his shenanigans unscathed. And, all the while, competition has become increasingly fierce.

For consumers, lower prices for EVs are unambiguously good, and we’ll see if other automotive manufacturers follow suit. It’s a bold strategic move, and it’ll be interesting to see if a 20% Asshole Tax payable to the consumer helps overcome any queasiness at driving a MuskMobile. My experience is that people generally get over queasiness pretty quickly once prices get low enough.

It’s certainly an interesting time to be a Tesla stockholder, that’s for sure.

In the meantime, if you’re a used car dealer sitting on a load of expensively purchased Tesla inventory. I’m sorry.

2. Eyebrow Raising.

tl;dr: So, McDonald’s made an ad…

I’m not an advertising guy. Aside from almost taking a job at BBH once, way back when, the ad side of the branding business has never really held much appeal for me.

So, when ad people fall all over themselves to tell us how brilliant a new ad is, I can’t decide whether to watch it and make my own judgment or defer to their greater experience.

So, with that, I bring to you…waggling eyebrows from McDonald’s. Personally, I found it boring, asinine, dull, cloying, instantly forgettable, not-at-all-interesting, and a complete waste of what felt like an hour of my life that I can never get back. A fairly typical McDonald’s ad, then.

However, the folks over in ad-land reckon it’s great. Something, something, eyebrows, something, distinctive assets, something, no burgers, playing with codes, blah, blah, something.

To be honest, it feels like advertising has gotten so bad, so short-termist, so rational, so feature/function-oriented, that anything that isn’t that, no matter how not-particularly-great, is held up as a shining light of what we should all be doing.

Anyway, you decide for yourself. It certainly didn’t make me feel like eating a burger.

Taking a razor to some very annoying eyebrows, on the other hand…

3. Growth Slows. Chief Growth Officers Demanded.

tl;dr: It’s like the storyline of a bad soap opera.

How to spot if the economy is imminently approaching recession? Yup, you guessed it. It has nothing to do with the fabled “inverted yield curve.” Nothing so esoteric. Instead, demand for “Chief Growth Officers” is through the roof. Sigh.

It’s like a bad soap opera. I can picture the boardroom now:

“Demand is off; looks like growth is slowing.”

“Oh, that’s terrible. Whatever shall we do?”

“Well, I’ve heard about companies hiring for a new role. It’s called a Chief Growth Officer.”

“A Chief Growth Officer you say? When we have slowing growth? Why haven’t I heard about this before? That’s BRILLIANT! Yes, BRILLIANT, I say! That’s PRECISELY what we need. I’m so glad I had this AMAZING idea! Get McKinsey in here to write up a job spec, and then go get us one of these new-fangled growth officer thingies, will you.”

So, what is a Chief Growth Officer, you might ask? And how is this role different from marketing, sales, or that other darling role of the moment, Chief Revenue Officer?

Well, I have precisely no clue. If anyone can enlighten me, that would be great. My suspicion is that it’s all basically the same, the only difference being in the title and the lack of baggage it brings with it:

Chief Marketing Officer? “Oooh, I don’t know. We had one once. Didn’t work out. Sounds like the shapes and colors department to me.”

Chief Growth Officer? “Now we’re talking. That sounds perfect. Clear, focused. We need us one of those.”

More broadly, I’ve found that we typically talk ourselves into recessions. As an economic cycle peaks, we utter the R-word in hushed tones. News articles talk about the “inverted yield curve,” and people wait for quarterly employment reports with bated breath. Then previously approved budgets start getting paused, it gets harder to fill headcount, travel restrictions start, and layoffs begin on the margins. And, well, before we know it, all of the sound decisions we’re making at a micro-level to make ourselves a little more responsible start showing up at a macro-level as drop-offs or outright declines in demand. The economy slows, falters, and then you guessed it. We’ve talked ourselves into a recession.

So, yeah, if Chief Growth Officer is a fast-growing role, recession must be imminent.

Volume 125: Designing For Culture; Gaming The Algorithms.

January 12th, 2023

1. Designing For Culture; Gaming The Algorithms.

tl;dr: You might not be doing what you think you are.

Last year, I talked at the Brand New Conference in Austin. As I nervously waited my turn, I watched the other speakers, which I thoroughly enjoyed.

As I did, I noticed something interesting: the use by different people of the term “designing for culture.” Now, this is a statement that could be taken in a few different ways. For example, my first reaction was to groan. It’s hard to see this as new in a world where design has always had a part to play culturally, meaning I was initially skeptical that it was nothing more than a statement of the obvious masquerading as profundity.

But, as I sat through more speakers using the term, it was clear that something else was going on. When people said “designing for culture,” they showed work that had been successfully amplified socially. In other words, “designing for culture” seemed to actually mean designing things to be noticed and amplified by the algorithms driving social media engagement. So, while the designers might think of what they’re doing as being culturally of the moment, it’s actually about meeting the amplification requirements of the machines that act as our cultural gatekeepers.

This is interesting because if you understand what’s going on and how they work, then algorithms can be gamed. This is the reason so many people find themselves writing two resumes. One to get through the automated screening when they apply for a job, and the second to put in front of an actual human being when they get an interview. It’s also why online recipes have so much exposition before you get to the recipe itself - this time because the Google search algorithm weights pages more highly based on “engagement,” and people figured out that you can game this engagement by placing a load of exposition copy above the recipe itself. And, finally, it’s why “pods” of people work together to like, comment on, and reshare each other’s LinkedIn posts because they know how the LinkedIn algorithm works and have figured out how to game it.

It’s highly likely that as we move into recessionary times, there will be greater demand from clients for work that cuts through our algorithmically gated environment to achieve the myth of viral reach at low or no cost. And while virality is far from a sound strategy, and all the data suggests it isn’t something you should rely on, that doesn’t prevent there from being an almost infinite appetite on the part of clients seeking it. So, far from being a unique skill set that can only be delivered by the few most talented designers out there, I deeply suspect that “designing for culture,” AKA “gaming the algorithms,” will increasingly represent a learned skill amidst the design community.

And while I don’t know what this might mean for the work overall, what I did realize as I sat through people presenting their work, was that those things achieving the most social traction also seemed to be the work that was the most novel, different, and unexpected. So, yeah. Maybe designing for culture (or, more accurately, gaming the algorithms that gate culture) will be a further nail in the coffin of the boring ass Helvetica in Pastels movement.

Or, at least, one can hope.

2. Falling on The Sword of D̶a̶m̶o̶c̶l̶e̶s̶ Efficiency.

tl;dr: A few thoughts inspired by the Southwest Airlines debacle.

Unless you’ve been living under a rock recently, you’d be aware of the complete meltdown of Southwest Airlines over the festive period. Facing a perfect storm of weather-driven delays and fully booked flights, its back-end technology infrastructure failed spectacularly, requiring it to cancel a vast majority of its flights for a period of days to ‘reset’ the system. At one point, Southwest represented something like 75% of all canceled flights in the country.

As a result, I figured it was a good opportunity to talk about efficiency. Over the pandemic period, we heard much about efficiency relative to supply chains, mainly through a lens that views efficiency and resilience as mutually exclusive. Here, the view is that for a system to be resilient, it will naturally be less efficient. And that for a system to be efficient, it will naturally be less resilient.

But, this is a fairly narrow view of efficiency and resilience. Looking at Southwest, we see two kinds of efficiency; financial and operational.

For years, employees warned Southwest about the clunky, 1990s-era technology it uses to organize, manage, and track people and aircraft. And that having groundcrew do manual entry changes when flights are delayed or re-routed was inefficient and would almost inevitably lead to collapse.

Which, of course, is exactly what happened.

Southwest was optimizing for financial efficiency rather than operational. It didn’t want to spend the money updating its back-end systems and was willing to embrace a certain degree of operational inefficiency to save this cost. Were Southwest optimizing for operational efficiency, this wouldn’t have happened. It would’ve invested the necessary time, money, and resources into developing a modern scheduling and tracking system. Instead, it ran the old system until it broke.

As a result, whenever we discuss resilience and efficiency, it’s essential that we also consider whether we’re talking about operational efficiency or financial.

The rise of financial efficiency is highly correlated with the financialization of American corporations over the past few decades. Where corporations went from being businesses that made things, invested in innovation, and delivered value to their customers to…something else. Creating a world where the corporation became a financial vehicle engineered for maximum payout to shareholders, management, and little else.

Jack Welch-era GE was ground zero for corporate financialization, driving up the stock price of what had been a sleepy industrial conglomerate to new heights, even as his leadership cut hard into the muscle of the business, replacing hard-to-deliver industrial innovation with easy profits from lending. An edifice, of course, that ultimately crashed in 2008, when the financial crisis highlighted just how exposed GE was to incredibly risky sub-prime lending. A humiliating period of its history that it never recovered from and which led directly to its forthcoming breakup.

Or, look at Boeing. Another storied American brand that’s been brought to its knees by financialization. In this case, engaging in a game of regulatory capture to avoid having to deal with difficult questions about the safety of the 737 Max, which had disastrous consequences. To see what happened there, look no further than its board, where financial engineers vastly outweigh actual engineers, even though Boeing is meant to be an engineering company.

And this is the thing. When we look at corporations that are buying back stock, borrowing money to pay special dividends, and engaging in creative accounting practices to increase payouts to shareholders, we’re almost always dealing with firms that place a huge primacy on financial efficiency, even if it has a materially adverse impact on operational efficiency, resilience, and usually, the customer experience. Because when you think of the company as a financial vehicle rather than an ongoing operation, you’re more inclined to starve those operations of investment in order to return capital to shareholders.

And, more often than not, when major issues created by the idolatry of financialization occur, these firms find it hard - often impossible - to recover. GE never did, and it’s unclear whether Boeing ever will.

This brings me neatly back to Southwest Airlines. It’s hard to say right now how big this issue will be for the long-term health of the brand and business. It’s clearly had a significant impact in the immediate term relative to flight cancellations and refunds. Still, the bigger question is whether there has been a longer-term hit to its goodwill and brand equity that only greater operational consistency could solve. I suspect people will likely be warier about flying Southwest, in a similar way that I’m wary of flying JetBlue after the awful experience I had with them earlier in 2022.

Beyond a hit to a single company’s reputation and brand preference, however, it also raises a bigger economy-wide question. Over the past fourteen years, when interest rates were zero, corporations rewarded C-Suites that could financially engineer their way to success. In particular, using debt to enhance stock market performance, which airlines were particularly aggressive proponents of. By contrast, the upcoming period, where interest rates are no longer zero, means artificial debt-driven stimulation is largely off the table. This, in turn, might create a new reality of the C-Suite being rewarded for delivering profits via operations. Something that gets lost in our conversation about efficiency versus resilience.

As a result, there’s a good chance we might be entering a golden age for operationally-minded, customer-focused leaders as a reaction to higher interest rates. People who understand the nuts and bolts of running their businesses, not just the financial levers of how to artificially stimulate stock prices.

3. The Enshittification of The Customer Experience.

tl;dr: When Google And Amazon Went Bad.

One of the less remarked upon consequences of Amazon quietly building a $30bn+ advertising empire is that it’s had a direct and negative impact on the Amazon shopping experience.

While retailers have operated under variations of pay-to-play merchandising for years, Amazon has taken it to a new level. Today, pretty much everything you see when shopping at Amazon is paid for by a vendor. I don’t know about you, but I find myself scrolling way down the page to try and find products that better match what I’m looking for and aren’t obviously paid-for placement. So much for being “the most customer-centric company on earth,” unless you class your advertisers as your primary customers.

As an aside, this also shows the limits of first-party data and personalization. Amazon has more data on me and my shopping habits than any other company, bar none. Yet, it still can’t tailor the product assortment to my personalized needs and still sends emails promoting products I’ve already bought. From Amazon.

Cory Doctorow has written about this, describing it as the “enshittification” of the Amazon experience, and he’s not wrong. And Amazon is far from alone. The mobile web has become almost unusable due to the sheer volume of ad windows, video auto-players, and newsletter pop-ups you find yourself constantly clicking to avoid, assuming you stay on the page long enough for all the various ad servers to do their thing, bogging down load times as a result.

Even digital advertising leader, Google, has turned its homepage from one of the simplest ways to find information online into one of the most annoying. Not only are the ads everywhere, but people have become so adept at gaming the Google algorithm that you might need to go as far as ten pages deep to find the kind of result that you’re looking for, and even then, it’s a crapshoot.

It’s only going to get worse from here. As capital becomes ever more expensive, profit-challenged companies with significant traffic will be led like moths to a flame toward the experience-enshittifying business model that is advertising. Uber, Doordash, and Lyft being three recent examples that have begun doing just this.

Now, what’s interesting here, are two distinctly different observations.

First, it’s unlikely that an enshittified experience will have any material impact on Amazon, at least not in the short term. There just isn’t a competitor out there that can match the scope and scale of the Amazon retail offering. We’re all just going to have to eat it. Google, however, could be a different story. Much of Google’s monopoly position in search is driven by consumer habits. With the advent of ChatGPT, it’s clear that AI could offer real and meaningful competition in information search, to the point that Microsoft is already planning an AI-powered version of Bing, which has the potential to change the category. With the Google experience being so compromised from a consumer value standpoint, it’s not without question that it could find itself in a world of hurt at some point in the not-too-distant future, were a competitor to make relevant search information available in a quicker, simpler, more convenient, and less enshittified fashion. And as much as people may say they love Google, the switching costs of typing Bing.com instead of Google.com are trivially small.

Second, it amazes me that after all these years, and all the money and effort expended on customer experience, UX, UI, and all of its ancillary activities, combined with all the money and talent invested in ad tech, and all of its ancillary activities, that nobody, not one single corporation seems to have connected the dots between the two in such a way that advertising can be presented in a compelling, yet unobtrusive fashion.

If there’s one arena of the online advertising landscape just begging to be innovated, it’s this. Not more ad-tech, buy-side, sell-side, data-platform, first-party, third-party, measurement, attribution, blah blah. But innovating the ad formats themselves, so they work within experiences without enshittifying them, and that allow advertisers to showcase their creativity and craft. And, as more eyeballs go digital, this is precisely the kind of mature category innovation we’re crying out for. Because, like it or loathe it, TV advertising is still the most effective at driving incremental sales. And it shouldn’t be. The only reason it still is is that nobody has figured out how to make the digital ads better. At least not yet.

Volume 124: Looking Back, Looking Forward

January 5th, 2023

Looking Back, Looking Forward With Depressing Nostradamus.

tl;dr: Reflections on 14 years of ZIRP and what’s to come.

Happy New Year! I hope that 2023 is filled with much joy, laughter, good health, and prosperity for you and those closest to you.

It’s common at this time of year to see various looks backward and forward, but outside decade ends, these are typically focused only on the year past and the year ahead. However, it’s more likely that history will view 2022 as the end of the past decade rather than 2020.

When 2020 ended, we were still at the height of the pandemic, with $10 trillion worth of global economic stimulus keeping things moving. By the end of 2022, for all intents and purposes, the pandemic is over (It isn’t, but we act like it is, so it may as well be), and world governments have swung hard from stimulus to tightening, and the impact of that is going to be…interesting.

To understand why let’s look back. Just as history is likely to view 2022 as the end of a decade, it’s just as clear that this decade started in 2008 rather than 2010. Why? Because the financial crisis that melted down economies across the world ushered in ZIRP (If you only click one link today, click this one. It’s an excellent explainer of what happened to the economy under ZIRP conditions).

ZIRP stands for “Zero Interest Rate Policy,” which happened across the globe as a means to fight the effects of the financial crisis.

Now, why, you might wonder, am I singling out interest rates dropping to zero in a newsletter about branding? Well, because it’s super important to the situation we now find ourselves in.

You see, ZIRP fueled the post-2008 economic bounceback, which means that anyone entering the workforce, buying a home, buying a car, investing in stocks, or opening a savings account in the past 14 years has only known a world where interest rates are either zero or pretty darned close. It’s also the case that we view brands that grow up alongside us as “ours.” For me, this was Orange in the late 90s. So even though I was never a customer, I viewed it symbolically as mine in a weird way.

So, while tech didn’t cause the financial crisis, it was by far the biggest beneficiary of ZIRP, as it became the investment destination du jour for capital seeking a return. (Which explains why every business seeking capital pretended it was a tech business, even if all it was doing was renting out office space). This means that without ZIRP, there would’ve been no DTC revolution, no Uber, no Lyft, no Doordash, no Peloton, no Snap, no Pinterest, and very possibly no crypto, no Tesla, no Airbnb, and certainly, no WeWork. In other words, the brands that an entire generation now views as “theirs” wouldn’t have existed but for the disastrous actions of Wall Street risk-takers in the lead-up to 2008.

It feels very odd to realize that a whole universe of brands we now take for granted only exists because ZIRP drove pension funds to pump capital into risky tech speculation because safe assets were paying zero. (I am over-generalizing here, but only by a little). And that as interest rates rise and capital flows inexorably out of speculative tech and back toward safety, many of these businesses will cease to exist. More on that later.

Unfortunately, when we branding people do “trends” work, we all too often make two mistakes. First, we don’t look at trends at all; we look at fads. First, because short-termism dominates, and marketing is a very short-term game these days. And, second, because we overweight groovy new toys like “The Metaverse!” ahead of much more important but vastly less monetizably-sexy-in-a-deck issues like interest rates, inflation, working age population, income inequality, wage growth (or stagnation), political dysfunction, health outcomes, education, climate, etc. You know, the stuff that has a huge impact on society that we conveniently like to ignore in our pursuit of the Next Big Gizmo™. For example, a big reason for the unlikely resilience of the labor market appears to be boomers retiring en masse during the pandemic, leaving a labor shortage. Of course, this begs the question of how many marketers have young-ish retired boomers with time and money on their hands in their marketing plans? Fewer than have a Metaverse strategy, I’d safely bet.

It’s only when we take a broader look at the forces impacting society and the economy that we generate true strategic insight. Take the automotive market, for instance. Auto brands entering the metaverse tell us precisely nothing. However, the used car market is almost certainly going to crash to earth in 2023. Why? Because rapid increases in interest rates to try and combat inflation means car loans are now pushing as high as 10% interest, car payments increasingly exceed $1,000 p/month, forcing people to take out 72-month (or longer) loans on a depreciating asset that risks negative equity and the Repo Man. As a result, subprime car finance looks, well, horrible, and it doesn’t take a rocket scientist to see how fundamentally unsustainable this is. The days of selling your used BMW with 40,000 miles on the clock for more than you paid are long gone. Don’t be surprised if we see a wave of car repossessions in 2023, a spike in bad car debt (with commensurate pain to car financing companies), and a fairly brutal collapse in used car values as a result (Oh, yeah, and Carvana is almost certainly going bankrupt). All this means that some car company somewhere will get real smart and roll out the Hyundai playbook from 2009 to gain share in a down market. A play that will be vastly more valuable than any amount of Metaverse trend decks.

However, as we look back over the past 14 years, it’s clear that what we should’ve been doing when capital was free was preparing for a zero-carbon future. With zero percent interest rates, we could’ve financed electrification on a massive scale for free. But, instead, we got 15-minute delivery, loss-making taxi companies, and whiny, cruel Bullshitter Billionaires.

So, what next? Well, as I’ve said a million times, the only consistently accurate prediction of the future is that predictions of the future are almost always wrong. But here are a few thoughts based on what we can see right now.

Interest rates will dictate almost everything in 2023, replacing inflation as the primary source of economic pain as corporations and households that over-leveraged themselves in the past 14 years come to terms with a cruel new economic reality. Some of the 2nd order effects of this will include a continuing decline in value among profitless corporations (the chart in the link is insane, BTW), a rise in bankruptcy among zombie corporations (and households), as well as pain in sectors dependent upon debt-finance, including both automotive and housing (Ironically in the US, a housing sales collapse might have only a minimal impact on prices. This is because most homeowners are on long-term, low-rate mortgages, which creates a huge incentive to stay put rather than accept a big drop in what’s affordable under a new interest rate reality).

For branding folks, the DTC world will go from boomtown to tumbleweeds, if it hasn’t already, and tech will get a lot tougher, as even the largest find themselves fighting off activist investors pointing to Twitter as a rationale for slashing staff and other costs. (While conveniently forgetting that this same slashing also crippled Twitter’s revenue and, very likely, its operational resilience).

Because tech is so depressed, layoffs will continue. Strangely, this might be good as the tech talent previously hoarded by Silicon Valley is now available to all the other companies struggling to attract desperately needed tech talent. This, in turn, will make unlikely tech powerhouses like Walmart more common. Embedding technology into businesses that were previously viewed as distinctly non-tech savvy. For this reason, the next tech revolution will likely be the transformation of non-tech companies with solid balance sheets that can afford to hoover up the talent exiting Silicon Valley.

With Silicon Valley in mind, it’s sobering to consider the future of San Francisco. Unlike New York or Los Angeles, San Francisco lacks the scale and diversity of economic output to be resilient to a collapse in its tech core. With leased office space at historic lows and people exiting the city, there is a distinct possibility that San Francisco could become the Detroit of the 21st century. It’s easy to say it’ll never happen, but if history is any guide, it could.

I’m acutely conscious that this all seems a bit depressing, which may have more to do with my ongoing issues with SAD than actual reality, but then again, maybe not. I find it hard to separate the two. But, ultimately, I’m not particularly down about the situation we find ourselves in. I view this more as a period of short-term pain brought about by quickly rising interest rates hitting an economy artificially built upon a platform of ZIRP. It’s going to be something of a cleanse if you will. At some point, possibly by the end of 2023, inflation will drop, and the pressure will be on to stimulate a stalling economy. And when it does, the next wave of tech innovation will be fueled by things like AI-Bing (I kid, I kid, I didn’t even know Bing still existed), climate science, bio-computing, and life sciences. In other words, things that are generally more useful to society than ad tech, profitless taxis, fictional currencies, and 15-minute delivery. Just think, we’re on the verge of making cancer vaccines real, and enzymes that eat plastics already are.

So, yes, in the short term, I’m a little concerned about what we face economically as we face up to the inevitable pain of higher interest rates. But longer-term, exciting stuff is on the way.

Thank you for allowing me to play Depressing Nostradamus for a day. Regular service shall resume, with a big fat grin, next week.

Volume 125: Designing For Culture; Gaming The Algorithms.

January 12th, 2023

1. Designing For Culture; Gaming The Algorithms.

tl;dr: You might not be doing what you think you are.

Last year, I talked at the Brand New Conference in Austin. As I nervously waited my turn, I watched the other speakers, which I thoroughly enjoyed.

As I did, I noticed something interesting: the use by different people of the term “designing for culture.” Now, this is a statement that could be taken in a few different ways. For example, my first reaction was to groan. It’s hard to see this as new in a world where design has always had a part to play culturally, meaning I was initially skeptical that it was nothing more than a statement of the obvious masquerading as profundity.

But, as I sat through more speakers using the term, it was clear that something else was going on. When people said “designing for culture,” they showed work that had been successfully amplified socially. In other words, “designing for culture” seemed to actually mean designing things to be noticed and amplified by the algorithms driving social media engagement. So, while the designers might think of what they’re doing as being culturally of the moment, it’s actually about meeting the amplification requirements of the machines that act as our cultural gatekeepers.

This is interesting because if you understand what’s going on and how they work, then algorithms can be gamed. This is the reason so many people find themselves writing two resumes. One to get through the automated screening when they apply for a job, and the second to put in front of an actual human being when they get an interview. It’s also why online recipes have so much exposition before you get to the recipe itself - this time because the Google search algorithm weights pages more highly based on “engagement,” and people figured out that you can game this engagement by placing a load of exposition copy above the recipe itself. And, finally, it’s why “pods” of people work together to like, comment on, and reshare each other’s LinkedIn posts because they know how the LinkedIn algorithm works and have figured out how to game it.

It’s highly likely that as we move into recessionary times, there will be greater demand from clients for work that cuts through our algorithmically gated environment to achieve the myth of viral reach at low or no cost. And while virality is far from a sound strategy, and all the data suggests it isn’t something you should rely on, that doesn’t prevent there from being an almost infinite appetite on the part of clients seeking it. So, far from being a unique skill set that can only be delivered by the few most talented designers out there, I deeply suspect that “designing for culture,” AKA “gaming the algorithms,” will increasingly represent a learned skill amidst the design community.

And while I don’t know what this might mean for the work overall, what I did realize as I sat through people presenting their work, was that those things achieving the most social traction also seemed to be the work that was the most novel, different, and unexpected. So, yeah. Maybe designing for culture (or, more accurately, gaming the algorithms that gate culture) will be a further nail in the coffin of the boring ass Helvetica in Pastels movement.

Or, at least, one can hope.

2. Falling on The Sword of D̶a̶m̶o̶c̶l̶e̶s̶ Efficiency.

tl;dr: A few thoughts inspired by the Southwest Airlines debacle.

Unless you’ve been living under a rock recently, you’d be aware of the complete meltdown of Southwest Airlines over the festive period. Facing a perfect storm of weather-driven delays and fully booked flights, its back-end technology infrastructure failed spectacularly, requiring it to cancel a vast majority of its flights for a period of days to ‘reset’ the system. At one point, Southwest represented something like 75% of all canceled flights in the country.

As a result, I figured it was a good opportunity to talk about efficiency. Over the pandemic period, we heard much about efficiency relative to supply chains, mainly through a lens that views efficiency and resilience as mutually exclusive. Here, the view is that for a system to be resilient, it will naturally be less efficient. And that for a system to be efficient, it will naturally be less resilient.

But, this is a fairly narrow view of efficiency and resilience. Looking at Southwest, we see two kinds of efficiency; financial and operational.

For years, employees warned Southwest about the clunky, 1990s-era technology it uses to organize, manage, and track people and aircraft. And that having groundcrew do manual entry changes when flights are delayed or re-routed was inefficient and would almost inevitably lead to collapse.

Which, of course, is exactly what happened.

Southwest was optimizing for financial efficiency rather than operational. It didn’t want to spend the money updating its back-end systems and was willing to embrace a certain degree of operational inefficiency to save this cost. Were Southwest optimizing for operational efficiency, this wouldn’t have happened. It would’ve invested the necessary time, money, and resources into developing a modern scheduling and tracking system. Instead, it ran the old system until it broke.

As a result, whenever we discuss resilience and efficiency, it’s essential that we also consider whether we’re talking about operational efficiency or financial.

The rise of financial efficiency is highly correlated with the financialization of American corporations over the past few decades. Where corporations went from being businesses that made things, invested in innovation, and delivered value to their customers to…something else. Creating a world where the corporation became a financial vehicle engineered for maximum payout to shareholders, management, and little else.

Jack Welch-era GE was ground zero for corporate financialization, driving up the stock price of what had been a sleepy industrial conglomerate to new heights, even as his leadership cut hard into the muscle of the business, replacing hard-to-deliver industrial innovation with easy profits from lending. An edifice, of course, that ultimately crashed in 2008, when the financial crisis highlighted just how exposed GE was to incredibly risky sub-prime lending. A humiliating period of its history that it never recovered from and which led directly to its forthcoming breakup.

Or, look at Boeing. Another storied American brand that’s been brought to its knees by financialization. In this case, engaging in a game of regulatory capture to avoid having to deal with difficult questions about the safety of the 737 Max, which had disastrous consequences. To see what happened there, look no further than its board, where financial engineers vastly outweigh actual engineers, even though Boeing is meant to be an engineering company.

And this is the thing. When we look at corporations that are buying back stock, borrowing money to pay special dividends, and engaging in creative accounting practices to increase payouts to shareholders, we’re almost always dealing with firms that place a huge primacy on financial efficiency, even if it has a materially adverse impact on operational efficiency, resilience, and usually, the customer experience. Because when you think of the company as a financial vehicle rather than an ongoing operation, you’re more inclined to starve those operations of investment in order to return capital to shareholders.

And, more often than not, when major issues created by the idolatry of financialization occur, these firms find it hard - often impossible - to recover. GE never did, and it’s unclear whether Boeing ever will.

This brings me neatly back to Southwest Airlines. It’s hard to say right now how big this issue will be for the long-term health of the brand and business. It’s clearly had a significant impact in the immediate term relative to flight cancellations and refunds. Still, the bigger question is whether there has been a longer-term hit to its goodwill and brand equity that only greater operational consistency could solve. I suspect people will likely be warier about flying Southwest, in a similar way that I’m wary of flying JetBlue after the awful experience I had with them earlier in 2022.

Beyond a hit to a single company’s reputation and brand preference, however, it also raises a bigger economy-wide question. Over the past fourteen years, when interest rates were zero, corporations rewarded C-Suites that could financially engineer their way to success. In particular, using debt to enhance stock market performance, which airlines were particularly aggressive proponents of. By contrast, the upcoming period, where interest rates are no longer zero, means artificial debt-driven stimulation is largely off the table. This, in turn, might create a new reality of the C-Suite being rewarded for delivering profits via operations. Something that gets lost in our conversation about efficiency versus resilience.

As a result, there’s a good chance we might be entering a golden age for operationally-minded, customer-focused leaders as a reaction to higher interest rates. People who understand the nuts and bolts of running their businesses, not just the financial levers of how to artificially stimulate stock prices.

3. The Enshittification of The Customer Experience.

tl;dr: When Google And Amazon Went Bad.

One of the less remarked upon consequences of Amazon quietly building a $30bn+ advertising empire is that it’s had a direct and negative impact on the Amazon shopping experience.

While retailers have operated under variations of pay-to-play merchandising for years, Amazon has taken it to a new level. Today, pretty much everything you see when shopping at Amazon is paid for by a vendor. I don’t know about you, but I find myself scrolling way down the page to try and find products that better match what I’m looking for and aren’t obviously paid-for placement. So much for being “the most customer-centric company on earth,” unless you class your advertisers as your primary customers.

As an aside, this also shows the limits of first-party data and personalization. Amazon has more data on me and my shopping habits than any other company, bar none. Yet, it still can’t tailor the product assortment to my personalized needs and still sends emails promoting products I’ve already bought. From Amazon.

Cory Doctorow has written about this, describing it as the “enshittification” of the Amazon experience, and he’s not wrong. And Amazon is far from alone. The mobile web has become almost unusable due to the sheer volume of ad windows, video auto-players, and newsletter pop-ups you find yourself constantly clicking to avoid, assuming you stay on the page long enough for all the various ad servers to do their thing, bogging down load times as a result.

Even digital advertising leader, Google, has turned its homepage from one of the simplest ways to find information online into one of the most annoying. Not only are the ads everywhere, but people have become so adept at gaming the Google algorithm that you might need to go as far as ten pages deep to find the kind of result that you’re looking for, and even then, it’s a crapshoot.

It’s only going to get worse from here. As capital becomes ever more expensive, profit-challenged companies with significant traffic will be led like moths to a flame toward the experience-enshittifying business model that is advertising. Uber, Doordash, and Lyft being three recent examples that have begun doing just this.

Now, what’s interesting here, are two distinctly different observations.

First, it’s unlikely that an enshittified experience will have any material impact on Amazon, at least not in the short term. There just isn’t a competitor out there that can match the scope and scale of the Amazon retail offering. We’re all just going to have to eat it. Google, however, could be a different story. Much of Google’s monopoly position in search is driven by consumer habits. With the advent of ChatGPT, it’s clear that AI could offer real and meaningful competition in information search, to the point that Microsoft is already planning an AI-powered version of Bing, which has the potential to change the category. With the Google experience being so compromised from a consumer value standpoint, it’s not without question that it could find itself in a world of hurt at some point in the not-too-distant future, were a competitor to make relevant search information available in a quicker, simpler, more convenient, and less enshittified fashion. And as much as people may say they love Google, the switching costs of typing Bing.com instead of Google.com are trivially small.

Second, it amazes me that after all these years, and all the money and effort expended on customer experience, UX, UI, and all of its ancillary activities, combined with all the money and talent invested in ad tech, and all of its ancillary activities, that nobody, not one single corporation seems to have connected the dots between the two in such a way that advertising can be presented in a compelling, yet unobtrusive fashion.

If there’s one arena of the online advertising landscape just begging to be innovated, it’s this. Not more ad-tech, buy-side, sell-side, data-platform, first-party, third-party, measurement, attribution, blah blah. But innovating the ad formats themselves, so they work within experiences without enshittifying them, and that allow advertisers to showcase their creativity and craft. And, as more eyeballs go digital, this is precisely the kind of mature category innovation we’re crying out for. Because, like it or loathe it, TV advertising is still the most effective at driving incremental sales. And it shouldn’t be. The only reason it still is is that nobody has figured out how to make the digital ads better. At least not yet.

Volume 124: Looking Back, Looking Forward

January 5th, 2023

Looking Back, Looking Forward With Depressing Nostradamus.

tl;dr: Reflections on 14 years of ZIRP and what’s to come.

Happy New Year! I hope that 2023 is filled with much joy, laughter, good health, and prosperity for you and those closest to you.

It’s common at this time of year to see various looks backward and forward, but outside decade ends, these are typically focused only on the year past and the year ahead. However, it’s more likely that history will view 2022 as the end of the past decade rather than 2020.

When 2020 ended, we were still at the height of the pandemic, with $10 trillion worth of global economic stimulus keeping things moving. By the end of 2022, for all intents and purposes, the pandemic is over (It isn’t, but we act like it is, so it may as well be), and world governments have swung hard from stimulus to tightening, and the impact of that is going to be…interesting.

To understand why let’s look back. Just as history is likely to view 2022 as the end of a decade, it’s just as clear that this decade started in 2008 rather than 2010. Why? Because the financial crisis that melted down economies across the world ushered in ZIRP (If you only click one link today, click this one. It’s an excellent explainer of what happened to the economy under ZIRP conditions).

ZIRP stands for “Zero Interest Rate Policy,” which happened across the globe as a means to fight the effects of the financial crisis.

Now, why, you might wonder, am I singling out interest rates dropping to zero in a newsletter about branding? Well, because it’s super important to the situation we now find ourselves in.

You see, ZIRP fueled the post-2008 economic bounceback, which means that anyone entering the workforce, buying a home, buying a car, investing in stocks, or opening a savings account in the past 14 years has only known a world where interest rates are either zero or pretty darned close. It’s also the case that we view brands that grow up alongside us as “ours.” For me, this was Orange in the late 90s. So even though I was never a customer, I viewed it symbolically as mine in a weird way.

So, while tech didn’t cause the financial crisis, it was by far the biggest beneficiary of ZIRP, as it became the investment destination du jour for capital seeking a return. (Which explains why every business seeking capital pretended it was a tech business, even if all it was doing was renting out office space). This means that without ZIRP, there would’ve been no DTC revolution, no Uber, no Lyft, no Doordash, no Peloton, no Snap, no Pinterest, and very possibly no crypto, no Tesla, no Airbnb, and certainly, no WeWork. In other words, the brands that an entire generation now views as “theirs” wouldn’t have existed but for the disastrous actions of Wall Street risk-takers in the lead-up to 2008.

It feels very odd to realize that a whole universe of brands we now take for granted only exists because ZIRP drove pension funds to pump capital into risky tech speculation because safe assets were paying zero. (I am over-generalizing here, but only by a little). And that as interest rates rise and capital flows inexorably out of speculative tech and back toward safety, many of these businesses will cease to exist. More on that later.

Unfortunately, when we branding people do “trends” work, we all too often make two mistakes. First, we don’t look at trends at all; we look at fads. First, because short-termism dominates, and marketing is a very short-term game these days. And, second, because we overweight groovy new toys like “The Metaverse!” ahead of much more important but vastly less monetizably-sexy-in-a-deck issues like interest rates, inflation, working age population, income inequality, wage growth (or stagnation), political dysfunction, health outcomes, education, climate, etc. You know, the stuff that has a huge impact on society that we conveniently like to ignore in our pursuit of the Next Big Gizmo™. For example, a big reason for the unlikely resilience of the labor market appears to be boomers retiring en masse during the pandemic, leaving a labor shortage. Of course, this begs the question of how many marketers have young-ish retired boomers with time and money on their hands in their marketing plans? Fewer than have a Metaverse strategy, I’d safely bet.

It’s only when we take a broader look at the forces impacting society and the economy that we generate true strategic insight. Take the automotive market, for instance. Auto brands entering the metaverse tell us precisely nothing. However, the used car market is almost certainly going to crash to earth in 2023. Why? Because rapid increases in interest rates to try and combat inflation means car loans are now pushing as high as 10% interest, car payments increasingly exceed $1,000 p/month, forcing people to take out 72-month (or longer) loans on a depreciating asset that risks negative equity and the Repo Man. As a result, subprime car finance looks, well, horrible, and it doesn’t take a rocket scientist to see how fundamentally unsustainable this is. The days of selling your used BMW with 40,000 miles on the clock for more than you paid are long gone. Don’t be surprised if we see a wave of car repossessions in 2023, a spike in bad car debt (with commensurate pain to car financing companies), and a fairly brutal collapse in used car values as a result (Oh, yeah, and Carvana is almost certainly going bankrupt). All this means that some car company somewhere will get real smart and roll out the Hyundai playbook from 2009 to gain share in a down market. A play that will be vastly more valuable than any amount of Metaverse trend decks.

However, as we look back over the past 14 years, it’s clear that what we should’ve been doing when capital was free was preparing for a zero-carbon future. With zero percent interest rates, we could’ve financed electrification on a massive scale for free. But, instead, we got 15-minute delivery, loss-making taxi companies, and whiny, cruel Bullshitter Billionaires.

So, what next? Well, as I’ve said a million times, the only consistently accurate prediction of the future is that predictions of the future are almost always wrong. But here are a few thoughts based on what we can see right now.

Interest rates will dictate almost everything in 2023, replacing inflation as the primary source of economic pain as corporations and households that over-leveraged themselves in the past 14 years come to terms with a cruel new economic reality. Some of the 2nd order effects of this will include a continuing decline in value among profitless corporations (the chart in the link is insane, BTW), a rise in bankruptcy among zombie corporations (and households), as well as pain in sectors dependent upon debt-finance, including both automotive and housing (Ironically in the US, a housing sales collapse might have only a minimal impact on prices. This is because most homeowners are on long-term, low-rate mortgages, which creates a huge incentive to stay put rather than accept a big drop in what’s affordable under a new interest rate reality).

For branding folks, the DTC world will go from boomtown to tumbleweeds, if it hasn’t already, and tech will get a lot tougher, as even the largest find themselves fighting off activist investors pointing to Twitter as a rationale for slashing staff and other costs. (While conveniently forgetting that this same slashing also crippled Twitter’s revenue and, very likely, its operational resilience).

Because tech is so depressed, layoffs will continue. Strangely, this might be good as the tech talent previously hoarded by Silicon Valley is now available to all the other companies struggling to attract desperately needed tech talent. This, in turn, will make unlikely tech powerhouses like Walmart more common. Embedding technology into businesses that were previously viewed as distinctly non-tech savvy. For this reason, the next tech revolution will likely be the transformation of non-tech companies with solid balance sheets that can afford to hoover up the talent exiting Silicon Valley.

With Silicon Valley in mind, it’s sobering to consider the future of San Francisco. Unlike New York or Los Angeles, San Francisco lacks the scale and diversity of economic output to be resilient to a collapse in its tech core. With leased office space at historic lows and people exiting the city, there is a distinct possibility that San Francisco could become the Detroit of the 21st century. It’s easy to say it’ll never happen, but if history is any guide, it could.

I’m acutely conscious that this all seems a bit depressing, which may have more to do with my ongoing issues with SAD than actual reality, but then again, maybe not. I find it hard to separate the two. But, ultimately, I’m not particularly down about the situation we find ourselves in. I view this more as a period of short-term pain brought about by quickly rising interest rates hitting an economy artificially built upon a platform of ZIRP. It’s going to be something of a cleanse if you will. At some point, possibly by the end of 2023, inflation will drop, and the pressure will be on to stimulate a stalling economy. And when it does, the next wave of tech innovation will be fueled by things like AI-Bing (I kid, I kid, I didn’t even know Bing still existed), climate science, bio-computing, and life sciences. In other words, things that are generally more useful to society than ad tech, profitless taxis, fictional currencies, and 15-minute delivery. Just think, we’re on the verge of making cancer vaccines real, and enzymes that eat plastics already are.

So, yes, in the short term, I’m a little concerned about what we face economically as we face up to the inevitable pain of higher interest rates. But longer-term, exciting stuff is on the way.

Thank you for allowing me to play Depressing Nostradamus for a day. Regular service shall resume, with a big fat grin, next week.

Volume 123: Building A Business Around Your Brand, or…

December 15th, 2022

1. Building A Business Around Your Brand or A Brand Around Your Product?

tl;dr: Thought-provoking, from a surprising source.

Way back when, when I was first starting out in this business, we had the opportunity to pitch a major UK high street bank. It was one of those fast-burn pitches, where because of various logistical issues, we only had two days to put the pitch together, which also happened to be a weekend.

I distinctly remember coming into the office and whiteboarding it out with Brian Boylan, then Chairman of Wolff Olins. The essence of the pitch was that competitor high street banks, which were busily turning branches into coffee shops, were taking the wrong path and that we had a somewhat different vision for what this bank could be instead, which we then proceeded to outline.

The pitch happened, we won, and we later found out that the CEO had immediately couriered the pitch document to the lead transformation partner at McKinsey, with whom they were already working, with a message along the lines of “Read this. It’s our new vision.”

These days, I’d have posted on LinkedIn how humbled I felt that the CEO thought so highly of our meager document, but thankfully LinkedIn didn’t exist back then, so I couldn’t.

Fast forward a few months, and while our team was busy helping the bank figure out a new brand strategy, visual identity, customer experience, retail experience, and unique value propositions, the client team sought a new advertising agency to help bring all this to market. And sure enough, they managed to land the most in-demand agency in London, with a storied creative director vowing to work on the business and be a key part of transformational change for the bank. Only he never got involved. I later found out that he’d been intently focused on a new campaign for McCain Oven Fries instead.

I literally couldn’t figure this out. Be a part of significant transformational change for a huge business that directly impacted millions of people, or execute a TV campaign for frozen potato strips in a plastic bag? Wut.

It always stuck with me because the longer you work in this business, the more you realize just how big the differences are between brands and branding in the CPG/FMCG world, and brands and branding for organizations that might have hundreds of products, thousands of employees, and millions of customers. Especially since advertising agencies still, to this day, treat everything as if it’s oven fries and would gladly do a campaign for fries over anything else if it offered them the “creative freedom” they so desire.

Anyway, this is a feeling that’s only been exacerbated recently, as the rise of marketing science and its attempt to empirically identify what works and what doesn’t from a “moving the merch” standpoint tends to treat every brand the same, irrespective of whether it represents frozen potato strips in a plastic bag or the human endeavor and ingenuity of thousands of people.

My challenge is that I’ve always struggled to find the language to adequately make the distinction…until now. And I have to say, it came from the most unexpected of sources, Interbrand.

Their most recent list of global monopolists distinguishes between companies that “build a brand around a product” and companies that “build a business around a brand.” And while I think the pejorative leadership angle they place around the distinction is nonsensical, the frame of reference is super interesting for my purposes. So here goes.

For many years, the CPG/FMCG world has been focused on building brands around a product. And there’s generally a clear distinction between what goes on inside the package and the brand perceptions that are layered on top of it. In this world, with things like, say, McCain Oven Fries, you really can’t change what’s in the bag, so everything is focused on the image you build around it. It’s an exercise in image-making and little else since you can’t influence the product, you can’t influence the buying experience, and you probably can’t influence the packaging all that much, either. I suspect this is partly why so many CPG/FMCG brands fell down the purpose hole - it represented something novel and new and interesting that you could influence in an environment where there wasn’t much novelty or newness to draw upon.

Contrast this reality with a world where you’re developing a brand for a corporation or any organization, really. Here you’re influencing the behavior of people; you’re impacting way more touchpoints, including the types of products they make, the service model they employ, and the experiences they create. And you have way more stakeholders to think about than just the customer. Like investors, employees, partners, regulators, individual communities, etc. In this world, you’re more likely not just building a brand around your product but building a business around your brand (even if this definition suffers more than a little from hyperbole).

Now, I know it’s far from the perfect description, and I certainly don’t see it as being as binary as Interbrand presents it as. More that it’s a spectrum across which brands might span. But, as a conversation point with clients, I’ve found it very useful lately because it allows you to figure out together which branding approach is right so you can focus attention where it needs to be focused. I can’t tell you how often an implicit disconnect causes real problems, where the client thinks about their brand at one end of this spectrum, and their consulting partner (in this case, me) thinks they’re at the other.

So, yes. Thank you Interbrand. Fair play and credit where credit is due.

2. We Interrupt This Broadcast For A Rather Long Commercial Break.

tl;dr: Time for a self-serving advertorial, well confessional mostly.

This year has seen so many new Off Kilter sign-ups; thank you all. I truly love that you’ve signed up, and I deeply appreciate it. You’re the reason I keep writing this stuff every week.

As more have signed up, more have reached out to ask who I am, what I do, and whether I work for a living or write newsletters all day. (Yes, I do work. I’m a consultant focused chiefly on brand strategy. Newsletter writing is a passion project for nights and weekends because it pays zip).

So, I figured that since we’re approaching the end of the year, perhaps I should do an advertorial disguised as a confessional for all of you folks that don’t already know me. And while I’m cringing at the prospect of writing about myself, here goes.

Hello. I’m Paul. I’m from the Shetland Islands in Scotland. Until I was a teenager, I lived on the island of Unst, the furthest North you can go while still being in the UK. It’s the same size as Manhattan but only has 600 people on it instead of 6 million.

I hated my childhood, hated being stuck in Shetland, hated the dark nights of winter, hated the parochial reality of small-town living, and despised my time at high school, where bullying was baked into the very fabric of the place. Realizing that education was my only way out, I did just enough to make it to college. (As an aside, whoever described school years as the best of your life was delusional).

I did my undergraduate degree at the University of Strathclyde in Glasgow, where I went to less than 40% of my classes, spent weeks at a time in a drunken haze, developed tinnitus from waaaaayyy too much time in nightclubs, and somehow worked my way into something approximating adulthood. Then, through sheer luck, I graduated with an upper second-class BA with Honors in Marketing because the economics classes I’d also been studying required math skills I didn’t have and wasn’t interested in developing.

After four years of bliss, real life hit me like a truck when I realized I was way behind everyone else. A feeling that still haunts me to this day. While my peers were busy lining up jobs months before graduation in exotic fields I’d never heard of, like investment banking and management consulting, I naively went about my business thinking you only applied for jobs after graduating, which meant there were only crappy jobs left to apply for. So that’s what I got. Eventually.

I quit that job after two weeks. It was in Salford, a distinctly downtrodden part of Manchester in England, and it was a disaster. All I’ll say is that the office was ram-raided on my second day and that the owners insisted on calling me Thomas (My middle name, my dad’s name, not my name) because they already had “too many Pauls.”

Slinking back to Shetland with my tail between my legs, I vowed that to get out permanently, I needed to become successful enough at something, anything, because if I didn’t, I’d be stuck there forever.

After a brief sojourn on the Isle of Skye (beautiful but even more parochial than Shetland), a failed application for a job with the Stewart Formula One team drove me back to academia. I had the hard realization that I wouldn’t have hired me either and that I’d be stuck in the backwaters of Scotland forever if I didn’t do something about it.

So, I begged my parents for money they didn’t have (thank you, both) and did an MBA at Lancaster University in England, which I loved, where I met people I’m still good friends with over twenty years later and where I realized that while I was still way behind everyone else, I had the good fortune to be at least as smart as they were. Since I had unfinished business with academia, I buckled down this time and graduated with distinction, which is similar to one of those Cum Laude things if you’re from the US.

This time, I tried to find a job before graduating, but even as I watched my classmates get plenty of offers, for me, there were none. Notable among many rejections, McKinsey sent a rejection letter a full two years after I applied, and P&G offered me an interview two weeks earlier than the letter informing me was postmarked. Since I can’t time travel, it meant I couldn’t interview with them again for another 12 months. Global Crossing briefly raised my hopes before refusing to pay interview expenses, so I couldn’t go because I couldn’t afford the trip to London and back. In hindsight, I dodged a bullet as it went spectacularly bankrupt shortly after.

At my lowest point, while openly considering using my degree certificate as toilet paper, I saw a recruitment ad in the Sunday Times from Wolff Olins looking for senior strategy consultants. Now, I knew I was far from senior consultant material, but I’d also been watching Wolff Olins from afar for years because I was obsessed with their work and had seriously considered sending a speculative letter anyway.

So, I wrote a desperate letter born from the depths of despair. Little did I realise it then, but it was the first Off Kilter. I can’t remember all that was in it. I’m sure there was plenty of boot-licking. But I do remember three things. First, it said, “I know you’re busy, so just read the bold bits,” which I duly bolded. Second, because they’d asked for outside-the-box thinkers, it said, “Thinking outside the box first requires you to accept that there is a box. There is no box.” And finally, I begged. Saying something like, “I know my resume is unimpressive, and I won’t get a job as a senior consultant, but it costs almost nothing to do an interview. I’m not asking you for a job; I’m simply asking you for a chance to talk.”

So we talked, and I got an entry-level job as a junior consultant (thank you, Robert), mostly, I think, because I was a novelty from far away, and they took pity on me. And even though I was grateful, I was also driven because there was no way I intended to end up back in Shetland again. And even though being a junior consultant meant you had to carry everyone else’s bags to client meetings, at least I was in the meetings, where I could listen and learn and try to figure out what the hell it was we were doing.

I spent ten years at Wolff Olins, from 2001-2004 in London and 2004-2010 in New York. I arrived in NYC with two bags of clothes to my name, and by the time I left Wolff Olins, I’d worked with some of the world’s largest corporations, was a client principal, as well as head of strategy in the US, a member of the US management team, and the global leadership team. You know, all the bollocks you write on your resume that don’t really mean much. What you can’t put on your resume is having a colleague and friend refer to you as “The Rainman of Branding.” I love that and occasionally use it as a tongue-in-cheek description of myself to this day.

More importantly, I had the distinct pleasure of working with some of the best, smartest, most creative people I’ve ever worked with, including the amazing woman who foolishly agreed to become my wife.

But, by the end, I was done. Burned out, jaded, pissed off, you name it. The financial crisis hit us hard, and my first act as strategy head had been to lay people off, which I never really got over. I blew a disc in my back. I had to do the hard yards of helping build things back up by winning clients in Tokyo, Qatar, LA, and Seattle, but I was based in New York. And after spending my son’s second birthday interviewing a Sheikh about a museum in the Middle East, I knew I was done. Pissing American Airlines off in a pitch where they wanted a new logo, but I insisted we focus on fixing their shitty experience instead was simply the period at the end of a ten-year sentence.

Since I’d previously helped us win a considerable pitch for Microsoft, I realized there was now a window of financial security for the business that meant I could leave without it being hugely traumatic. So, I decided on a Friday and quit on Monday. I’ve never felt freer than the weekend in the middle. I had no plans, nowhere to go, no career goals, no direction, and no job. All I knew was that I didn’t want to work at the only place I’d ever wanted to work anymore.

I bounced around freelancing for a bit before quickly realizing there isn’t much of a place for senior freelance strategy talent. You’re just too expensive for agencies that want to mark up your fees by 3X, and I don’t find it very satisfying anyway.

Then, I got an opportunity to work directly with a client Wolff Olins had passed on, so I took it. My accountant told me I needed a corporate entity to shield me from liability, so I came up with Invencion. I could give you a song and dance about how this name came about, but the reality is that my wife and I batted ideas around in front of the fire in the back room of the Clover Club in Brooklyn on a wintery March afternoon while getting blasted on gin cocktails. And, well, the Invencion dot com URL was available for $749. So I bought it.

Thus, Invencion, Inc. was born. If I'm honest, there weren’t any plans, certainly no business plan, or even much of a clue. There was never any intent to hire anyone else but me (I retain the view that while I don’t mind taking a risk on my ability to pay my own mortgage, I won’t take that same risk with anyone else’s). It was just a vehicle through which I could do business. I put the website together myself using Squarespace, as you can tell, and it hasn’t changed much since. Frankly, it’s awful and makes me cringe. I try not to look at it. I fantasize that if I ignore it for long enough, it might go away or magically become good.

At some point, someone asked me what I do, and I flippantly responded that I help corporations figure out who they’re going to be when they grow up. And, well, that’s still the best description I’ve come up with.

However, the longer answer is that Invencion is a strategy consultancy that works with leadership teams going through periods of transformation to help them match their brand to their business relative to whatever change it is they face. I probably could zhuzh that description up a bit with a few more buzzwords, but that’s what I do. I’m good at working with senior business leaders and adept at connecting the dots between business strategy, brand strategy, and design in interesting ways that often differ from what you’d get from anyone else. And finally, in addition to being a practitioner, I’m a student of my field because if you’re going to do something, you’d better damn well educate yourself to be good at it.

Which, neatly brings me to Off Kilter. I started Off Kilter in 2019 for two reasons. The first is that we’d moved to Cambridge, MA, a couple of years earlier so my wife could take a job at a startup. Because my network was all New York-based, I found myself with a huge “out of sight, out of mind” problem, which meant business opportunities were drying up, and I didn’t have a Boston area network to take up the slack.

This meant Off Kilter was created as a vehicle to try and stay top of mind with the people in my network, of which 90 odd were sent the first edition. Putting a sign-up box on the website was more of a “well, I can, so I may as well” kind of thing. Since I’d never had more than 2 or 3 site visitors a month at that point, I never for an instant thought anyone would sign up, and I remain shocked and grateful to this day that so many of you have.

The second reason was my increasingly fraught relationship with LinkedIn. I felt this incredible sense of anxiety every time I opened the app, looking at all the big jobs my peers were getting, with all of their not-so-humble, “I’m so humble,” bragging about it. I felt like I was way behind again because the truth about working for yourself for even a short time is that whatever recruiter calls you may have been getting (and I’ve never had more than a handful ever in my life), they dry up completely when you don’t have an Ivy League college or a well-known employer on your resume. It’s an ongoing irony that I advise senior people in organizations where I know I’d never get close to an interview if I applied for a job there.

Anyway, because of all of this stress and angst I created for myself, I felt the need to shout into the void just to remind myself that I still existed. Today, I refer to this as catharsis by newsletter.

In addition to my existential anxiety, I was angry at the utter nonsense and snake-oil people were peddling on the platform and felt there had to be a counterpoint. I think the thing that really pushed me over the edge was some idiot blathering on about Tesla being inordinately successful without spending a penny on marketing. It was complete bullshit, but the thousands of likes and hundreds of “right on” comments it garnered were most shocking. Christ, I remember thinking that if anyone actually followed this advice, they’d likely be bankrupt in months, if not weeks.

So, in addition to remaining top of mind with my network and shouting into the void to remind myself that I still existed, I also wanted to be a counterpoint to the bullshit and snake oil and hopefully give people a laugh while learning about this stuff. I mean, it’s not rocket science, and it’s not brain surgery. We’re just trying to get people to buy stuff, so why take it all so seriously and wrap so much nonsense around it?

Fast forward to today, and we’re now in Connecticut, living the boring suburban life of middle age, with two dogs and an excellent high school for our son. Invencion is still going, 13 years later, and I get to advise a broad range of fascinating clients with equally fascinating problems. Writing Off Kilter forces me to keep my edge, and some have suggested I also do a podcast, but I’m unsure. I like writing. (Let me know if you think it would be worth it or not)

I talked at the Brand New Conference this year because Bryony and Armin find Off Kilter funny and a non-designer with strong opinions on design a bit of a novelty. It was nerve-wracking and exhilarating, and I’d like to do it more often. So if anyone is hosting an event and wants a live Off Kilter with a speaker who swears too much yet makes up for it with a Scottish accent, I’m there for you.

So, there you have it. This is who I am. This is why I’m here. And this is why Off Kilter exists. Thank you for reading what accidentally became a long and rambling essay. I sincerely appreciate that we’re on this ride together.

Advertorial over.

Peace.

3. 2023 Prediction: More B2B Focused Branding.

tl;dr: Here’s a quickie to round out the day.

Over the years, I’ve done much of my work with B2B clients. It’s not hard to figure out why, after all, B2B represents a significant amount of economic output, and often their challenges are vastly more complex and interesting than your average B2C peer.

What’s interesting is that sales cultures often drive B2B corporations. And, while all salespeople want a strong brand (makes it easier to sell), they rarely have the appetite to invest in building one, especially since it means spending money that might not pay off until multiple quarters in the future. An anathema to a salesperson used to performance being measured in days, weeks, and occasionally months.

So, it’s no surprise that so many B2B businesses completely skipped brand-building when digital came along and gladly dove all the way to the bottom of the lead generation pool. Only now, they’re beginning to figure out that this may not have been the smart move they believed it to be and that, shock horror, the techno-utopians selling them on the vision were lying (As an aside, is there any arena of business where technology firms haven’t promised the world only to deliver a tiny sliver of the promise? It’s shocking that anyone still takes what they say at face value). Anyway, as a result, we’re beginning to see the pendulum swing back the other way.

I have to give credit to the LinkedIn B2B Institute on this. I believe the research they’ve been publishing has made a distinct impact. I’ve certainly been using their data with my clients and prospects, even if their website is shockingly hard to navigate.

And now MarketingWeek in the UK is predicting more B2B brand action in 2023, and I have to say, I think they’re probably right.

Volume 122: Generative Chatbot Edition

December 8th, 2022

1. Off Kilter…Brought to You by ChatGPT.

tl;dr: AI mastering the art of bullshit. Oh, God help us all.

Like most of you, this week I’ve been deathly ill (getting better, fortunately) and extremely busy with work. A truly terrible combo.

But, rather than skip Off Kilter, I decided to autogenerate it using chatbot of the moment, ChatGPT, from the OpenAI project.

If you haven’t heard about it, it’s a dialog-focused generative chatbot that uses AI to respond to queries. It’s been variously hailed a Google-killer, essay-killer, and Next Big Thing. But what it truly appears to have mastered is the art of…Bullshit.

You see, not only does it have the capacity to provide well-written responses to questions almost instantly, it also has absolute confidence in these responses, even when they’re absolute nonsense. Like stating that the Peregrine Dolphin (which does not exist) is the fastest mammal in the sea.

From a marketing standpoint, the implications are pretty clear. In addition to transforming customer service chatbots, a vast amount of low-hanging SEO-focused “content marketing” is about to be written by machines rather than humans. I can see this having a meaningful impact, especially on small businesses initially. Imagine, for example, a single-person retailer looking to sell online. Set up your store page, identify search keywords, and then have ChatGPT autogenerate Google-friendly blog content based on these keywords on an automated, ongoing basis. Boom, you’ve got an SEO-driven marketing engine whirring away in the background without any requirement for human intervention, for free.

In the branding business, we’re a hairs-breadth from auto-generating the copy that goes into brand guidelines (let’s face it, it’s a formula that’s trivially easy to teach the AI in) and we’re likely to see a big impact on both voice and messaging work. Clearly, a VoiceAI has significant potential to come along and act as a writing filter, ensuring all branded content is written in whatever distinctive voice has been derived for that brand. It might not match the best, most creative copywriters, but it sure has the capacity to beat the very long tail of mediocre writing most brands suffer from.

Concerningly, the online disinformation landscape is likely to get infinitely worse. People “doing their research” on Google is already fraught with crazy, but at least there are sources that can be traced, and if you’re smart, you can use some basic media hygiene to parse the worst of it. In a generative AI environment, however, there are no sources: The learning algorithms are a black box, and when you ask the AI a question, utter nonsense can be presented exactly as confidently as absolute truth. Only without any way to trace the difference. And if you don’t think bad actors are going to use this for their own ends to “flood the zone,” well, you’re dreaming. They almost certainly already are.

Anyway. Enough on the negative side. Please have a laugh at a couple of silly queries I made this week. Each took about 1.5 seconds to autogenerate. It’s as impressive as it is frightening.

2. Write a Branding Rap in The Style of Eminem.

tl;dr: Look, I never pretended to be creative.

I'm the king of the branding game. Ain't no one who can do it like me. I create a unique identity. For every product and company

I'm the master of perception. I make sure you get the right impression. I build a reputation. That sets you apart from competition.

I'm the genius behind the logo. The one that everyone will know. I make sure it's memorable. And leaves a lasting impact like a photo.

I'm the mastermind of marketing. I make sure your message is appealing. I spread the word through channels. And make sure you're always revealing.

I'm the voice of your brand. The one that always stands. I make sure you stand out. And take the lead in this branding bout.

So if you want to succeed In this world of constant greed. Come to me, the branding pro. And I'll make sure you never go.

Unnoticed or unappreciated. I'll make sure you're elevated. To the top of the game. Where your brand will always reign.

3. Write an Off Kilter Article Like These.

tl;dr: So utterly wrong, and yet, kinda almost right.

As we all know, the world is a strange and wonderful place. But sometimes, things can get just a little bit off-kilter. Take, for instance, the fact that flamingos can stand on one leg for long periods of time but can't walk well on two. Or the fact that the world's largest mammal, the blue whale, feeds almost exclusively on tiny shrimp-like creatures called krill.

These quirks of nature are just a small taste of the off-kilter world we live in. And if you want to learn more about the bizarre and unexpected, there's no better place to look than Invencion.com.

At Invencion.com, we celebrate the strange and wonderful things that make our world so unique. From unusual animal behaviors to mind-boggling scientific discoveries, we cover it all. So if you're looking for a little bit of off-kilter fun, be sure to check out Invencion.com today. You never know what bizarre and fascinating facts you might discover!

Volume 121: Idealism over Nihilism.

December 1st, 2022

1. Idealism Over Nihilism.

tl;dr: Heed the data, but reject the nihilism of modern marketing commentary.

I’m very conflicted when it comes to the modern focus on marketing effectiveness, marketing science, econometrics, etc. On the one hand, I feel it critical that we better understand what works, what doesn’t, and why. And I tip my cap to anyone doing the hard yards of trying to figure this out because it’s both important to our future and a critical counterpoint to the ocean of snake oil that has drowned us in recent years.

However, as valuable as I find this work, I also find its nihilistic overtones to be a little disturbing and perhaps commercially dangerous.

When I say nihilistic overtones, what do I mean? Well, and forgive me for overgeneralizing a little, it’s the attitude of “nothing matters except salience, so we should solely focus on being noticed and not think any deeper,” which leads directly to an increasingly common view that brands don’t matter much, don’t mean much (because customers don’t care), and that salience (being noticed and remembered) is king. And, when it comes to salience, anything goes, no matter how daft or potentially destructive.

The problem with this attitude is the overt sense that nothing matters as long as people notice. Which would suggest that what Elon Musk is up to over at Twitter is super smart, while to me, it looks more like destructive chaos. Or that Burger King’s penchant for stunts should be the paragon of effectiveness when that doesn’t appear to be true. Or that the current storm around Balenciaga, bondage bears and all, is totally valid as a way to garner attention. When in reality, it’s a controversy that risks spiraling way out of control.

And, while the data is the data on what works and what doesn’t, the nihilistic overtones seem more like human interpretation than something blaring at us from the data itself. So, why? My theory is that it’s largely an overreaction to brand purpose, which dominated the branding conversation over the last few years and massively over-sold the importance of social meaning. And, like most overreactions, we’re almost certainly now swinging the pendulum too far in the opposite direction.

Why? Well, mainly because nobody notices when you agree with something; they only notice when you run contrary. And with that in mind, I deeply suspect high-profile talking heads are using this nihilistic anti-purpose frame to raise their own prominence so they can sell more books, or marketing courses, or both. And, yes, that would seem a bit cynical. But then again, cynicism is exactly the playbook promoted by the modern marketing nihilist.

Me? I’m an idealist and proud to be so. I’d like to think a few of you are too.

When I started in the branding business, it was a time of true idealism. We talked about building brands people would love, and we meant it. We talked about the power of ideas to attract people to your brand, and we meant it. We talked about the value of standing for something and delivering on it, and we meant that too.

And, even though we’ve found over the years that brands being loved is more fantastical than it is real, it still has real value as strategic intent, even if it’ll rarely if ever, be achieved. To counter this, the nihilists will shout you down that having customers love your brand is irrelevant and that you’re stupid even to try. But they’re stuck in a land where all that matters is how noticed, and thus controversial, your ads are, and we know that ads are only a small part of the overall brand package. Ironically, it also means that if we continue down the path of marketing nihilism, all that’ll happen is the CMO remit will shrink even further than it already has as we flit from one disconnected “look at me!” stunt to another.

Instead, if we shoot to build a brand that people will love, it forces us to consider the total package across all four Ps of the marketing mix. It forces us to think about the experience, the service quality, the value proposition, the product, innovation, pricing, the ideas, the idealism, the channels, the partners, and all the qualitative things that make brands valuable to people rather than simply what we can easily measure quantitatively.

Take airlines, for example. Here, the nihilists might suggest that salience is all that matters. Bullshit. That doesn’t consider the reality of the experience and how appallingly so many airlines (hint, JetBlue, American) responded to post-pandemic travel. (Personally, I refuse to consider both for a very long time)

And this is important. Cory Doctorow has written about qualia, which represents qualitative information that cannot easily be quantified. His observation is that when we seek to quantify everything, we ignore that which cannot be quantified. Not because it doesn’t matter but because we can’t measure it. We then conveniently justify this by simply assuming that because something can’t be quantified, it never really mattered in the first place. Except that, all too often, it does.

This is what I fear about modern marketing’s love affair with overtly quantitative nihilism and where we may end up as a result. It makes the huge assumption that qualitative factors don’t matter. That all that matters is the attention we can quantify. And that by quantifying this attention, we land in a place where the true nature of brands will be understood.

But, sorry, as much as I value the data, I have to reject this conclusion because of all the missing qualitative data. Idealism in branding matters; seeking to create something people will love matters (even if we’ll never achieve it), and those qualitative factors that cannot be quantitatively measured also matter.

So yeah, love your brand. Be an idealist. And reject the nothing matters crowd because I truly believe they’re wrong, or at least only partially correct.

2. Who Cares if You Can’t Read The Logo?

tl;dr: Kia is an excellent example of a great rebrand.

There’s a news article flying around the interwebs right now that breathlessly tries to slay the Kia rebrand as being awful because “30,000 people a month are searching for KN.” Because, as the accusation goes, the new Kia script is illegible.

What a load of old bollocks.

The Kia rebrand is great. It feels future; it feels cool; it feels differentiated. And, unlike other car brands, you sure ain’t going to mistake the Kia badge for any other car out there.

I’ve been meaning to write about Hyundai Motor Group, which comprises Kia, Hyundai, and luxury sibling Genesis for a while because this is by far the most interesting car company right now, setting itself up to win in the race to electrification. (well, at least in terms of what’s available in the West. There’s some fascinating stuff going on in China and Vietnam that we haven’t seen here yet).

As a core part of re-positioning the entire group as a modern, future-forward automotive company, the Kia rebrand is a shining light. Rather than claiming 30,000 KN searches a month is bad, I’d rather suggest there are 30,000 people a month so curious about a Kia they’ve seen and so engaged they’re searching to find out more. Really, this should be a “bravo” rather than a “bah, humbug.” (Not to mention the fact that including KN in your SEO/SEM strategy isn’t exactly hard).

Rebranding, in general, has been given an increasingly bad rap in recent years. As more and more visually inept people read How Brands Grow and regurgitate distinctive asset blah, blah, we’re being beaten over the head that rebrands are universally bad because they take away the distinctive assets that have been painstakingly built over the years only to replace them with something completely new, which is a bad thing because nobody has seen the new stuff and so cannot recognize nor remember it.

This is fine as a theory but doesn’t consider the basic question of, “what if the assets we’re investing in are shitty, nobody really notices them anyway, and/or they no longer reflect the kind of company we’re becoming?”

So, before moving on, let’s first address the tiny little elephant in the room. Do we lose something when we significantly change how a brand is visually presented to the world? Unequivocally, yes. By definition, replacing something familiar with something new will take time to bed in, so there is always a short-term negative impact to take into account. That shouldn’t be in question. The question should really be, how significant is this negative impact likely to be? How much upside can we potentially gain over time from making the change? And will it be more or less harmful in the long run to make a big future-facing push with the old identity hanging around our necks like a noose?

Enter Kia.

For many years, Kia followed a similar path to other South Korean brands: think early Samsung or Lucky Goldstar era LG. Entering Western markets with copycat products with mediocre design and competent engineering at bargain-basement prices.

And that’s what the old Kia logo symbolized. Cheap, mediocre design attached to a cheap run-of-the-mill car. This wasn’t a badge anyone was going to feel emotional about. I certainly didn’t want one in my driveway, not just because of the badge but because of the vehicle it was attached to.

Yet, in hindsight, we can see the strategy wasn’t to keep building cheap, mediocre cars. Instead, the strategy was to double down on differentiation through design, technology, and a semi-luxurious cabin experience, allied to a shift to value rather than bargain-bin pricing. Buying a Kia would no longer represent a compromise, and someone somewhere decided a new logo was necessary to support this shift.

At the time, I admit, I didn’t get it. It felt like an identity that had exited the realms within which the company operated. It felt like the proverbial lipstick on dogshit. And yet, I’m delighted to admit that I was completely wrong. I pulled up behind a Kia EV6 at the lights the other day, and the back end of that thing is unequivocally futuristic and sexy. It just screams, “search KN on Google,” haha.

And that’s the thing about rebranding. Yes, if all you do is slap a new coat of paint onto the same old thing, you’re probably not going to achieve much. And, as the marketing scientists have shown, you’re probably more likely to end up net-negative, at least in the short term. However, if you’re making a more fundamental shift in strategy. If like Kia, you’re literally becoming a different kind of company with a different kind of product, then rebranding remains a powerful part of the overall package. You certainly don’t have to do it, and you should go in with eyes wide open, but it’s potentially a lot more valuable over the medium to long term than some would have you think.

I can tell you right now that the EV6 with the old logo would’ve looked like hot garbage. So, yeah, today, I’d happily have a Kia in my driveway. And that, my friends, is precisely the kind of transformative change the marketing science community doesn’t seem well set up to measure because it rarely–if ever–occurs in their preferred CPG/FMCG playground.

I’ll follow up on that later because treating every brand in every category as if it works exactly like oven fries is one of branding theory’s biggest and most consistent fails.

3. Work Now, Get Paid Eventually.

tl;dr: Payment terms reaching ridiculous levels.

One of the most frustrating things I find myself dealing with is the sheer insanity of trying to work with large corporations. 2-3 times a year, someone from a large corporation will reach out looking for help, and almost without fail, the most challenging part of the whole job happens before it even starts; navigating the hurdles erected by procurement.

Often, these hurdles include onerous insurance requirements, all-encompassing multi-year noncompete clauses, forensic multi-page bureaucracy where you have to detail everything about your business, financial position, etc., scary indemnification clauses (Yeah, like it’s cool to demand a single-person company blanket indemnify a multi-billion dollar corporation), spreadsheet after spreadsheet requiring you to detail your proposed FTE equivalents and average billing rates, and yes, payment terms commonly in the 60-day range, and increasingly pushing 90.

It’s not uncommon to find yourself saying no, even though it’s work you want to do, because there’s simply no way to get a contract signed off on in a timely and cost-efficient manner unless you and your client find a way to get insanely creative. Or they bring you on as an individual contractor, which brings with it the humiliation of having to go to a lab to take a piss test.

But, for all that I’m faced with, it’s nothing compared to others. I thought I’d seen everything when General Mills issued an advertising RFP requiring 120-day payment terms that also claimed ownership of all IP created by the agencies pitching, even though none were paid to pitch.

But no. Now there’s this. Keurig Dr. Pepper, a huge CPG/FMCG conglomerate (WTF is going on with that logo, btw), recently issued a public relations RFP that included…wait for it…360-day payment terms. Wut?

Aside from it being morally wrong to treat any vendor like this, especially one you want to act as a partner in your success, this trend toward increased contractual combativeness is hugely destructive to the client organization for a few simple reasons.

First, while onerous procurement requirements are nominally intended to drive value, they often achieve the exact opposite. Accidentally optimizing the client so you can only work with the largest, least efficient, and least creatively or strategically interesting partners.

Second, the price value you seek is an illusion. The agencies responding to RFPs with onerous terms are all factoring in the cost of meeting those terms in their response. So, while 360-day payment terms might look like great cashflow management on paper, any agency response will factor in the cost of whatever loan they’ll need to take out against the value of the contract. Either directly in the form of higher fees or, more likely/additionally, by understaffing the work with inexperienced, cheap talent.

Third, you eliminate the possibility of working with anything even approaching the best talent. (Clearly demonstrated by the Keurig Dr. Pepper homepage) The best at anything are usually in demand, so they don’t have to respond to nonsense like this.

Fourth, whomever you do work with is now in a combative relationship you created. They’re not looking out for your success; they’re not going above and beyond; they’re never going to color outside the lines for you. Instead, they’re focused on financial recovery, charging through the nose for out-of-scope requests (which they’ll track like bloodhounds) and applying the most junior, least costly talent on your business to squeeze some meager margin out of you.

And, you know what? If you really wanted to both save money and get a higher quality of work, you’d do the exact opposite. Here’s why.

Amid all the furor about agency holding companies being disrupted by consulting firms, there’s been another trend bubbling along under the surface: Talented people have been leaving both to hang up their shingles as independent contractors and as small boutique consultancies or agencies, often to escape terrible working environments exacerbated by combative approaches to procurement.

This means there are now incredible pockets of strategic and creative talent that don’t bring big agency overheads, inefficient bureaucracies, and people who’re just there to make up the numbers. (A sad fact of our business is that all too often, bigger teams don’t deliver better work, they’re just there to pad the fees and make the work more expensive…partly to cover the cost of onerous procurement terms).

The first large corporation to recognize this and switch procurement approaches from one designed to squeeze cost from large agencies to one designed to advantage independent talent will gain the upper hand. Streamlining the bureaucracy, eliminating the most onerous requirements, and engaging in prompt payment for services rendered. Do this, and you’ll have a veritable army of brilliantly talented people delighted to work with you at lower cost and higher quality.

If anyone from Keurig Dr. Pepper is out there, maybe you could try that next time and do a compare and contrast? You might be surprised.

Volume 120: Happy Thanksgiving.

November 24th, 2022

Happy Thanksgiving. I’m Grateful to You All.

Before moving to the US in 2004, I’d only ever experienced Thanksgiving via the movies, where there are only two storylines:

1. The road movie, where a person or people are trying to get home for Thanksgiving, only to find an array of increasingly wacky and unlikely obstacles in their way. But, of course, they make it in the end. Or,

2. The dysfunctional family movie that plays on family dynamics and where much awkward comedy ensues, but everyone comes together in the end.

The common theme is that Thanksgiving is special, and a Thanksgiving movie always has to end well, no matter how improbable that outcome may appear halfway through.

And that’s exactly as it should be.

Thanksgiving rapidly became my favorite adopted holiday in the 18 years I’ve lived here. One I intend to celebrate no matter where I may ultimately end up. It’s a time for family and friends, a secular celebration of what we give thanks for, unburdened by people having differing religions or feeling pressure to give gifts. It is special.

And, because it’s special, I’d like to extend my deep gratitude and thanks to all of you who read Off Kilter, to those who have a silent chuckle, to those who share it with others, to those who post about it on social media, who write to let me know you like it, or love it, or to ask more about a topic, or simply to say they disagree. You’re what makes me get out of bed on a Monday.

So thank you. I’m grateful for having you to write for. And my apologies for spamming you on a holiday.

I’ll leave you with my favorite story of Thanksgiving, especially for folks who may never have celebrated it.

Regular service shall resume next week.

Paul.

Volume 119: Brand, Living in Performance Harmony.

November 17th, 2022

1. Brand, Living in Performance Harmony.

tl;dr: Following up on brand & performance marketing.

Last week, I wrote about Airbnb, performance marketing, brand marketing, and why I think we’ve arrived where we are. The good news is that there’s an increasing realization that you need both working in harmony rather than relying on performance marketing alone. Now, I know this is hardly a new thought and that the likes of Binet & Field and Ritson have talked about it for years, but sometimes it takes a long time for ideas to embed into the synapses of society. And in this case, that society comprises marketers who’ve been under tremendous pressure to focus on direct response digital, which has created an entire generation who only know how to do that.

Based on discussions I’ve seen on LinkedIn and the Chaos Factory, formerly known as Twitter, the Airbnb example resonates with a desire for change, but let’s be careful about how we think about this.

As is often the case, we must be wary of swinging the pendulum too far. The reality for most is that it’s not about shifting wholesale to brand marketing and ignoring direct response entirely; it’s about ensuring an optimum balance. (Even Airbnb admits to using performance marketing as a targeted tool where necessary) And that balance is likely to differ depending upon the category you are in, the competitive dynamics you face, the customer attention you can (or can’t) attract, how well-known your brand already is, and where you are in your overall evolution as a company.

Put simply, brand marketing is not a risk-free exercise, and it’s no catchall panacea for the slowing growth of every business. However, just because it isn’t risk-free doesn’t mean we shouldn’t do it; after all, very little in business comes without risk. So, really this is about being cognizant of the risks and doing what we can to maximize our probability of success.

With that in mind, here are a few observations about how we might think about brand relative to performance marketing because, unfortunately, the talking heads who do nothing but think about this stuff all day long have made it way too complicated for most.

So, why do we need brand marketing?

Simple. Because we want people to know about us and think about us in the period before they’re actively in the market to buy in order to:

1. Accelerate their shift from not ready to purchase to ready

2. Increase the number of people who are willing to purchase from us when they are ready

3. Be top of mind when that happens.

And, while points 2 and 3 are the most important, doing all three is the Holy Grail.

For people who think in terms of funnels, the role of brand marketing is twofold. First, to widen the top of the funnel to increase the number of people willing to consider our brand. Second, to accelerate the flow of customers into this now wider funnel. By contrast, the role of performance marketing is to help capture more business as it moves through the funnel. As a result, if you do brand marketing well, it should increase the effectiveness of the performance marketing that follows. This is why they represent an and, rather than an or.

So, what makes for good brand marketing? OK, this is where shit gets unnecessarily complicated. Just this week, Mark Ritson went on another of his nihilistic rants that are more confusing than they are helpful on this subject, so if you’re thinking of doing some brand marketing, here are a few thoughts to help you along the way.

First, you must stand out and be uniquely recognizable as you.

For all practical purposes, distinctiveness and differentiation are the same. Yes, marketing academics are having a big ‘ole catfight over this subject right now, and no, it doesn’t matter because they’re dancing on the head of a pin. All you have to remember is the following. How do you intend to stand out from the crowd? And what will people remember you by? More specifically, make sure that irrespective of your campaign or message:

1. Your brand stands out uniquely from all other brands, cannot easily be mistaken for any other brand, and has things that make you unique and recognizable. For Nike, it’s the swoosh. For Adidas, three stripes. For Coke, it’s the color red allied with the white script of the logotype, a unique bottle shape, and polar bears at the holidays.

2. That you use your uniqueness (whatever it is) consistently over time so that people remember it and come to recognize you by it, so once you understand what makes you unique, use it, don’t ditch it arbitrarily, and make sure you don’t accidentally lose it when jumping from one campaign to another.

As an aside, take a look at your value proposition before you start down the path of brand marketing. If it’s uncompetitive or bad in any way, fix it first. Advertising of any stripe is a weak force. It can’t make up for an uncompetitive offer.

Second, yes, you must be noticed. But don’t sacrifice image to do so.

For all practical purposes, you should think of salience and image in the same breath. Yes, I know some of you are throwing your hands in the air in frustration at this statement, but think about it for a second. Salience means you get noticed, remembered, and come to mind when someone considers making a purchase. Image is what you are noticed and remembered for. They’re deeply interrelated. You can’t build an image without salience because that means nobody is noticing, but salience without a consistently attractive image is just chaos.

Think Twitter. Elon Musk has given it new salience - Daily active users have increased as his antics turned it into front-page news. But, becoming the Chaos Factory has created a terrible image with advertisers who are bailing, as are users that aren’t trolls or car-crash rubberneckers.

This is why Mark Ritson is wrong to say the Belvedere Vodka ad with Daniel Craig has salience without meaning. Yes, it’s doing a great job of being noticed because of its surprisingly silly irreverence (and thank God we finally see some ads with whimsy and silliness at the heart). This salience will make people think of Belvedere when ordering vodka, but it also carefully maintains the premium, aspirational image of the brand, even as it plays with it. In the same vein, yes, Brewdog has established much salience, but it’s also built an image as the iconoclast of the category in the process.

So, by all means, focus on salience (and I’ll reinforce why in a second) but be careful not to sacrifice image on its altar, as Elon Musk is hellbent on doing, both for himself and for Twitter.

OK. Back to salience for one last second. Why does it matter so much? Again, very simply, we want to be noticed and remembered and desired, and since consumers are bombarded with commercial messages all day long, they barely notice, let alone remember anything. So whatever we do better be something different, unexpected, creative, or whatever you want to call it to cut through.

Third, bland, boring, anything means you’ve failed.

Bland, boring brands that have nothing unique to remember them by executing bland, boring brand ads that nobody notices, let alone remembers, is an excellent way to light your money on fire. We want to be noticed, remembered, and, ideally, desired.

This is why if you’re a B2B brand, you should avoid the penchant for boring, functional, feature-driven narratives. They don’t work. As pretty much every research study finds.

It’s also why designers need to stop looking at their work through a lens of “good design” and start looking through a lens of “good branding,” where “clean, modern, and seamless” takes a huge backseat to “unique, different, and instantly recognizable.”

Fourth, understand that brand marketing and performance marketing are very different and act accordingly.

When we do performance marketing, what matters most is how well we target. Why? Because we’re trying to get in front of the tiny subset of 5-10% of people who are actively in the market to purchase at that moment so we can entice them to buy our product and not a competitors.

When we do brand marketing, what matters most is the salience of the ad/PR/experience and the image this presents. Why? Because now we’re dealing with the 90-95% of people who aren’t in the market and aren’t paying attention, and we’re competing with every other brand they see for whatever sliver of attention they’re willing to give us. It’s not our right; we must earn this attention every time, all the time, over time.

Fifth, brand and performance marketing measure very differently.

With performance marketing, we measure via dashboards in the moment and seek the reassurance of immediacy. Put simply; it’s addictive. And that isn’t an accident because tech firms have become expert at designing products for addiction. Secondarily, we have so-called “hard metrics” like ROI, ROAS, attribution, conversion rates, etc., ad-infinitum, that we rely upon to prove value to our more numerate business colleagues, mostly in finance. (Although, in tech firms, this also includes engineers who bring their own biases, see the point about B2B ads above)

With brand marketing, because the job it’s doing is different, the effects measure over longer timeframes; they’re often softer and thus harder to attribute directly and will never have addictive immediacy to give us that dopamine hit. Put simply, good measurement of brand marketing generally takes longer, costs more, and is more complicated to undertake than the measurement machines tech firms have built to support performance marketing. This doesn’t mean we shouldn’t do it. As I’ve said before, “what gets measured gets managed” isn’t true in most organizations. The truth is usually “what gets easily measured gets managed, mismanaged, and sometimes manipulated, and what’s hard to measure gets ignored.”

So, don’t ignore brand marketing just because it’s hard to measure.

Where does all this leave us?

Well, in summary, brand marketing expands our potential market, while performance marketing helps us capture more of that potential. Brand marketing gets us noticed and remembered and helps build our image before the customer is ready to buy, which makes it easier for performance marketing to capture the sale when the customer does want to buy. And brand marketing is measured across months and years, while performance marketing is measured in minutes and hours.

It’s not that one is bad, and the other is good. Don’t fall into that trap. It’s just that they have different jobs to do and are most effective when done together, in harmony.

2. The Case For The Chief Brand Officer.

tl;dr: And oldie but a goodie.

I’m conscious that with all the focus right now on brand marketing, it would be easy to lose sight of the fact that brands are defined by much more than how they communicate.

For many years, I used the example of HSBC. While it loudly communicated its status as “The World’s Local Bank,” I found it harder to open a US HSBC account after I moved to New York than I did other banks, even though I’d been a UK HSBC customer for years. In other words, no amount of comms can make up for a discordant experience.

The why is simple. Advertising is a weak force. Its power lies in the ability to nudge people to act differently than they otherwise would. For any brand, word-of-mouth is almost always a stronger force. Get these two forces working harmoniously, and the impact can be huge. Have them working in opposition, and we’re left with the old adage that “nothing kills a bad product faster than great advertising.”

With this in mind, you’ve probably seen one of the myriad of charts that are meme-ing their way across the interwebs right now that seek to compare “marketing” to “brand.” They usually look like two circles with marketing in charge of communications and brand in charge of…well, everything else.

And, while this is wrong, like all the best lies, there’s a nugget of truth at the heart that cannot be explained adequately with two circles and a few words.

This is why I recommend you read The Case For The Chief Brand Officer, which I wrote back in 2018 before Off Kilter was even a glimmer on my keyboard. I think it stands up surprisingly well. Hope you agree.

If you do or don’t, please let me know via email or the comments on the post itself.

3. If Brands Really Cared, They’d Protest Harder.

tl;dr: Hard to get excited about such a compromised World Cup.

I love football, the beautiful game, AKA soccer, to my American friends. Although, as a player, I realized at a very young age that my best position was left back…in the locker room.

I was truly abject, first playing as a defender with the sole skills of:

1. Clumsily and accidentally wiping out opposition players instead of playing the ball

2. Hoofing the ball out of play while trying to pass to a teammate

3. Jogging briskly for about five minutes before doubling over and wheezing for the next fifteen due to my abject lack of fitness

After realizing I was incapable of mediocrity in any outfield position, I briefly switched to goalkeeper, where I was handicapped by having no clue what the offside rule meant and not being able to afford gloves.

Before my final ever competitive game as a young teenager, I foolishly devoured a massive portion of battered sausages and ultra-greasy chips on the way to the football pitch. I spent the next 90 minutes desperately trying to hold it down while freezing my ass off in howling wind and horizontal Scottish rain, the temperature of frozen nitrogen, all while doing my best to ignore a constant stream of angry sarcasm masquerading as “coaching” from a pair of old codgers on the sidelines. Apparently, they had nothing better to do that night than stand in the freezing wind and rain, smoke cigarettes, get lashed on whisky, and verbally abuse a teenager.

Anyhoo, I shipped seven goals, was roundly and loudly blamed for the drubbing by my teammates, and never set foot on a football pitch again.

But that did nothing to stop my love of the game; if anything, it may have made me an even more rabid fan. And while my first love will always be the greatest team ever to grace the Earth; 19-time English League Champions, 8-time FA Cup champions, 9-time League Cup Champions, 6-time European Champions, and 1-time FIFA World Club Champions, Liverpool Football Club, YNWA, the World Cup has always held a special place in my heart. Until now.

(As a side note, since Scotland rarely qualifies for the tournament due to our being–to use a technical term–a bit shit, I normally adopt another country, usually Spain. This year, I haven’t bothered)

You see, I can’t bring myself to get excited for a World Cup held mid-season that’s defined more by corruption, cruelty, and death than anything resembling the love of the beautiful game.

So, with some meager satisfaction, I note a subset of national teams getting creative in their protest efforts. We have the Danes and their shirt sponsors, Hummel, blanking out the national emblem and sponsor marks on their shirts, as they don’t wish to be seen endorsing a tainted tournament. We have the US national team using a rainbow logo at their training facilities to highlight the illegality of homosexuality in Qatar, and we have varied captains of European teams who’ve pledged to wear One Love armbands for similar reasons.

Unfortunately, that’s about it, as major World Cup sponsors are all conspicuous by their silence as they prioritize access to a massive global audience ahead of any discomfort they may feel over the circumstances of the tournament.

At least my fellow Scotsman and rabid football fan, Rod Stewart, turned down a $1m+ payday to perform at the World Cup. Good for you, Rod.

The President of FIFA, Gianni Infantino, claims we should leave everything else aside for the next month and focus on football, but it’s a bit late for that. FIFA should’ve focused on football when they awarded the tournament in 2010.

I just hope my excitement ramps back up for USA ‘26.

Volume 118: Of Airbnb & Franken-Ads.

November 10th, 2022

1. Of Airbnb & Franken-Ads.

tl;dr: Brands matter. Can’t believe I’m saying this. Again.

Sometimes, when you’re looking for something to write about, you get lucky, and more than one article of interest on the same topic happens simultaneously. Fortunately, this week happens to be one of those weeks.

First up, we have the CFO of Airbnb on a recent earnings call defending its switch to brand marketing. In case you’re unaware, at the onset of the pandemic a couple of years ago, Airbnb slashed all marketing spending, including hundreds of millions of dollars worth of performance marketing. It then monitored what happened next during this massively unanticipated A/B test, realized that, for Airbnb, there was very little performance in performance marketing, and decided to focus the vast majority of its efforts on brand marketing because this is driving results.

We also have a corresponding article focused on the “performance plateau,” backing up the example set by Airbnb, as it points out something I’ve witnessed again and again among firms that focus the majority of their attention on direct response efforts - namely that you reach a point of saturation, where results stall out, and businesses find themselves spending more money just to stand still.

What I find interesting relative to the mounting evidence that brand still matters is just how ubiquitous performance marketing has become in the marketing lexicon, how effectively software engineers have reshaped the marketing narrative to promote it, and how compromised this orthodoxy of modern digital marketing is.

Let the following sink in for a second, a major player in one of the largest consumer categories on earth needs its CFO to defend a focus on brand marketing on earnings calls. The implication is that the performance marketing propaganda machine has been so successful that investors assume it should be the primary marketing focus for everyone.

Here’s a quick summary of why this is wrong. Performance marketing doesn’t mean higher performance; it just means it’s paid for based on a measure of performance, like a click, rather than paying for placement. As a result, it’s become a catchall term for digital direct response advertising, where marketers seek to attribute sales to specific ads to maximize efficiency–via measures like ROI and ROAS.

In any market, only 5-10% of customers actively seek to purchase at any given moment. Because it requires direct association with a sale, performance marketing solely focuses on these buyers, but as a result, it suffers from three inherent conceits:

1. That we can find, target, and then persuade this 5-10% of people to buy our product at what might be a fleeting moment in time at what is often the end of their purchase journey.

2. That we will somehow be able to distinguish between those customers who wouldn’t otherwise buy from us from those who would; as Airbnb shows, there’s plenty of evidence that attribution models are wrong. Often, these are sales that would’ve happened anyway, but because someone clicked on an ad along the way, it gets attributed as the reason for the sale. This is why performance marketing has been criticized as a way of giving discounts to customers who would’ve bought from us anyway.

3. That we aren’t accidentally optimizing ourselves for the most price-sensitive buyers, who are often actively looking for the best deal, leaving us dependent on a constant cycle of discounting for business.

Here’s the thing, 93ish% of purchases are made with brands we’ve already heard of. This means that if we aren’t also building awareness and salience of our brands before someone is actively in the market, we reduce our available buyer pool, which leads to growth stalling.

Think of it like this. Performance marketing picks low-hanging fruit; brand marketing builds a stepladder to higher branches. Pick all the low-hanging fruit without also building a stepladder, and you’ll eventually run into problems. The only question is one of when not if.

Now, this is all becoming so obvious; the real question is, how did we get here?

Well, here goes. Marketing, and the subset that is advertising more specifically, has suffered for many years from the perception that it represents money wasted, or at the very least, allocated inefficiently. The Wanamaker dilemma, widely attributed to John Wanamaker a hundred years ago, states that “half my advertising is wasted; the problem is I don’t know which half.”

When digital became a thing over the past twenty years or so, engineering-led firms like Google, Facebook, and a gazillion other VC-subsidized ad and mar-tech companies jumped on the Wanamaker Dilemma as a business opportunity: If the world spends $780 billion or so on advertising and half is wasted, this means there’s $390bn worth that can be more efficiently allocated.

While the following might sound like an overgeneralization, it isn’t far from the truth: Software engineers have never had much interest in marketing because they don’t understand or respect it. Instead, they want to change it. Why? Because they view themselves as rational actors, uninfluenced by image-making, who buy based on rational, functional factors, and feel entirely driven to purchase the best product to meet their needs, irrespective of who it might be from. So they have, for the past 20 years, been on a mission to transform marketing in this image.

It’s also why Google, the world’s largest advertising company, does not self-identify as an advertising company. Instead, advertising is merely the slightly grubby monetization engine that enables Google engineers to do all the cool stuff they do. That’s a significant signal right there.

In practical terms, this has led us to a point where what was the tail of the marketing dog - direct response advertising, has become the dog.

Ultimately, the reason we are here has nothing to do with solving the Wanamaker dilemma because this approach to advertising is often more wasteful than what preceded it. Engineers didn’t understand or particularly care about how people make purchase decisions. Instead, they were busy pursuing a solution to an engineering problem of quantifying and tracking ads that say, “here’s a discount; buy my cookies.” An approach that had a ready ally in CFOs who already doubted marketing efficacy and received little pushback from marketers who’ve traditionally lacked commercial numeracy and political heft. And let’s face it, no marketer has been fired in the past twenty years for elevating direct response, performance, and programmatic activities above all else, irrespective of the value-destroying potential of taking it too far.

As an illustration, here’s an interesting stat. Look at any research on the subject, and it will tell you that creative quality is the number one factor in the effectiveness of any ad. Yet, when we buy online advertising, we’re pushed to spend 99% of our effort, and as much as 50% of our budget, on targeting and only a tiny fraction on the ad itself. Why? Put very simply, targeting is a solvable engineering problem, while creativity is not (Or at least, it hasn’t been up until now. Generative AI has the potential to shift this, so look for engineers getting religion on creative efficacy very soon).

So, what next?

Who knows how the future will unfold, but there are a few things I can think of. First, we’ll likely see a new understanding, where there’s a broader realization that brand marketing isn’t something that should have to be defended on an earnings call, especially as we shift from a focus on growth to profitability. (Arguably, brand marketing helps maintain pricing power, while performance marketing reduces it).

Second, I think we’re arriving at a point of realization that the performance plateau is real. For all its much-vaunted hype, the digital performance landscape can’t get you all the way to your destination. And that while it might give you a jump start in picking low-hanging fruit, eventually, you will need that step ladder to get to the higher branches.

Third, we’re going to see a whole generation of digital marketers seek to develop an understanding of brand-building as a means of up-skilling themselves, but because so many of them jumped from engineering to marketing after re-factoring marketing to look like engineering, it’ll be a struggle to get there.

And finally, as I alluded to above, look for engineers using AI to get religion on creative quality. But their interpretation isn’t making a whole lot of sense so far. They’re trying to turn something inherently qualitative into something quantitative. Pulling ads apart and testing all the elements separately and rationally before bringing them back together into a Franken-ad, which they’ll assure us will be the highest possible performing ad you can place. Only it won’t be because we’ve been here before. It was called “direct mail,” and it died off when response rates plunged below half a percent. So, far from the best creative in history, it’ll just be a mess, like junk mail still is. Get used to it; a precipitous drop in the cost of production due to generative AI means we’re going to see a lot more Franken-ads in the future.

2. Emperor, Meet Nudity.

tl;dr: Suppose I should mention this year’s Interbrand list.

If I had more time, I’d write about Crypto meeting its Lehman moment in what Bloomberg is calling “Cryptonite,” but I don’t.

Unfortunately, I’d already written this about Interbrand’s biggest monopolists, zzzzzzzzz, list, so I’m rolling with it (sorry, I just fell asleep thinking about it).

Anyway, the Interbrand Best Brands list, like all such valuation lists, is nonsensical, and we should all ignore it because it doesn’t make any sense.

To prove that it doesn’t make any sense, just look at the comparison to other brand valuation lists, which are defined more by their differences than their similarities. I mean, shit, the three lists can’t even agree on which brands should make up the top 10 or which are growing versus declining, let alone what they should be valued at, which consistently varies by tens of billions of dollars.

Emperor, meet Nudity.

If you think taking these numbers to your CFO will get you a gold star, then perhaps you should think again. More likely, they’ll laugh uproariously at your mockery of sound financial analysis.

Of course, the list itself is primarily a PR vehicle. And it’s my strong suspicion that all of these list-makers play the same trick: boosting the valuations of their clients (one of the reasons for the differences between lists) and using declining valuations as a burning platform to entice prospects they want to do business with into their ranks. Which, if true, is unethical, but I get it.

What’s most concerning, though, is when this stuff gets used to make forward-looking projections. If looking backward at the same data spits out such radically different results, then goodness only knows how inaccurate future predictions must be. Good luck, GE.

I can only liken using valuation methodologies as a forward-looking tool to phrenology conducted by drunkards in the dark with crayons and a Magic 8-ball.

But, then again, in these data-driven times, analytics theater conducted in the dark by drunkards with crayons and an 8-ball is often taken more seriously than thinking intelligently.

¯\_(ツ)_/¯

3. Challengers Gonna Challenge. Just Follow Through Next Time, Maybe.

tl;dr: Brewdog latest in a long line of too-small rejectionists.

Many moons ago, while still at college, I remember a professor discussing the Co-Op Banks’ position on not funding or financially supporting unethical practices globally. His point was that while this might be a noble goal, it was also a trivially easy case for the Co-Op Bank to make because it lacked the scale to be in the business of international development loans anyway.

It’s easy to promise not to do something you’re not in a position to do. Not that this should necessarily stop you, as it can be an effective challenger position to take (And the Co-Op Bank is still positioned this way 20+ years later).

This week, I was reminded of that when I saw the Brewdog World Cup “anti-sponsor” campaign/stunt. Sure, at first glance, it’s a little sand in the eye of what’s palpably the most corrupt World Cup in history. (Which is saying something considering just how utterly corrupt FIFA has proven to be over the years). But it’s also the case that Brewdog lacks the requisite scale to be a World Cup sponsor anyway. So, this way, they get to have their cake and eat it too. Well, almost.

You see, “cake and eat it too” is a funny thought when it comes to being a World Cup anti-sponsor because Brewdog has A—faced its own challenges as a reputedly toxic workplace and culture, and B–is still promoting the World Cup at all of its venues and still sells beer in Qatar.

So, while I can appreciate it as an exercise in attention-grabbing, perhaps a little follow-through on getting its own house in order might be in order.

Volume 117: Shake, Shake.

November 3rd, 2022

1. Shake, Shake.

tl;dr: Tough times are a time for levity, within reason.

Everything right now is a bit grim. We’ve got a war in Ukraine, the hammer of inflation, mortgage rates through the roof, political chaos, unchained energy prices, and the stock of big-tech monopolists tanking like it’s 2000.

In times like these, you’ll inevitably hear decision-makers at major corporations trotting out the cliche, “we don’t want to appear as if we’re tone-deaf.” This always struck me as weird, as if they’re more afraid of the appearance of tone deafness than actually being tone deaf, but whatever.

This is usually code for “put away the silly, the whimsical, the joyous, and the creative, and be all grown up and serious instead.” And this would be precisely the wrong thing to do. When people feel grim, the last thing they want is for the brands they do business with to make them feel even grimmer. They need some lightness instead, within reason.

This morning I drove my son to school. He’d missed the bus. He was up until the early hours last night doing homework; he was exhausted, and his mother has a cold, which made for a truly combustible combination. It was all a bit grim and could quickly have become even grimmer with a solid dose of sitting in the passenger seat, alone with your thoughts and personal recriminations.

So, what did I do? I could’ve lectured him about doing his homework on time and not arguing with his mother, but he already knows these things. So, I put Hair Nation on the radio, and we laughed the whole way to school. Why? Because they were playing Rattlesnake Shake by Skid Row, and the lyrics are so puerile and ridiculous that you can’t help but laugh out loud, especially if you happen to be a 15-year-old boy:

Shake, shake, shake it like a rattlesnake
Boom, boom baby out go the lights
Shake, shake, shake it like a rattlesnake
Staying up late doing the rattlesnake shake

As I drove home after, it struck me that, in contrast to this song, how serious everything is these days. Rattlesnake Shake was released in 1989, just as the Berlin Wall fell. A time of great optimism, where for the first time in almost 100 years, Europe was no longer threatened by war. It preceded the 1990s, which, in hindsight, looks to have been one of the most optimistic decades in history.

I’m no fan of nostalgia (it’s a fantasy we use to tell ourselves that the past was better than today when usually it wasn’t). Still, I can’t help but reflect that within an increasingly serious world, just how desperately serious we’ve become about something that doesn’t warrant it: Branding, marketing, and design are hardly life or death subjects. We’re not curing cancer here; we’re merely trying to move the merch.

And yet, as everything has become increasingly well-designed and professionally branded, it’s also become infinitely more serious, and the joy is being stripped away as a result.

This is why I love that Liquid Death, now valued at $700m, exists. It’s just completely daft. I mean, “murder your thirst” wouldn’t even have been written down had it been uttered in most brainstorms. And yet this brand is cutting through in possibly the most commoditized, challenging, and competitive category to be in - water. Why? Well, I reckon it’s because Liquid Death is the Rattlesnake Shake of drinks, and people quite like silly things, especially amid a sea of deeply serious alternatives.

So, as things look like they’ll get even grimmer over this coming winter, we might all look in the opposite direction. Toward fun and joy, and silliness, and whimsy, and things that don’t take themselves all that seriously at all. And, just perhaps, we might find that this is what people needed all along.

Shake, shake.

2. Make The Logo Bigger.

tl;dr: British Airways has new campaign. Most won’t notice.

Being even remotely connected to advertising Twitter offers a strange view into what can only be labeled a parallel universe.

Take, for example, the recently released brand campaign for the deeply troubled British Airways. I’d summarize as follows: Billboards with an array of clever copy presented via a singular formula that gets old almost immediately, a logo that’s probably too small, and yet another new BA tagline. Most of the poster is blank. And most people won’t even notice, let alone care.

Advertising Twitter, on the other hand, is losing its mind over the creative brilliance, the return of the power of advertising copy, and how this is revitalizing the BA brand and placing it back atop its pedestal.

Well, that’s bullshit.

British Airways has been in trouble for years. The customer experience appears to be in terminal decline, it hasn’t innovated nor invested in its customer in any meaningful way for a long time, and its terrible post-pandemic operational issues have truly trashed its goodwill.

You’re delusional if you think this is fixable with some cute advertising copy.

As a counterpoint, take a look at Delta in the US. Now, I know the market dynamics differ, but not by as much as you might think. Delta, too, has squared off against some tough price-driven competition, faced its own past financial struggles, and had to figure out post-pandemic operations. Yet, if I were choosing any US airline right now, I’d probably choose Delta. The planes are modern, mostly turn up and leave on time, the staff are friendly, the lounges are nice, and their app is the best in the business. This is how you put in the hard yards of revitalizing an airline brand, not by chucking a bunch of posters out there with “500 unique messages” on them.

To be fair to British Airways and its marketing team, I suspect they know this and are much less delusional than the talking heads on Twitter. Instead, they’re probably looking at this more through the lens of “something we can run with immediately to get our reputation out of the toilet” while more difficult decisions are being made elsewhere.

And this, I think, might be the lesson in all of this. Big brand campaigns often happen for one of two reasons - you’ve either innovated, and you want everyone to know and to give you credit, or your problems are so acute that a brand campaign is turned to as a last resort Band-Aid. You’re just hoping and praying it buys you the time to make the fixes you need.

In the case of BA, it’s the latter. Brand campaign from a position of weakness rather than strength.

Were I Easyjet, Ryanair, Virgin, or any other of the other myriad of competitors they have, I’d be licking my chops. This is not a well business, and it looks like an increasingly desperate brand.

3. Pantone Color of The Year: Black.

Tl:dr: Big tech moves. And an Adobe/Pantone spat.

Well, this has been a week in tech. Here are some quick hits because there were just too many interesting things to focus on just one:

Agent of chaos acquires Twitter, might get crushed financially.

Elon Musk finally completed the insanely chaotic acquisition of Twitter, immediately lost circa $30bn of his wealth on the deal, fired the executive team for “cause” to avoid paying severance (yet more chaos, he’s 100% going to lose when this winds its way through the courts, but he doesn’t care because it gave his fanboys something to crow over for five minutes) and then Tweeted out and then immediately deleted a widely debunked right-wing conspiracy theory, All on his first day. No matter whether you agree or disagree with the Musk brand of political chaos, retweeting a conspiracy theory was an incredibly dumb move when it comes to Twitter revenue, of which 90% comes from advertisers who’re desperate to be reassured that Twitter will be “brand safe” and not the dumpster fire this retweet suggests it’s going to be.

Nilay Patel wrote this great piece on the deal, which I’d summarize as follows: Does he deliver the free-speech-absolutism his most fervent supporters want, and in the process, completely tank the advertising business model and watch the majority of users uninterested in extremism slowly wither away? Or does he make Twitter a more consumer-friendly, advertiser-friendly experience and accept the inevitable personal backlash he’ll face from his fanboys? Sadly, I fear his ego is so fragile that he’ll choose the former.

I can’t predict the future, but I can say that the hubris of the Twitter deal puts Musk in a precarious position financially, even if he is currently the world’s richest person. Here’s the stack of cards waiting to fall. Twitter incinerated $30bn worth of his wealth and now represents a significant chunk of what he has left, he massively borrowed against his Tesla stock to buy it, and it has $13bn worth of debt that he almost certainly had to guarantee personally. It’s worth way less than he paid, hasn’t got the revenue to cover the debt payments (and with advertisers bailing, this number looks even worse. Hence the panic “fee” for a blue checkmark), and if Tesla stock slides, he’s going to have to sell to cover his obligations, which adds the double whammy of having to pay heavily in taxes. (Not to mention having to answer to shareholder lawsuits questioning the secondment of Tesla engineers to Twitter) And all this before we even get to the possibility of a Twitter competitor coming along to profit from the chaos. All told, there’s a non-trivial chance of Twitter going bankrupt, Tesla dropping in value, and Musk losing everything.

Zuckerberg gives investors the finger. Has given up on core platforms.

Meta stock plunged dramatically last week as investors continued to process the impact of Apple and TikTok on its advertising revenue. At the same time, Mark Zuckerberg demonstrated a complete disregard for their concerns by promising to double down on his speculative multi-billion dollar bet on the Metaverse. He can do this because his personal stockholding controls the company’s voting rights.

What’s interesting amid all the focus on Apple and TikTok is that Meta (and Twitter, to a much greater extent) aren’t solely facing an Apple and TikTok-shaped problem. What’s happening is far more interesting. Here’s a quick summation: Advertising is massive in Dollar terms, but it’s not a growth industry overall. As a % of GDP, it’s been pretty consistent for years. This means that in recent times, every dollar of digital advertising growth has also been a dollar of traditional advertising decline. (This is why traditional media corporations’ valuations collapsed at the same time the likes of Google and Meta grew exponentially)

Now digital advertising has become so big that the same thing is happening within it, which means that for the first time, we’re going to see digital winners and digital losers. Here’s why. Over the past few years, Amazon has built a multi-billion $$ advertising business, Walmart is now doing the same, Netflix is launching an advertising tier this week, Apple is rumored to be getting back into the game in a big way, and the likes of Uber and Doordash are turning to advertising in a desperate attempt to achieve profitability.

Any tech company with a big enough audience is introducing an advertising layer. This creates more supply, but without more demand, it will simply drop the price per ad and spread the revenue over more properties, thus reducing the available revenue to the likes of Meta, or Twitter. Because of its sheer scale, Meta will be a must-advertise for some time, and Zuckerberg is betting he can divert that advertising cash into creating the Metaverse, which will be even more valuable. For Twitter, however, this is likely yet another nail in its advertising coffin. Good luck, Elon.

Pantone color of the year? Black.

If we ever needed proof that Adobe and Pantone are not our friends, it was just announced that if you want to use Pantone Colors in Adobe products, even if the files themselves are 20 years old, you’ll have to pay an additional monthly fee for the privilege or have those colors rendered as black. This is just plain old greed, but it also illustrates that the SaaS business model isn’t anywhere near as customer-friendly as the tech industry would like you to think. Tech firms love SaaS because the stock market endows firms that rent, rather than sell, their software with a much higher valuation multiple. But, a challenge of always using the “latest version” of a piece of software is that you’re subject to the whims of the company making said software. So, if Pantone decides to shake down Adobe for revenue, it can pass this shakedown on to its customers. And customers don’t have a choice because Adobe is a monopolist, and after purchasing Figma, it’s increasingly hard to avoid using its tools. (Although, with Figma selling for $20bn, and Canva valued at $26bn, look for an explosion of VC-backed design tools over the next 12-24months).

This might be the first, but it won’t be the last time this happens. So don’t be surprised by more surprise squeezes from ingredients that live in the bowels of the platforms you use. The profit-challenged are now looking for any source of revenue in a storm.

Auto-generative spam.

Finally, we’re starting to see the first commercial application of AI-driven generative imagery, video, and text. Unfortunately, yet predictably, the VC world isn’t throwing its dollars at startups exploring the edges of what’s possible. Instead, they’re throwing bucketloads of money at content marketing automation. In other words, auto-generated spam is to be the first commercial application of the awesome potential of generative design. Sigh.

Volume 116: GoslingVue.

October 27th, 2022

1. Barbie’s Boyfriend’s Contact Lens Business Curiously Sells Band-Aids.

tl;dr: J&J unveils execrable Kenvue name & mediocre identity.

Oh, deary, deary me. How dire. I’ve talked before about how J&J is in the process of exploiting some fairly dubious legal practices pioneered by the private equity industry to insulate shareholders of its largest and fastest-growing business (pharma and medical devices) from the legal fallout of its talc debacle (in summary, J&J has reportedly known for decades that Johnson’s Baby Powder contains asbestos, a cancer-causing agent, which is potentially going to cost billions in class action lawsuits, so they’re trying to wriggle out by spinning off a new company to house the talc liabilities; one that declares instant bankruptcy upon creation).

As a further part of this process, it’s also about to spin out the entirety of its low-growth consumer products business that makes the likes of Tylenol, Band-Aid, and Listerine. This will have two intended impacts. First, it will remove the drag of the slow-growing consumer products business on the stock price, which should help the remaining J&J grow its market value faster. And second, it will create a further layer of legal protection relative to the talc debacle I just referenced.

While that was all announced a while ago, they’ve now revealed the name of the new company: Kenvue. That’s right; it sounds like a contact lens company founded by Ryan Gosling, Barbie’s perennially tanned and smiling boyfriend, only it doesn’t seem to include any of J&Js contact lens businesses, while it does sell Band-Aids and mouthwash. Weird.

Lippincott created this name (were I in their shoes, I’d want that kept quiet). It’s based on a colloquial Scottish ism “ken” as in “know,” allied with “Vue,” which phonetically references sight and has become a cliche in contact lens circles. I’m guessing it was sold as representative of the client’s “visionary intelligence,” which sounds seriously warm and fuzzy if you’re in charge of an unloved business getting the ceremonial boot, but unfortunately, does nothing to hide the fact that Kenvue is an atrociously bad name and deserves to be on every wall of shame. (Look, I’m Scottish, and even I think the rationalization of ken in this instance is daft).

To prove how much of a nightmare of a process this must have been, Wolff Olins was then tasked with the visual identity. Considering that Lippincott isn’t a standalone naming agency, this almost certainly means Lippincott was initially hired to do the name and the identity but screwed up the identity somehow, which led to J&J hiring Wolff Olins to swoop in and save the day. Presumably, as a fast-burn and high-pressure emergency project without much budget since all the time and money had already been used up. (I can tell you from experience that this is precisely how such projects happen).

This, at least, provides two reasons to excuse the identity itself for failing to pass the first cliche it stumbled upon; rounded forms equalling the consumer and hard edges, science. FML. Sigh.

Goodness knows what Lippincott’s work must’ve looked like if this got chosen. The type is weird, with a poorly matched combo of upper and lowercase, and the symbol looks like a giant ass exiting a doorway. I know it’s meant to be a sideways heart, but it looks like an ass. It’s also bizarre to put a heart of any kind onto a brand that’ll be sold through and competes with CVS, which already has a heart as a logo, just right side up, and a lot less ass-like. Ah well.

There’s zero conceptual cohesiveness going on here. I mean, it would take a heroic feat of rhetorical brilliance to explain how an ass exiting a doorway relates back to a business having visionary intelligence, not to mention the randomness of the consumer and science angle, but there you go. It’s hard to be conceptually consistent when you’re almost certainly panicking your way through a Fear and Loathing meets Squid Game of a process.

It would also be deeply unfair to blame Lippincott and Wolff Olins solely. The whole thing reeks of client politics, and the two-agency thing suggests chaos. And none of what I’ve mentioned even brings me to the stated purpose of “realizing the extraordinary power of everyday care,” which seems even further disconnected conceptually. I’m also guessing it’s aspirational, so please wake me when Kenvue does something extraordinary, as long as I’m not dead by then. Thanks.

Overall, this combo of a feces-grade name with a mediocre and cliched identity leaves you wondering two things: 1. What went wrong in the process that this was the result? And 2. Doesn’t anyone have any professional pride left anymore?

Finally, while it’s easy to dunk on agencies, as I have done here and as others have done to me, this particular job really does shine a harsh light on clients, who, while they might not be doing the work themselves, do create the conditions within which the work happens, and are responsible for the final outcome. I’d really love to know what went wrong here and to better understand why this ended up the way it did. Then we could devise a solution, so nobody need ever do a Kenvue ever again.

2. Timelessness. What a Sham of an Idea.

tl;dr: Timeless design just means suitably familiar.

Unfortunately, this week there isn’t all that much going on unless you include advertising agencies breaking out the recession playbook, talking heads crowing “told you so” over e-commerce struggles, and varied people attacking/defending Adidas over Kanye West. (If you’ve been living under a rock, Ye recently made anti-semitic comments that put corporate partners under pressure to cut ties. Yes, Adidas took too long to respond. No, it won’t cause irreparable brand harm).

Anyway, since all of the above are depressing, I figured I’d talk about timelessness in design instead.

Whenever you do identity work for a client, there’s almost always someone in the room who’ll look at the options on the table and decide that some are “too out there,” some “too trendy,” and one or two “timeless.” And whenever they say timeless, they really mean, “I like it. It’s familiar enough to make me feel comfortable and inoffensive enough that I won’t have to defend it.”

So, let’s decode timelessness for a second because often, it’s a trap we should be careful to avoid.

First, there’s no such thing as timelessness. Everything we do has roots in the time in which it was created or is reflective of a time to which it hearkens back. The easiest way to spot this is to look at our built environment. Walk around any major global city, and you’ll find a bunch of buildings that are hundreds of years old, plenty from the 20th century, and some that are bleeding-edge contemporary. Which of these buildings is timeless? None of them. Does it matter? Not one whit. How long will they be around? Hundreds of years, potentially.

I mention this last point because clients love the idea of timelessness because they’re desperately afraid of the work aging and needing a facelift at some future date. I get that, but if there’s one thing we should never do, it’s to second guess the future. We don’t know what the future holds and how tastes will change, so holding up an impossible criterion like timelessness ahead of much more important criteria like difference doesn’t make much sense. Plus, identities get tweaked for relevance all the time precisely because this fabled timelessness does not exist.

Furthermore, I find it hard to fathom the idea of timeless when it’s most often used to describe simple, reduced modernism. An aesthetic that didn’t exist until the mid-20th century. If the entirety of human history is around 200,000 years, how can something of such recency be timeless? Well, simply put, it can’t.

So, what’s really going on?

Well, I hinted at it earlier. When we say timeless, what we really mean is familiar, inoffensive, and bland. It stands up through time because there isn’t anything to like about it or loathe about it, so there’s nothing to age. In other words, timeless design is the Prozac of branding. It eliminates the highs and the lows, leaving us with middle-of-the-road instead. However, unlike a patient taking anti-depressants, where being middle-of-the-road is a desirable state, in branding, it is not. It just makes you generic and anonymous.

Genericism relative to brands and branding is like lighting your money on fire. If the visual identity has no defining characteristics, is un-noticable, won’t be remembered, and is hard to recognize amid a sea of same, it doesn’t matter how timeless it might be. It’s just bad.

So, what’s the alternative?

First, we need to encourage our clients not to have timelessness as a criterion for the reasons I mentioned above. Second, we need to better decode the visual tropes, trends, and patterns that already exist in the competitive visual landscape, specifically so we can recommend avoiding them. And finally, we need to focus on what it means to be different, to stand out, and to represent a conceptual idea that nobody else has.

If I had to put my finger on just one thing, it would be this: We should always push toward the progressive and the unfamiliar. To create something that will stand out, that will be different, that will be noticeable and noticed, and that will cut through the visual clutter because this is what matters. And as it ages, we’ll go in and fix it as we’ve always done.

Timelessness, by contrast, does not matter. It’s always been a sham. It just means old enough to be familiar, yet not so old as to seem old-fashioned.

3. Is Message Enough?

Tl:dr: Ruminating on proposals.

This one will be quick as I’ve been busy doing new business and writing proposals, which is never the most fun way to spend your week but is essential, nevertheless.

The fun aspect of new business is always listening to prospective clients outline their issues, concerns, and aspirations. Helping to diagnose problems and opportunities and uncover potential avenues for solutions is always a blast. However, it’s curious how often a prospective client lays out fundamental issues - perhaps a business model weakness, a sales channel that’s losing relevance, a brand that’s been serially underinvested in, or perhaps even a product problem, and then outlines their desired solution as…a message.

Now, don’t get me wrong, having a strong message is paramount in these ADHD times, where it’s hard to catch attention and be remembered for doing so, but I can’t help but question the validity of message as solution for every type of problem a brand might have.

Now, I have a fair idea of why this happens. Most often, it’s because the person I’m talking to sees the bigger issues, but they only have permission and authority over messaging. Occasionally, they genuinely think a new message is the solution, and sometimes I get the feeling it’s RFP boilerplate that nobody really thought that much about.

Now, where I’ve messed up in the past is in taking on such a project and delivering a strategy, positioning, idea, or whatever, that requires more than just a change in messaging to deliver. Now, if the client is expecting this and agrees, then it’s OK. But if they’re not, it can accidentally lead to recrimination. This can be especially shocking if you know a message isn’t enough to resolve the problem and thought you were providing a path to a better solution. However, years ago, I learned the hard way that a better solution doesn’t much matter if the client feels blindsided by something outwith their scope to deliver.

So, nowadays, I’m always careful in how I parse this. When the ask is for a differentiated message, and I see a deeper requirement for a differentiated offer, I lay these out as different options along a spectrum. So, for example, option one might be message-driven, option two might require some degree of broader change, and option three might require a great deal of non-messaging change. This way, pulses are being lowered, and we can have a deeper discussion on what the company has the appetite for and what it would take to deliver. All the sure knowledge that a message solution is covered.

Anyway, as I say, it’s a quickie. But I figured it might be useful for anyone facing a similar situation. When it comes to clients, “no surprises” should be every consultant’s mantra.

Volume 115: Re-Building Marketing For Profit, Not Growth?

 October 20th, 2022

1. Re-building Marketing For Profit, Not Growth?

tl;dr: Where next marketing, as priorities shift?

I have many concerns with brand valuation, most of which center on the fact that every methodology is essentially a game of Jazz Hands. No matter the fancy math, subjective scoring makes up the foundations, which leads to wildly differing outputs and huge error rates hidden in the small print. This is likely why Interbrand and Kantar BrandZ, both gold-standard methodologies, differ by as much as 13X in their valuations of the same brand, based on the same publicly available data (Specifically Visa in this case.) I could be catty and suggest that Visa must be a Kantar client (they value it at $191bn) and not an Interbrand one (they value it at $15bn) since client status appears to be the most significant factor in valuation theater. But I won’t.

However, another challenge implicit in brand valuation is that it’s tough to separate between the pricing power created by brand strength and the pricing power created by having a monopolistic position in your market. This is why I often joke that the Interbrand Best Brands list should really be called the Biggest Monopolists list.

Usually, this doesn’t much matter unless you’re a government regulator or the kind of executive likely to hire Interbrand or Kantar to value your brand, but in these times of high inflation and impending recession, it really matters.

I’m not well enough equipped as an economist to be anything other than dangerous in any discussion of inflation, but I have been observing an interesting phenomenon on earnings calls recently: CEOs excitedly discussing their ability to pass on large price increases to the consumer, which has markedly increased their profitability. (Fascinatingly, the CEOs of both Kroger and Albertsons have bragged on recent earnings calls about how their scale enables them to lift prices and profitability. Yet the same CEOs claim their planned merger to create a grocery behemoth won’t lift consumer prices. Hmmm, is that because it’s true or because it’s illegal to admit that a market-consolidating merger will lead to higher prices? You decide for yourself, but I know what years of merger data says)

Here’s the question, though. As we approach a 100% chance of recession next year, how much pricing power in tough times will be due to brand strength driven by marketing activities, and how much will be due to monopolistic effects driven by market consolidation? A question that really matters if you’re in the branding and/or marketing business.

Over the past dozen or so years, money was essentially free, with interest rates sitting at zero in most countries and negative in some. As a result, capital flowed like water in search of a return. This put unprecedented emphasis on growth over profits because when money is free, markets deem profitability unnecessary, thus turning growth into the primary driver of company valuation (in other words, the faster and bigger you grew, the more valuable your company became, and the more likely investors, especially early investors, would make bank)

This had a direct knock-on effect on brands, branding, and marketing of all stripes. Rather than viewing marketing, branding, etc., as a vehicle for creating profits by establishing and maintaining a price premium, the business world pivoted toward growth, which happened to coincide with the digital transformation of marketing, which leaned heavily into this focus to drive a wedge between what the ad-tech industry labeled “traditional” versus “digital” marketing (A false distinction created solely to peddle ad-tech and mar-tech products.)

As a result, we saw a huge rise in programmatic price promotion-driven advertising activities, rather cutely labeled “performance marketing” (it’s called this because you pay for it based on a measure of performance, like a click, not because it performs more highly than any other form of advertising. But, holy shit, it’s a masterclass in how a name can drive perceptions.)

This led to a whole new focus on efficiency-driven advertising metrics like ROI, CAC, ROAS, etc. (excellent piece on the dubious value of ROAS here)

It also had a significant impact on pricing. If the overall economy is only growing at 2-3%, how will you achieve excess growth rates over enough quarters to spike your company valuation into the stratosphere? Well, put simply, price. If you vastly undercut on price because you’re subsidized by free money, it’s the single most guaranteed driver of growth. It’s why Uber, for years, undercut the pricing of taxi firms. Yes, it’s more convenient, and it’s a well-put-together digital product and suchlike, but the growth of Uber was because it was cheap. So cheap that for every ride taken, Uber, to this day, still loses money. That’s right, as Uber grew its business, it never made a cent in profit; it just radically scaled its losses. (This is why Uber today has become expensive and why it’s adding as many ad products as possible in a desperate attempt to achieve profitability, as the fantasy fiction of its financial reporting ain’t cutting it with the markets anymore)

So, how do you shift entire businesses from a focus on efficient customer acquisition for growth to a focus on profitability? Well, think of the analogy of turning a supertanker and apply it to the universe of branding, marketing, and business models. Everything built over the past twelve years, all these metrics, and a vast swathe of the digital marketing landscape is focused on efficiently acquiring customers rather than profit maximization, even as the business landscape has turned 180 degrees. None of the above metrics, for example, even touch on the ability to command a price premium, achieve excess margins, or anything that helps put more money into the company coffers. Instead, the focus has narrowed to how cheaply marketing activities add new customers, often via a discount. (Not to mention that a blinkered focus on efficiency also hinders growth as you fail to invest in more costly to acquire customers).

As we move forward, it will be particularly interesting to see how this plays out. Growth-driven companies that price extremely low–often below cost–and where the entire marketing infrastructure has been built to acquire customers cheaply, often by utilizing further discounting, are likely to be in exceptionally deep trouble.

When the advertising world rolls out the recession playbook, the primary message is always “don’t stop spending on ads.” And, even though this is self-serving on their part, there’s some truth in this. If you can afford to, you shouldn’t stop spending because we know the brands that maintain or even increase their share of voice tend to accelerate out of recessions more quickly than their peers. However, the difference between our upcoming recession and previous recessions is that we’re also shifting from a world of free money to a world where money is costly, which puts a premium not only on maintaining share of voice but also on maintaining prices because we no longer have access to ultra-cheap debt or the increasingly shallow pockets of Softbank.

So, this time, the recession playbook shouldn’t just be “don’t stop spending on ads,” but also “retain brand strength to maintain pricing power” and “don’t fall into the trap of discounting to drive sales unless you have absolutely, positively, no other option.”

Here’s why. Discounting has a compounding effect. If you sell a product for one dollar and make a 10% profit, you make 10c per sale. If you discount that product by 10%, your profits don’t go down by 10%; they go down by 100% to zero. Your 10% discount on the sale price completely wiped out your profits because your costs stayed the same.

So, while we see CEOs being bullish on their ability to raise prices and increase profits today, the question remains about what happens tomorrow and which firms will be able to stick out a recession due to monopolistic power compared to those that will do so through brand strength.

Retail looks to have built up much excess inventory that will have to move eventually. Due to chip shortages, the automotive industry has been piling up cars it can’t sell. Ford alone sits on almost 50,000 vehicles it will need to sell. The previously red-hot DTC landscape looks distinctly chilly, as their entire go-to-market approach is deemed value destructive due to a structural lack of profits. Commercial office properties face a $1.1trn obsolescence challenge. And there’s an increasingly alarming number of zombie companies where revenues can no longer cover the rising cost of debt.

So, who will be the winners? Well, monopolists will do just fine. They’re likely to keep prices high, maintain profits, and then go bargain-hunting for less fortunate peers, thus creating a game of whack-a-mole for the FTC. Equally, well-run corporations with strong brands and a marketing infrastructure built for more than just efficiency will be OK. And the PE firms that built up vast stores of capital in the boom times will do just fine, as they snap up publicly traded bargains and take them private, likely rolling up DTC players, in a similar way that Durational Capital attempted with Casper.

For everyone else? Well, buckle up because the literal foundations of how marketing has been practiced over the past 12 years is about to change as profits are in and growth is out.

“May you live in interesting times” is an old Chinese proverb/curse. Well, we’ve got some interesting times ahead, that’s for sure.

2. Generational Nonsense.

tl;dr: Why is this even still a thing?

In a recent Morning Consult poll of the most popular brands among Gen Z, we saw two things:

1. The whole “Gen Z only wants to buy brands with a social or environmental purpose” thing now looks like the utter bullshit it always was. Number one on the list is Instagram, and number nine, Shein. This alone should tell you all you need to know; Instagram has been found legally culpable in teen suicide and is owned by the least ethical corporation on earth, while Shein is an environmental catastrophe credibly accused of using forced labor.

2. Of the ten, nine were apps or social platforms, and one was an extremely cheap fast fashion retailer. What do they all have in common? They’re either free or almost free. What do members of Gen Z have in common? Because of their stage of life (not unique to them as a generational cohort), members of Gen Z don’t have much money. In fact, of all the generational cohorts, Gen Z has by far the lowest income.

This brings me to two thoughts. First, and I’ve written about this before: generational segmentation should disappear and die already. There’s zero empirical evidence to support a fantastical idea that someone’s date of manufacture somehow dictates their purchase choices for life. All you need to support this are the following:

1. The people who literally wrote the book on generations utilized an appallingly bad methodology. In 2009, the Chronicle of Education described one of their more popular books “Millennials Rising” as a “hodgepodge of anecdotes, statistics, and pop-culture references” based on surveys of approximately 600 high-school seniors from Fairfax County, Virginia, an affluent suburb of Washington DC with a median household income twice that of the national average. In other words, everything you’ve ever read about Millennials was stereotyped nonsense based on a few interviews with a narrow band of high school kids from a wealthy American suburb.

2. The anecdotal Internet meme of King Charles and Ozzy Osbourne, both 73-year-old English men, isn’t wrong. Generationalists would claim many shared characteristics; a simple glance tells you otherwise. If you want data to prove it, BBH did the work and found that reading the same newspaper indicates group cohesion more than people with a shared date of manufacture.

And yet, marketers fetishize youth and treat Gen Z (and Millennials before them) as if they’re the only thing that matters, which is a bit weird in these so-called data-driven times. If we solely stick to a generational focus, you’d think Gen X, which has more than double the spending power of Gen Z, might matter more, or Boomers, who hold over 50% of the entire wealth in the country (in wealth terms, Gen Z isn’t even a blip on the radar).

You might have seen a report touting the $360bn disposable income “Gen Z opportunity.” Well, there are about 68m members of this cohort in the US, so $360bn averages to roughly $5k per person. I’m not saying that’s nothing, but it’s not a lot in relative terms.

Let me provide a real-world example to prove how odd this all ends up becoming and how intellectually dishonest stereotyping people based on age really is. Last year, I was asked to help pitch for the re-brand of a global hotel brand. Its average nightly price per room would wipe out the entirety of that $5000 in disposable income in about two weeks. In the brief, they used a nonsense McKinsey statistic on Gen Z spending power to support an intent to re-brand with a sole focus on the Gen Z consumer (I went down the rabbit hole, the original source was a subjective estimate by a small regional insurance company. Yeah, that’s right, those paragons of data at McKinsey were quoting a number with zero basis in fact. Why? Probably because it’s easier to sell consulting services if you tell people what they want to hear. Hmmm, shit. That must make me a bad consultant. Ah, well. I’d rather tell the truth).

It just made no sense. First, very little connects people born at the same time. Second, it’s frankly degrading to stereotype millions of people in this way, and third, only a tiny fraction of them could afford that hotel anyway. There’s no way they’d have landed there with even a cursory economic analysis, and the commercial implications are potentially stark. If it were possible to land a perfect “GenZ re-brand,” the most likely outcome for this hotel chain would be massive discounting to get closer to something the cohort could afford, not because they’re a unique generation, but because their stage of life means they don’t have any money.

Now, this was a pitch I was not on the winning team for. I’m OK with that. I knew we wouldn’t win it within about 30s of getting on the call. For years, pitches have moved from the BS dog and pony show of “impress me with your brilliance” toward a more two-way “let’s discuss the problem together and see if we click.” So, I knew we were toast when I started by asking questions only to receive a brick wall of “you tell me” responses. I detest the “impress me” rather than the “help me figure this out” mindset. But, to be honest, why should I have been surprised? If the entire basis of the job was so nonsensical as to fail a basic test of commercial competence, what else should we expect?

Anyway, an old pitch isn’t what inspired me to talk about this again. That was someone on LinkedIn saying, “Gen Z is a generation of contradictions.” Well, that’s about the only true thing that’s ever been said about Gen Z. You know why? Because every generation is a generation of contradictions. It’s the lone thing that binds everyone with a shared date of manufacture.

3. Fun With Packaging.

Tl:dr: Finally, a sense of humor in the branding business.

I’ve written before that the future of branding will come from consumer packaging as the digital world slides ever deeper into the mind-numbing boringness of the engineer-driven hole it finds itself in.

Where CPG/FMCG branding used to be universally awful, today, it represents a rare bright spot, even if it’s often selling things that aren’t very good for us.

Recently, in addition to representing the most diverse version of the branding arts, I’ve also found this world to have a new-found sense of humor, thank goodness. Here’s a quickie with a couple of examples I stumbled across.

I’d love it if we could find it in ourselves to be a little less serious, a little less precious, and a lot more fun and whimsical. I suspect many consumers would agree.

Volume 114: Climate Tech Needs to Find its Awesome.

October 13th, 2022

1. Climate Tech Needs to Find its Awesome.

Tl:dr: Inertia is the toughest competitor. “Education” won’t work

Last week I stumbled upon this Bloomberg article describing the challenge of getting Americans to choose electric vehicles. Specifically, the disconnect between people’s range expectations and actual car usage. Put simply, 300 miles is the magic number for range, but 95% of the time, we aren’t going further than 30.

What’s interesting is the inherent conceit in the article that we’re “entering the education phase of electrification” and that through little more than telling people how they really use their cars, expectations will magically change, and adoption will surge—reinforced mightily in the social media comments, where people roundly bemoan the idiocy/selfishness of the consumer.

Based on many years of experience, I can safely say this is more than a little naive. It’s rare in the extreme that telling people off under the guise of “education” makes much, if any, dent in behavior. The truth is that we don’t live in a rational and objective world. We live in an irrational and emotional one. So instead of a lecture, what we need is for climate tech to find its inner awesome.

Everything is relative. Three hundred miles of range already represents a compromise in the minds of many consumers. Heck, my beat-up old Ford Explorer tells me it’ll do almost 350 miles on a single fill.

This begs a strategic question of what has to be true for people to accept a lower-range electric vehicle. Here are some thoughts:

1. A really cheap EV will be awesome.
   A lower-range car needs to be considerably cheaper than a higher-range one because a lower-range/smaller battery psychologically represents a lesser value proposition than a higher-range/larger battery. In a similar way that horsepower in a gasoline car represented the value path, battery capacity seems to be the same in electric (for now).

2. Ubiquitous charging will be awesome.
   A huge reason we think we need so much range has nothing to do with the car itself and everything to do with a (perhaps irrational) fear of being stuck in the middle of nowhere without a charger. In other words, range anxiety is directly connected to the charging infrastructure or lack of it. Until we see highly visible and ubiquitous public charging, range anxiety isn’t going away.

3. Super fast charging will be awesome
   With very few exceptions (anything made by Hyundai, Kia, or Genesis, cough, cough), electric cars are slow to change, which is a particular problem in a lower-range vehicle that needs to be charged more often. However, the problem goes away when charging speeds can be dropped significantly.

4. New battery chemistries will be awesome
   OK, this is a trick bullet point, but range anxiety goes away the moment new battery chemistries change the cost equation. If manufacturers had batteries that were half the price for twice the range, they’d use it. Six hundred miles of range is a compelling proposition if your competition only offers 300 for the same price.

5. Making it fun and cool will be awesome
   This might sound a little pat as an answer, but another way to make a low-range car attractive is to deliberately set out to make it the funnest, coolest car out there. And to get over the whole charging thing by creating an experience where charging this car is so entertaining that it’s something you can’t wait to go do. It might sound weird, but it wouldn’t be the first time a compromise was turned into a differentiator.

Here’s the most important thing. As any marketer knows, inertia is the most formidable competitor.

In relative terms, it’s much easier to persuade a consumer to switch from one brand of product to another than to have them adopt a new category of product in the first place - especially if that new product is perceived to be lesser in some way. That’s why things like Tesla, Uber, and the iPhone had first to demonstrate something new and awesome that hadn’t been seen before. Something to drive the irrational desire of the heart rather than the logical demands of the head.

This is why the emerging field of climate tech so desperately needs to embrace a consumerized mindset. It faces a huge uphill battle against inertia, not just for acceptance but for desire. It isn’t enough to say EVs are better for the planet - you need to demonstrate how it’s a better, cooler, more futuristic car (The instant torque from an electric motor, for example, is a showstopper compared to an internal combustion engine in the acceleration stakes, which is why “Ludicrous Mode” from Tesla is a branding masterclass).

Of course, this isn’t solely limited to EVs. We also need to think emotionally about why a heat pump can be superior to other forms of home heating and cooling. Or why solar and battery backup is better than a home generator. (Hint…silence) Or why eating kelp is better than eating a steak (good luck with that one, but I’m fascinated by how we get people to embrace new foodstuffs as climate change begins to dictate the foods our calories will come from).

This is the real battle line that’s coming. Not to lecture people on why they should accept compromises they’re unwilling to make because it’s better for the planet. Down that path lies nothing but niche status, no matter how much you or I may wish it to be true.

No, for the kind of mass, society-wide adoption the planet needs (when I say planet, I really mean us. We’re not killing the planet, we’re killing ourselves. The planet will still be here long after human beings have roasted themselves into oblivion), we’re going to need better, more awesome products attached to cooler brands.

We need to get to a situation where we’re not making psychological compromises for the earth’s sake but where we feel exhilarated that we’ve got something newer and better and more awesome and, oh, bonus…it just happens to be better for the planet/humanity. 

2. Find Your Edges.

tl;dr: Hopefully, adding clarity to the specialist/generalist debate.

At last week’s Brand New Conference, I made a passing reference to “things and the edges of things” and figured it was worth doing a follow-up for two reasons. First, I think it’s a great construct through which we can look at ourselves, especially those near the beginning of their careers. And second, I think it might help bring additional clarity to the increasingly tired generalists versus specialists debate that’s been ongoing in marketing land for seemingly…forever.

Many years ago, while undertaking an MBA at Lancaster University, I met Prof. Vudayagi Balasubramanyam (“Baloo”), an economics professor. Aside from being gracious–and patient–enough to teach basic economics to the economically illiterate, Baloo was also singularly open. Delighted to spend time with students in his office, at lunch, or simply in the corridor between classes. Something I loved because he was such a fount of knowledge and insight.

During one such spontaneous conversation, I remember him talking to a few folks who’d come to the MBA from very different backgrounds. One an engineer, another a lawyer, another from a non-profit. I think they were feeling a bit of imposter syndrome, which he overcame with his observation that there are things and edges of things and that interesting stuff always happens at the edge. Here’s how I interpret this.

First, we all have some area of core skills, competence, domain expertise, or whatever we want to call it. This is your thing. Many other people are likely similarly experienced and educated in that same thing. You can forge a decent career headed directly down the middle of your thing, but going straight down the middle isn’t very interesting. What’s interesting is that as you move out from the middle, you start to encounter edges that intersect with other things. So, for my MBA peers, Baloo was pointing out that being a lawyer is fine, and being a business school graduate is fine, but something much more interesting likely exists at the edge of law and business.

Branding is my thing, and I have two distinct edges I’ve developed. The first is business strategy. So, while I’d never describe myself as a management consultant, I can connect the worlds of branding and business strategy in a way that others can’t. My other edge is design. Again, while I’d never describe myself as a designer, I’m well enough versed to connect the dots, so I can make connections from business strategy to design via branding and brand strategy. My core “thing” of branding is fine, but many people can do that. What makes me interesting happens when you want to connect business strategy, branding, and design into something more than it might be otherwise, especially for those companies undergoing some form of transformation. And I’ve realized over the years that I’m pretty good at this in a way that others aren’t, with an ability to be the universal translator between the three. Now, my being better at this than others isn’t because I’m inherently smarter or more experienced or such, but because I’ve chosen to develop edges that others have not.

I also understand edges that I don’t have. For example, I don’t have an edge in contemporary culture; I don’t have my finger on the pulse of what it takes to be cool in the moment. And while I appreciate people who do, it isn’t for me. So, why describe an edge that I don’t have? Well, just to observe that if you find yourself needing an edge you don’t have, it starts to dictate what a team might look like. For as many edges as we may cultivate for ourselves as individuals, teams allow us to have more. And the more edges we have, the more interesting we collectively become.

This is one of the reasons I find groupthink so frustrating. Put a bunch of people in a room who go straight down the middle of the same thing, and they’ll all come up with the same ideas, usually tired ones. What a waste when we could have had a vastly more interesting conversation by including people with an array of weird and wonderful edges instead.

I have two edges, and I’m trying to develop a third in climate tech (or whatever this ultimately gets called). I want to develop this edge for two reasons. First, the most valuable thing we can apply our image-making talents to is the mass consumerization and adoption of new technologies, behaviors, and products that help mitigate the impact of climate change. Second, I believe investment growth in this economic sector will likely make it a vibrant and lucrative place to play. (Like many of you, I, too, have a mortgage to pay for).

So, why mention this relative to people at the beginning of their careers? Right now, you’re probably still grappling with how to both find your thing and become an expert in it. That’s good. You should pursue this. But, the more open you are to finding your edges, the more interesting your career is likely to be. And with the speed at which change happens, your edges are likely to be the things that help you stand out as you navigate a world where an unprecedented array of job titles have yet to be invented.

Here’s an example. After the conference, I met a young copywriter. As we chatted, I suggested she learn more about screenwriting because it might represent an interesting edge. Screenwriters write backstories for their characters, deal in narrative arcs, and want to understand how a character will react to a given situation. For example, will the character be rational or emotional, happy or sad, lonely and introspective, or bubbly and exuberant? I don’t know where this exploration might ultimately take a copywriter, but there’s a clear overlap between screenwriting techniques and brand voice, which means your ability to write good copy will likely be enhanced by exploring the edges of other forms of writing, like screenwriting.

I could finish with a cliche of your gaining an edge by finding your edges, but I won’t. Instead, I’d encourage you to have the curiosity to explore the edges of your field of expertise, embrace others who have interesting edges of their own, and use this to seek more interesting directions than straight down the middle.

3. More Than One Thing Can Be True at the Same Time.

tl;dr: Sigh. Why does modern dialog always have to be binary?

Most people don’t pay attention to internecine warfare in the landscape of marketing ideas. I wish I didn’t feel like I had to. It’s like having teeth pulled with a blunt spoon and no anesthesia watching smart people castigate each other for having different ideas about things they tend to broadly agree on.

It’s become so bad that Mark Ritson has seen fit to name this phenomenon “bothism.” It’s a daft term for a daft situation that we shouldn’t have to find ourselves in. It shouldn’t be so hard for us, as smart, intelligent adults, to accept that two things can be true at the same time and that more than one thing can matter at the same time. Unfortunately, we live in a moment in history where algorithms amplify outrage and disagreement while simultaneously deprecating quiet head nods. So outrage and disagreement are exactly what we provide the algorithmic gods as we seek our daily, weekly, or monthly fix of likes, comments, and re-shares. (Frankly, I’m as guilty of this as the next person). It’s a little sad when you realize your public persona has been shaped by an attention algorithm, like a hamster learning that it’ll get cheese if it runs on its wheel.

Anyway, while marketing academics are busy hammering each other, Mr. Ritson has pointed out the blindingly obvious. You’re both right, and you’re both wrong, and so now it’s up to everyone else to figure out what that means.

To summarize for those whose eyes have glazed over, the battle lines are as follows. One side says differentiation matters a lot; the other says it doesn’t matter at all. The reality is likely somewhere in the middle. One side says salience matters a lot, and the other that it doesn’t matter so much. The reality is likely somewhere in the middle. One side says distinctiveness matters a lot. The other reckons it isn’t such big a deal. The reality, guess what is likely somewhere in the middle.

It really shouldn’t be this hard. And on this issue, I’m with Mr. Ritson. I just wish this nonsense wasn’t so prevalent he felt the need to name it.

Volume 113: How Not to Be Replaced by an Algorithm

October 6th, 2022

Apologies for the late delivery and shortened format this week. I was down in Austin talking at the Brand New Conference, which made me a little distracted on the writing front.

Anti-Ultraboring. How Not to Be Replaced by an Algorithm.

Hey. For anyone who wasn’t there, I spent the past few days in Austin with the exceedingly lovely Bryony Gomez-Palacio, Armin Vit, 1,000 attendees, and fellow speakers at the Brand New Conference 2022, a design conference focused on branding, where I had the distinct pressure of being the only non-designer on stage.

Rather than re-hash past work, I decided to focus on the thing that strategy exclusively deals with—the future. Specifically, what a future might look like upon the advent of AI-enabled design tools.

I’m not sure if the webcast was recorded for future posterity. I’ll reach out and see if there’s a way to share. Until then, here are the slides and the very detailed speaker notes I wrote for myself. I went off-piste a few times, but the content is pretty close. Imagine the slides on a 30-foot by 20-foot screen. Think of it as Off Kilter if it were live and on stage.

What isn’t in the article is that my Apple Watch buzzed violently and lit up with bright red alarms just minutes before going on stage. My heart rate was elevated…I already knew that Apple. You’re not helping.

And, for anyone doing public speaking. While it’s more common to make simpler notes to remind yourself of what to say on stage, if you’re feeling incredibly nervous like I was, writing everything out in full is a great way to help internalize it for later. Had I the time, I’d have shortened the notes afterward, but since I finished writing these about 2hrs before go-time, I couldn’t do that. The good news is that because I didn’t have time to edit, you’re way more likely to follow what I was trying to say now.

Volume 112: Be Big, Be Special.

September 22nd, 2022

1. Be Big, Be Special.

Tl:dr: A cack-handed attempt at explaining brand effects.

“You’re not big, and you’re not special” is an old put-down said to people who do particularly idiotic things. Well, turns out that when it comes to brands, big and special is exactly what we’re gunning for.

When I started this business, I was a voracious reader of all things brand. I read about strategy, design, identity, advertising—all of it. I inhaled the likes of Aaker, Kapferer, and Kotler. And I dallied briefly with snake oil sellers like Godin, purple cows and all.

And then, after a while, I stopped. The books were boring and repetitive. Too much of what I was reading was rooted in the world of CPG/FMCG rather than building brands for corporations where you don’t represent a product but a culture and system of human endeavor. And, way too often, what I was reading about and what I was experiencing in practice were profoundly disconnected (Notably, I remember reading about GE as a superlative example of a master brand, even as I was working with GE to help fix its terribly atomized reality.)

Eventually, I concluded that while much hot air was expended on the topic of brands and branding, there wasn’t much worth paying attention to.

And then, the internet changed everything. Well, not really. But the rise of digital did lead to a much more robust and analytical look at how brands work, what makes them tick, and how they help drive growth. And as much as the theoretical postulations of Aaker, Kapferer, and Kotler had faded in my memory, a new generation of thinking from the likes of Sharp, Ritson, Binet & Field, et al. captured my attention as they blended old and new and empirically researched concepts into what might loosely be labeled a modern unifying theory of brand. However, as fun as this has been, the challenge is that it’s all a bit complex to share with your average client, especially those that aren’t brand geeks like I am. Unless you’re talking to fellow geeks, the moment you bust out terms like salience, reach, memory structures, mental and physical availability, penetration, positioning, brand spend, activation spend, distinctive assets, attention, share of search, ESOV, etc., you may as well turn out the lights because your audience has long ago fallen asleep.

So, while it may be viewed as heresy by the puritanical wing of the marketing science community, there remains a need to explain this stuff more simply for people who don’t live and breathe it every day.

Here’s how I simplify when talking to clients, especially non-marketers.

If you look at the positive effects brands have on business - purchase preference, price premium, etc., you can boil these effects down to how big you are and how special, which you can conceptually plot onto a chart (hey, I’m a consultant. There’s nothing we love more than a whiteboard and an erasable marker so we can draw charts)

The biggest benefit comes from being big - brand scale gives you more awareness, reach, preference, and availability. It also tends to increase trust, as trust generally goes up as you become better known. (assuming you haven’t done anything terrible.)

However, not all brands are big. Some don’t want to be. Some never will be. Some aren’t there yet. Here, we find that being special is what brings a benefit. Successful smaller, more niche brands typically have something special that helps them stand out. (Note, we could talk about differentiation, distinctiveness, innovation, purpose, positioning, etc., here, but then we quickly run slap-bang into the “too complicated” bucket. Special, as broad and as vague as the term may appear, is much easier to digest).

Often, with very young brands, being perceived as special is a lead-in toward scale, where being special for someone rather than not special for anyone is key to growth. (This closely mirrors a “wedge” product strategy for anyone focused on startup culture.)

Typically, this ephemeral specialness declines as businesses grow and brands expand in both scale and scope. The larger the potential audience, the broader the surface area of the brand, the bigger the business, and the more management focuses on efficiency, the harder it is to be special. By definition, the natural forces of scale tend to make brands blander, more generic, less innovative, more broadly defined, and thus harder to connect with at any more than a surface level. For many brands, this isn’t a detriment. I don’t want Cascade to be something I feel emotionally drawn to; I want it to be a mental shortcut to clean dishes. However, just because maintaining specialness is difficult doesn’t make it impossible. Notable exceptions are Apple and Disney. One of the management strengths of both has been the ability to sustain the perceived “specialness” of their brands, even while operating at massive scale, enabling both to drive volume at a meaningful price premium.

While smaller brands often look toward what makes them special as a stepping stone toward greater scale, we see the reverse from large brands that already have the scale and now seek greater specialness.

Just recently, I’ve been working with a large market-leading brand. Looking at its vast reams of research, it has all the benefits of scale. Simply put, the top of its funnel is wider and captures more potential opportunity than competitor peers. However, what’s interesting is that while it outperforms at the top of the funnel, it underperforms on the way through. For some reason or another, this brand wastes a greater percentage of potential sales than its peers, which means something not special is happening in the experience.

Now, I’m not going to get into how we’re addressing that problem here other than to say it’s a problem of not being special enough to enough of the right people. But the point is that when we boil things down to questions of how big your brand is and how special people perceive it to be, it opens up a richness of conversation that’s useful to have.

Brand scale is often a factor of how large your business is, how much and how well you spend your advertising budgets, how well you manage distribution and access, and the level of resources you throw at PR. Specialness is often a factor of your value proposition, how distinctive your experience is, how innovative and desirable your products are, how hard they are to substitute, and how well you engage people through creativity and storytelling.

In sum, it’s not just size or specialness that matters; it’s the interplay of both.

Oh, and as a final aside. While you can be incredibly successful by being big and not special, your chances of success if you’re small and not special are slim. This is why for very young brands, unless you have gazillions of VC dollars behind you, you should start by focusing on what makes you special to your customers before considering how to drive toward scale.

2. Patagonia Raises The Bar On Purpose.

tl;dr: Even at 83, Yvon Chouinard continues to carve his own path.

I believe deeply that business has a duty of care to the world it exists within. It should pay decent wages, it should pay taxes, it should be run with long-term value in mind (not just quarterly results), and it shouldn’t take shortcuts that potentially kill people and the planet.

I’m not alone. It’s a huge reason why the concept of purpose in business has taken on a life of its own in recent years. And, for years, Patagonia has been held up as a paragon of purpose. With good reason. It’s a great brand. It makes great products. It’s been consistently daring in its iconoclasm. It does a lot of good things (assuming we look past the fact that it’s de-facto extractive purely because of the business it’s in), And it makes VCs feel good to wear its badge on their chest.

And now, in an ultimate act of purpose, it’s been given away to a charitable organization where “the earth will be its only shareholder.” Thereby raising the stakes on purpose and demonstrating the gulf between the truly purposeful and those for whom it primarily exists as an advertising tactic.

Across all of my experience, it’s been easy to spot the difference between a company spouting “brand purpose” nonsense versus a truly purposeful company. The former like to think they can use purpose as a “pathway to profit,” primarily through schmaltzy social cause “purposevertising” that typically has little or nothing to do with their core business. In contrast, the latter use purpose to sacrifice what they view as harmful profits entirely in support of their core business. And now, Patagonia’s profits will be used exclusively to support environmental causes. (As an aside, the made-up controversy over Yvon Chouinard and his family avoiding taxes on the deal is nonsense. Just because someone believes deeply in the environment doesn’t mean they can’t benefit from the same tax loopholes other billionaires shouldn’t have access to either.)

So bravo, Yvon Chouinard. You stuck to your rebellious ways to the end. You carved a unique path for yourself and your corporation. And you’ve mightily raised the bar for others. Over to you, Unilever.

3. Buckle Up.

tl;dr: Economic signals look grim.

I’m no economist, but I did study it at university and have a passable understanding of the subject. And, while it’s an old joke that if you asked 20 economists a yes or no question, you’d get 20 different answers, there’s currently a frighteningly high degree of consensus that the future ain’t looking pretty.

Inflation has been on everyone’s lips in 2022 as Covid-fueled supply chain disruptions, changes in consumption patterns, global financial stimulus, a war in Ukraine, and climate change have all made themselves felt.

This has led to a cost of living crisis around the world. And while there are a bunch of concerning signals, consumer indebtedness forbodes a grim story ahead. Consumer credit card and buy-now, pay-later debt seem particularly concerning, while car loan payments in the US are now pushing past $1,000 a month. To massively over-simplify, there seem to be a couple of things going on. First, poorer members of society have been hit hardest by inflation in essential goods, such as food and energy. As a result, they’re increasingly making these purchases using debt, with almost 40% of all US buy now pay later transactions being for food. Second, folks further up the income ladder who had extra discretionary funds during the pandemic are supplementing with debt as stimulus funding ends and inflation bites into their discretionary buying power.

At any normal time, this use of debt for everyday items would be concerning. But when interest rates are rising and debt becoming more expensive, it’s a particularly worrying canary in the coal mine.

Inflation is the scourge of the moment, but we should be careful what we wish for. Raising interest rates is the primary tool used to fight inflation, and it’s a blunt tool at best. It’s a bit like using a sledgehammer to make a surgical incision. Yeah, you’ll make the cut, but it’ll be raggedy and imprecise, and it there’ll be loads of additional trauma.

Although the US economy is a frighteningly complex and highly adaptive environment, which makes results unpredictable, the theory behind raising interest rates is pretty simple: Inflation is high because of overheated demand; raising interest rates puts a brake on this demand because it makes money more expensive, and voila, inflation goes down. But, not so fast, as even Chairman of the Federal Reserve, Jerome Powell, admits that high inflation is only partly due to over-heated demand, with other factors playing a significant role.

So, what are the potential knock-on effects of higher interest rates? Well, when you consider that our economy is now built upon a foundation of cheap money, very possibly, chaos.

We’re already seeing an impact on the housing market, where 30-year US mortgage rates have more than doubled in a year to just over 6%. As a result, mortgage originations have plummeted, mortgage lenders have started to go bankrupt, and house prices are beginning to decline in the most overheated markets. (Economists are torn on the depth of the potential decline. Some see it as fairly minimal as people stay in homes they bought or refinanced at minimal rates. Others believe that if the broader economy falls, house prices might decline by 20% or more.)

Next on the block will be zombie corporations. A zombie corporation is one that has so much debt that it can barely cover its debt obligations, which makes it particularly exposed to a double whammy of interest rates going up (debt more expensive) and demand going down (less revenue to cover debt). Following an almost 12-year period of ZIRP (zero interest rate policy), the number of zombie corporations exploded as cheap debt was used to boost shareholder returns. A recent estimate suggests that 20% of the 3,000 largest corporations in the US are now zombies, including meme-stock favorite AMC and pariah of the skies, American Airlines.

Zombie corporations don’t just represent 20% of the largest 3,000 corporations in the country; they also represent millions of jobs and $900bn in debt. If/when these companies start going bankrupt due to an inability to pay, we’ll see mass layoffs, failure to pay loan obligations, and potential contagion throughout the financial system. It won’t be a 2008-level crisis, but it could well be ugly.

If zombie corporations start to fall, we’ll also see the impact spread to zombie households. Those with the weakest balance sheets and high debt-to-earnings ratios will find themselves in trouble, particularly those who also find themselves out of work. In addition, those heavily utilizing credit cards with variable interest rates will be particularly hard-hit.

And, yet, what else is the Fed going to do? It doesn’t have a scalpel; it only has a sledgehammer, and tapping lightly didn’t work because high inflation remains a problem. We’ve been artificially propping up zombie corporations for years. We lack sound regulations preventing corporations or individuals from getting into unsustainable debt in the first place, and every historical indicator says we’re overdue for a recession.

And while I find Elon Musk to be little more than a man-child in his public pronouncements, he’s right when he describes bankruptcies as necessary because it’s been “raining money on fools for far too long.” Unfortunately, it has been raining money on fools, and now everyone gets to pay the price.

Of course, on the flip side, it’s also true that historically, recessions have strengthened the positions of the best-run companies, killed off the worst, and acted as an incubator of potentially robust startups (if you can achieve lift-off in a recession, post-recession growth drives the hockey-stick). And, let’s not forget that there’s an unprecedented $290bn worth of “dry powder” sitting in the VC coffers that they’ll have to start doling out in the next year or so because they don’t get any prizes for not allocating it.

So, yeah, buckle up. I hate to say it, and my wife refuses to let me say it in her presence, but things might be a bit grim in the not-too-distant future.

Volume 111: Everything in Life…

September 1st, 2022

1. Everything in Life Doesn’t Have to Be so Useful All The Time.

tl:dr: Usefulness is to design what purpose has been to strategy.

Brand purpose has been talked to death, so I’m not planning to re-hash it here. But, for summary purposes, it’s an approach that works for some brands but isn’t necessarily right for most. And the further removed the brand’s purpose is from the business, the less valuable it tends to be. (As an aside, if I’m linking to brands that cause cancer and diabetes and where both claim to be creating a better world, that should pretty much say everything you need to know about the problem with purpose).

But, what’s particularly interesting, is that what purpose has been to strategy, usefulness appears to be for design.

What do I mean by this?

Well, arguably, the push to purpose had less to do with consumer demand and more with marketers and their agency partners feeling the need to do something, anything, more meaningful than simply selling product. I’ve talked before about the institutional guilt that manifested itself post-2008 financial crisis (its story three at the bottom of the page), which created a fertile breeding ground for the concept.

With design, I’ve railed against the shift to boring, commodified minimalism. While there are many arguments for it, they’re mostly boosterism rather than a meaningful insight into what’s going on (My favorite excuse is that the “Gen Z” branding aesthetic was created to stand out on Instagram. A quick trip to Instagram quickly shows this to be a myth. These brands don’t stand out; they blend together in a bland scrolling melange).

Anyway, in a similar way that purpose became the word du jour in strategy circles, usefulness and its cousin usability are words that repeatedly appear on designers’ lips.

And, in a similar vein that the people pushing purpose were often doing so for personal reasons rather than commercial (there must be more to this than simply moving the merch), the same has been happening in design. If everything is useful and usable, it’s valuable. It has a purpose; it solves a problem, gives the user a more useful experience, and, most importantly, makes what I do as a designer important. It makes me feel I’m more than just the shapes and colors department. It makes my work feel meaningful to my peers and to me.

Unfortunately, in the same way that purpose often disconnects the strategist’s work from the brand they’re working on, the fetishization of usefulness often makes the designer’s work become joyless, overly earnest, largely interchangeable with the competition, and boringly forgettable.

You see, everything in life doesn’t have to be useful. I love my dogs, but they’re not useful for much beyond laying on the couch, barking at the neighbors, and crapping in the rose bush.

Art isn’t useful; we love it because of how it makes us feel. Fiction isn’t useful, but it transports us inside our minds. Music isn’t useful, yet it’s life-defining for many. And supporting Liverpool FC right now isn’t very useful for my emotional state, haha.

If you look around, we surround ourselves with things that lack usefulness all the time, and that’s OK. But, just because something isn’t useful doesn’t mean our lives aren’t richer because of it. And, if everything in life had to be useful, our lives would be desperately dull.

I got into the branding game because of two brands; Orange and Goldfish. They blew me away, not because they were useful but because they were full of joy and whimsy and were quirky and different. At the time, they staked out a totally different emotional territory. I felt drawn to them in a way that I’d never felt drawn to the likes of British Telecom or HSBC.

We need more of that. Not to go back to a nostalgic time that never was but to move forward resolutely in a way that says it’s OK to be quirky, whimsical, and full of joy. It’s OK for something to be novel, and disposable, and maybe even (shock-horror, whisper it very, very quietly) decorative. These things don’t make a brand less useful; instead, they make it richer and more interesting.

I love that VW put a little flower vase on the VW Bug. I love that Genesis turned the gear selector into a weird, flippy crystal. However, I don’t love that there are so few examples I can think of and literally zero brand identities in recent times that have had even a modicum of joy in them.

So, let’s remove the shackles of usefulness, embrace our inner uselessness, and find a quirkier, richer, and more joyful side to our work. And let’s stop viewing things like quirkiness and whimsy as frictions to be removed because they’re not. On the contrary, they’re essential parts of what moves people and, thus, what makes them want to connect with, and maybe even love, our brands.

2. RIP Figma.

tl;dr: Adobe buys Figma, likely to wither slowly on the vine.

Whenever you hear the term “strategic acquisition,” it typically means two things: First, the company doing the acquiring over-paid to the point that no one else would do the deal. And second, the buyer believes overpaying will be good for shareholders because the acquisition will unlock significant new value. For a great example of this in action, Disney bought Marvel for $4bn, which at the time looked expensive, but today looks like an astute bargain when we consider what the addition of the Marvel IP portfolio did for the Disney business empire.

However, a much more common reality is that they’re overpaying because they’re scared of what they’re buying and are deeply concerned that it’ll represent a long-term competitive headache if it’s left on the chess board. So, better to remove it now before it gets too big to do a deal. For examples of this, look no further than Google’s purchase of YouTube or Facebook’s purchase of Instagram.

With that in mind, Adobe just announced the intention to purchase Figma for a cool $20bn, which makes this the largest acquisition of a privately held startup in history, eclipsing the previous record held by the $16bn acquisition of WhatsApp by Facebook. Notably, this deal is pretty dilutive–Adobe announced that in addition to the stock it will issue, it’s likely going to have to take on debt to pay the cash part of the deal, which is yet another indicator of how concerned Adobe was about the likely future competitiveness of Figma.

And they had good reason. In addition to being a tacit acknowledgment that the Adobe XD product isn’t good enough, Adobe has looked into the design tea leaves and realized two things: One, that Figma represented a material threat to Adobe’s Creative Cloud business, and two, that the addition of Figma to its Creative Cloud would instantly cure Adobe’s weakness in tools that support collaborative web design, while also eliminating any need for it to compete based on…I dunno, actual product innovation.

So, from a shareholder value standpoint, this kind of defensive acquisition is a no-brainer - it takes a major player off the chessboard, adds a predictable source of new revenue to the mix, and eliminates the risky variable of competition. (And, yes, it is a costly deal. But that’s the thing about strategic acquisitions; you’re paying a huge “shitting my pants about what you might become” premium).

However, as good as it will be for shareholders, this is likely much less of a good thing for the customer. First, the following statement from Figma leadership is likely to prove absolute nonsense:

“We plan to continue to run Figma the way we have always run Figma — continuing to do what we believe is best for our community, our culture and our business…Adobe is deeply committed to keeping Figma operating autonomously.

More realistically, prices are probably going up, whether directly or much more likely, by making it so you can only access Figma via a broader Adobe Creative Cloud subscription (thus rendering moot those who may have switched from Adobe Creative Cloud to Figma). It’s also highly likely that innovation and product development will slow to a crawl, that user-friendliness will entropy back to Adobe standards (e.g., not at all user-friendly), and that any product features designed to disrupt Adobe Creative Cloud will be removed from the roadmap entirely - leaving designers with a clunkier product that costs more, works worse, and that requires “integration” with other Adobe products to work.

In an ideal world, this kind of deal would face considerable antitrust scrutiny from the FTC, representing as it does a deep consolidation of design tools under Adobe. However, it isn’t clear that this will happen. Not only is antitrust scrutiny only just starting to find its feet again after years of kowtowing to industry, but it’s facing a barrage of “we dare you” acquisitions by Amazon (Some feel that Amazon is deliberately making a slew of acquisitions to overwhelm those responsible for antitrust, and thus render their actions irrelevant)

So, anyway, it’s a huge deal for the founders and owners of Figma. It robustly supports the case for design’s continued value and power within business. And it’s likely the beginning of the end for a product that many love. It had a good run. I’m a little sad that it’s over. RIP Figma.

However, rather than feel down, I’d like to wish luck upon anyone spinning out of there (or inspired by the $20bn exit) to set up the next, better design tool. Because goodness knows, nobody willingly chooses dependence on Adobe.

3. The Arcana & Ephemera of branding.

tl;dr: In defense of diving deeply down the rabbit hole.

It’s popular right now to focus on how fast things are moving and how short our attention spans have become. And while there’s very little evidence to support the former (I’d argue the Victorians moved faster than we do), there’s good evidence to support the latter: Media has fragmented, advertising formats have shortened, and trademark registrations have increased sharply (very simply, this means more brands are competing for our attention, which is becoming harder to attract).

But, hidden amid the drive to explain brands using fewer words, to make everything efficient and frictionless, to make ads last 5s or less, and to eliminate anything that might be viewed as superfluous, is that the Internet didn’t just shorten our attention spans; it also gave us the means to dive down any rabbit hole at any moment instantaneously.

Compared to previous generations, we now have the unique ability to go from completely ignorant to dangerously informed on any subject we choose using nothing more than the supercomputers we carry around in our pockets.

The first time I paid attention to this phenomenon was a few years ago when my son was into Minecraft. As any parent of a Minecrafter will know, while it looks ultra-basic, it’s a complex and powerful game…that comes without instructions. This led to a vast ecosystem of instruction springing up on platforms like YouTube showing people what to do. Which, in turn, led to interesting social interactions, where, for example, I’ve witnessed Minecraft skills acting as a form of social currency among pre-teens.

Anyway, this isn’t intended as a post about Minecraft; it is intended as a discussion about the arcana and ephemera of branding. You see, if we take the view that everything is moving fast, that people have tiny attention spans, and we need to get them to the sale as quickly as possible, then the last thing we’re going to do is invest in the complexity of backstory, narrative arc, and the kinds of rabbit hole defining stories, artifacts, and ephemera that operate not just to support our brand, but to define it.

However, if we consider that those who are interested are likely to be the most engaged and thus the most likely to tell others, then we can see why this might be a valuable use of our time, money, and energy, especially for those brands seeking to feel special and justify a price premium.

Fashion and luxury brands, for example, have long used their arcana and ephemera to establish a sense of value via history, craftsmanship, founder stories, and the like. The Omega Speedmaster is valuable because astronauts wore it to the moon. The leather used by Louis Vuitton is unsurpassed. The coffee made by Ralph Lauren is going to…I dunno…taste like a sweaty polo pony?

But, how often do most brands take arcana and ephemera into account in order to create and curate it effectively? How often do they actively make use of it to drive their narrative, support a price premium, and reiterate how their brand is more interesting and more engaging, and, yes, more rabbit hole-friendly than other brands?

Yeah, you’re right, almost certainly not often enough.

Volume 110: I have seen the future. And it’s...

September 8th, 2022

1. I Have Seen the Future… And It's a Cat In a Shark Suit.

tl:dr: Midjourney, Dall-E 2, and the future.

Last week, my wife and I played around with Midjourney, one of the new AI image generators. It’s pretty simple; you log in to their Discord server and tell it using words what you want to see. The below image was created in about 3 minutes by telling it we wanted to see a cat in a shark suit. Of those 3 minutes, the bulk was processing time.

First, it’s incredible to see something with this degree of fidelity springing from something as simple as a single-sentence command. While I understand there are legal and ethical issues surrounding such creations (who owns the IP, for example) and that some believe it dooms us to a future where nothing is new; we simply recycle what the AIs have learned from the past, there’s no doubt in my mind that tools like this are going to transform the world of design. (And to the originality naysayers, all I have to say is “look around you.” Human originality is usually a mashup of things that have come before, tilted in new and exciting ways. I can’t imagine the use of AI tools changing that in any material way, other than perhaps accelerating it.)

It certainly wouldn’t be the first time tools have changed design. I remember way back when talking with a production specialist who liked to wax lyrical about the days of manual typesetting, which even back in 2000 seemed utterly anachronistic. Since then, of course, we’ve seen the rise of what is now the Adobe Creative Cloud and, more recently, the hyper-growth of tools like Canva, Figma, or even the likes of Squarespace.

And, in much the same way that the Adobe 3D command, introduced in 2003, led to a fad of logo dimensionalization (ironically, the fashion of the moment is to de-dimensionalize), and the gradient tool led to…gradients, new tools, especially AI-based tools, are almost certain to transform what’s possible in brand design.

The question now isn’t whether it happens; it’s when. Let’s take a look at a few likely occurrences (Please take with a pinch of salt, if there is one thing we can predict with a great degree of accuracy, it’s that most predictions turn out to be false)

1. Craft will decline, ideas will rise.
   When speaking with designers about this, I use the statement “you can’t out-kern a machine.” What I mean is that while designers spend years learning, honing, and perfecting their craft, it’s also the first thing AI tools will commoditize as it’s eminently teachable. As a result, we’ll likely see widespread automation of those design tasks that require craft but little creativity. On the flip side, imagination and conceptual creativity will rise to the top. While machines can craft easily and cheaply, they lack imagination. This means the value will shift from craft toward the idea, the creative concept, and the inherent taste of the designer in curating whichever of the machine’s creations are most distinctive, interesting, and appropriate.

2. Commoditized design will be automated out of business.

   For years, I’ve failed to understand how some design businesses stay in business with business models utterly dependent on manual labor. For example, look at any design studio focused on CPG/FMCG work, and notably, profit pools such as designing the mechanicals for packaging SKUs bear more than a passing resemblance to Victorian factory work. All of this is likely to be automated in the coming years. It’s increasingly easy to teach an AI different SKU sizes, the graphical elements required, and the basic proportions you want to see them in. From there, all you need is a single human to review the work, make edits, and approve it. If you don’t believe this might happen, Google (and probably others) are already automating UX flows, which can be designed faster and with vastly more test and learn variations than any human.

3. Directing machines, not just people
   Increasingly, the creative directors of the future will be directing machines rather than directing people. Most likely, there will need to be new skills established not just in directing a machine but in directing multiple machines and then curating their outputs into something singular, consistent, and distinctive. And interestingly, in a world where craft is no longer a distinguishing feature of a designer, we may see this new generation coming from wildly different backgrounds and not necessarily with any classical design training.

Now, I know some will say this will never happen. To those people, I suggest they look at what has already happened to lawyers over the past few years, where work is either outsourced to countries with cheaper labor or, increasingly, automated by AI and machine learning systems.

And while there will undoubtedly be pain within this change, I see what’s coming as probably the most exciting period of my career, following what has undoubtedly been one of the least: The fetish of 1950s minimalism in branding design isn’t just dead; it’s a dead end. There’s nowhere left for it to go; it doesn’t differentiate, and it turned an entire generation of brands into a boring melange of nothingness, usually in pastels.

However, the advent of these new tools provides an opportunity to reset for a new future. One where the aperture for ideas and conceptual creativity is pushed wide open and design routes that may previously have been impossible because of the cost of execution, or the perceived complexity of channel fragmentation, or the skill limitations of in-house designers, become eminently possible.

Technology typically does three things–it makes the expensive cheap. It makes the slow, fast. And it makes things that were hard easy.

When it does this, those businesses that previously relied on things to be expensive, slow, and hard for their value either adapt or they die.

In the case of brand design, we’ll have to stop looking back with nostalgia at what human beings previously did because the genie is never going back in the bottle. Instead, we need to understand how to harness the machines in such a way as to build new businesses and new value on top. And if history is any guide, these new businesses are often much more exciting than what came before.

And, for those that get there first, they’ll get to transform what we think design can be.

So please don’t screw it up by making everything look like Braun circa 1965. We’ve already done that; it’s boring.

2. Killer Research or Kill the Research Methodology?

tl;dr: Debunking research methods. Finally.

Research is one of those weird fields. Large corporations spend a lot of money on it and then do very little with it, whereas small companies rarely do any.

In the first instance, having a large in-house research group tends to create the Independent Republic of Research, which is vastly more interested in methodological rigor than in solving real business problems–leaving people like me to wade through reams of data and analysis and uninteresting questions in the vain search for something that might be useful. In the second, a whole generation of companies has grown up using behavioral data for insight that views market research as something of a swear word. Why, they reason, would you waste time and money asking people what they think when what people say and do are two entirely different things?

In the past, I’ve referred to this as being “one eye blind.” If all you do is look at research without reference to your behavioral data, you’re blind in one eye. Equally, if all you do is look at behavioral data and do no research, you’re blind in the other. Either way, you’re half-blind.

Anyway, I come to this conversation about research because of a recent article highlighting five research methods that should go away. And I have to say; I found it hard to argue with any of them.

First up, we have consumer co-creation. This had me nodding vigorously and chuckling hard. For years, we’ve listened to branding consultancies dribble on about consumer co-creation as if it’s a transcendent journey into the future of business. But in reality, it’s mostly a crock of shit. First, because consumers rarely care enough to have any interest in co-creating with us, and second, because they rightly wonder why our own experts can’t come up with something better. As Henry Ford once said, “If I asked my customers what they wanted, they’d have told me a faster horse.”

Second, we have “need-state segmentation,” which, if taken literally, is obviously problematic. While it’s beneficial to understand our prospective customer’s needs, the idea that you can then permanently segment people into categories based on these needs is more than a little problematic because the same person often manifests very different needs based on circumstances and context. As an aside, “use cases,” that term so beloved by tech product managers, can at times, be scarily close to need state segmentation.

Next in line is attitudinal segmentation, which is notorious for the people doing it coming up with daft names for the segments. Sigh. (As an aside, I think Apple must’ve hired some of them when it came up with “Dynamic Island”). On balance, I understand where the author is coming from if these attitudinal segments are too small, too niche, and too overlapping. Still, I think there’s a place for it if we avoid the general segmentation trap of boiling things down into too many segments. Unlike the above two methods, I have found value in attitudinal segmentation, even if it’s something you have to read between the lines on, and often find yourself having to jam one or more of them together to get a large enough cohort of people to be interesting.

Fourth, laddering. I have to say I was slightly surprised that laddering still exists because it is, without a doubt, one of the stupidest ideas in marketing (and there’s much stupidity in marketing, folks). To give you a quick overview, it’s an approach where you ladder emotions up to some kind of self-actualization, which might sound OK at face value, but where it invariably nets out is that everything from candy bars to bank accounts to dishwasher soap all make people feel so much like their “best selves” that the brand spontaneously makes people dance, laugh, high-five, and jump in the air in sheer delight. And if that sounds ridiculous, it’s because it is. So, yeah, I’m with the author on this one. Kill laddering. Please.

And finally, we have brand archetypes. Oh my. A favorite pet peeve of mine. Honestly, I’ve always viewed brand archetypes as less a research technique and more branding phrenology. Especially since every strategist/planner likes to make out that the brand they’re working with is one of the cool archetypes, like the magician, the creator, or the explorer, and not the less cool ones like the innocent, everyman, or jester.

I once had someone on a client team adamant that it wasn’t possible to go through a branding exercise without defining the archetype (he was wrong, it’s eminently doable and definitely advisable to go without). Which meant I had to grit my teeth and go through a lengthy process of archetype theater. Never again. It’s rubbish, don’t go there. And if you must, then please ignore the 12 brand archetypes somebody somewhere once made up, and instead make up your own. It’ll be just as useful (e.g., not very), but at least you’ll have a laugh coming up with your own silly names.

3. Too Many Metrics?

tl;dr: Hard to educate the CEO when you’re busy playing defense.

Marketing has many challenges, but undoubtedly one of the most significant is that the C-Suite peers to the CMO, especially the CEO and CFO, typically view marketing as wasteful and a cost to be minimized rather than an engine of growth and profitability to invest in.

There’s also a real irony here that this attitude has been heightened, honed, and then weaponized through the marketing spend of thousands of engineering-led, VC subsidized, mar/ad-tech firms that would have you believe that “traditional” marketing is desperately wasteful and that the answer is the incredible efficiency of “digital” consumer surveillance.

Now, two things have accompanied the rise of this consumer surveillance ecosystem—first, an intense focus on ROI as a metric. Second, an explosion of other metrics that typically have less to do with marketing success and more to do with making whatever ad-tech or mar-tech platform that came up with it look good.

Here’s the challenge with this. First, ROI is a measure of efficiency rather than effectiveness, which means it isn’t necessarily a great choice as the “one metric to rule them all.” Second, the more additional metrics you add and then wallow in, the less likely your CEO or CFO will pay them any attention. More likely, they’ll just default to ROI, creating a Catch 22 for any marketer.

CEOs and CFOs are human beings like any other; they’re busy people, and the idea that they will spend a considerable period figuring out what the 22 metrics on your marketing dashboard actually mean is fanciful, at best.

And yet, we can easily see the perils inherent in placing too much emphasis on ROI. Here are three obvious ones. First, the highest ROI you’ll ever achieve is by spending nothing, which means there’s a huge incentive to underspend in a way that distinctly hampers growth. Tales abound of marketers choosing the less effective path that drew fewer customers because it was more efficient (e.g., higher ROI) than the alternative.

Second, ROI says nothing about your ability to deliver a price premium. The ability to charge more for a stronger brand is a well-known brand effect, yet it’s entirely missing from any calculation of marketing ROI. Incredible when we consider that a 1% lift in price could potentially lift profit by as much as 10%.

Third, focusing only on ROI typically misses that as a business grows, ROI tends to go down as you shift from easier to attract customers to those less inclined to try your brand. Yet, even though this is an essential part of the growth equation, a narrow focus on ROI paints this as a failure rather than a success. This inevitably leads to marketers fishing in a pond of existing customers that are easiest to attract, often offering discounts to try and speed along the transaction, leading to a situation where marketing ROI looks great, but customer growth, profitability, and overall business health are hampered.

So, what to do?

Well, the good news is that there’s a rising tide of empirically researched analysis (assuming we can look beyond the inevitable internecine warfare of clashing egos) that demonstrates how marketing success happens and, as a result, how to measure it.

This suggests that rather than get suckered into the ROI trap or play defense across a broad array of ad-tech and mar-tech vanity metrics, CMOs should instead take the known evidence, apply it to their own business, drop the metrics down to the few that matter, and then go on a major charm offensive with their C-suite peers - showing what should be measured, why it should be measured, and the business results that each metric impacts. Not only that, but they should also demonstrate the risk factors of not doing it this way (e.g., the inevitably harmful business consequences of solely focusing on a metric like ROI)

And, if you find that nobody is listening? That’s fine. You just discovered it’s time to seek a new position months before you’d have gotten there anyway, but with much less pain.

Volume 109: Where branding goes to die.

September 1st, 2022

1. Where Branding Goes to Die.

tl:dr: Interbrand strangles three new GEs at birth.

Last year, perennial underperformer GE announced that in a Hail Mary pass of a turnaround strategy, it would split itself into three: An aerospace company, a healthcare company, and an energy business.

My, how the mighty have fallen. From the most valuable company on earth under Jack Welch, to bailed out by Warren Buffet under Jeff Immelt, to huge payouts to current CEO Larry Culp, GE and its shareholders have felt the pain. To put this into perspective, since 1999, the S&P500 has risen by 370%, while the value of GE has shrunk to less than 20% of its 1999 high ($82bn versus $451bn if you’re interested).

I’ll come back to why such a massive hit to corporate ego matters in a moment, but let’s shift gears to Interbrand for a second.

Interbrand won the golden lottery ticket when it was retained by GE to deliver the branding for all three new businesses. This is notable because typically, in a spin-out like this, each company to be spun out would retain its own agency partners, who’d then go off to work in isolation from each other. (Well done to Interbrand for that, BTW, it’s a bit of a new business coup)

We’re also incredibly fortunate that Interbrand’s NY CEO has been on the PR trail following the recent announcement of the work because it gives us an insider view into what they did and why they did it. I’m glad he did because we get to see why the work publicly announced so far is so utterly woeful.

Here’s a quote from said NY CEO Daniel Binns from this article [comments in square brackets are mine]. My apologies for it being a garbled mess. I’ve talked before about how Interbrand is incapable of communicating clearly ¯\_(ツ)_/¯. Anyhoo:

“Our overall approach to the branding decision was shaped by our proprietary Interbrand Thinking methodology…”

[I didn’t realize Interbrand needs a proprietary framework to think. This explains a lot]

“Specifically, we conducted a series of business case modeling simulations to calculate the net-present value (NPV) of future EBIT flows generated by each possible branding solution, in isolation for each company and in combination with the others (including the “base case” scenario of keeping the current GE-led industry-descriptive names for each company).”

[Sorry, this is nonsensical analytics theater. You can’t possibly break out branding factors like this and have anything like predictive accuracy. I’d love to see their margin for error, because it has to be huge. The read between the lines here should be “we padded our fees by a shit-ton to deliver the certainty of analytics theater because our clients were desperately afraid of screwing up. Again”]

“Our model started with baseline revenue inputs based on historical financials and future forecasts, and applied variable assumptions for brand-related factors with the potential to affect revenues and expenses going forward.”

[Ah, the needle in the proverbial haystack: “variable assumptions,” so this is yet another example of Interbrand doing fancy quantitative data analytics atop subjective assumptions pulled from its nether regions. This is basically its raison d’etre at this point]

“Monte Carlo simulations were then run to model a range of high-end and low-end assumptions for each variable factor, yielding a most probable financial outcome for the individual solutions and scenario combinations. This allowed us to compare the relative EBIT potential of each scenario, both in perpetuity and in the first five years post-separation.”

[Oh, Interbrand, you’re blinding us all with your intelligence. Put it away already. Also, note the term “EBIT potential of each scenario…in perpetuity.” Let’s be clear, such a calculation is literally impossible to undertake with any degree of accuracy and just makes them look silly for clalming they can]

Before I move on, I want to be serious for a second. Brand valuation, which Interbrand has done for years, is the underlying basis for everything written above. Now, a backward-looking and subjective valuation delivered using historical data to a fairly rough and ready degree of accuracy is one thing, but using that same method to make predictive recommendations is quite another. And quite dangerous if we consider the sheer scale of the error factor that must be inherent in these calculations. To put this error in perspective, both Interbrand and BrandZ value the VISA brand in their annual league tables, but Interbrand believes it to be worth 15 times less than BrandZ does–$15bn versus $191bn. Put simply, if two different yet “gold standard” methodologies using the same historical data can be out by 13X, then we cannot possibly take predictive, future-facing calculations based on unknown data using the same methodology seriously. And by attempting to do so, I’d argue that a business like Interbrand, far from de-risking the process, is actually being wildly irresponsible.

OK, so enough about valuation nonsense; what about the work? Well, Interbrand isn’t nicknamed Interbland for nothing. Aside from a predictable degree of mediocrity, three things are notable from what’s been shared:

1. All three businesses will be branded GE, and all three will have the GE Monogram attached. Why? Because the GE name and mark have equity and compared to a completely new name, it has 100% more. This is obvious and an analysis that could’ve been done in seconds, for free.

2. They color-coded the three brands in “evergreen,” “compassionate purple,” and “atmosphere blue.” Aside from those names being awful, this isn’t particularly smart. Color coding rarely, if ever, works because it assumes your customers are paying way more attention than they are. The only saving grace here is that each corporation will operate in different markets with different customers, so confusion is likely not that big of a deal, at least not initially.

3. They did something horrendous to the typeface. Three times. This is a shame because, alongside the name and the Monogram, the GE typeface is one of the few distinctive assets the GE brand has. At least one of the new businesses should’ve kept it. Sigh.

In the article quoted above, Mr. Binns says the whole process was equal parts analysis and creativity, but that appears to be false. Instead, it looks like 20% analysis, 80% analytics theater, and no creativity anywhere to be seen, asphyxiated as it was under the sheer weight of the other two. What a sad way to go. RIP branding. Well done, Interbrand.

Aside from Interbrand being where branding goes to die, I take two things from this. First, Interbrand is clearly so proud of the process–2,200 industry practitioners and 3,000 employees, EBIT Modeling, Monte Carlo Simulations, and interdependent and independent teams–that they appear unaware of the utter mediocrity of the outcome this process led to. In other words, this looks like a lot of time and money spent defensively analyzing the task to death because the goal was not screwing up, rather than working backward from the desired outcome of what it would take for each of these new brands to win in their respective markets. Second, in delivering such a defensive “cover your ass” approach, Interbrand is simply serving the client what it wants. The clients most likely to clamor for “data-driven” solutions like this and thus the most likely to hire partners like Interbrand are normally underperforming for some reason or another, and branding defensiveness and business underperformance are often connected. (Back to my point about GE being a company whose corporate ego and fundamental sense of self have taken a battering in recent years. This creates a bunker mentality where the fear of screwing up massively outweighs any desire to seize the day)

Confident corporations that outperform have a clear vision and strategy and don’t require the safety blanket of such patently flawed analyses. They don’t waste their time second-guessing every possible permutation and seeking to quantitatively analyze those things that are exceptionally hard, if not impossible, to measure, let alone predict. Nope. They focus their energy on what matters, where it matters, and how to take the business into the future confidently.

Now, I’m going to leave you with something that might seem a bit left-field, but hopefully, you’ll bear with me. First, look at the above, and then read what Roger Martin says in his latest post on the difference between planning and strategy. I think you’ll see the overlap and how what Interbrand did with GE is rather more technocratic than it is strategic. I’d argue that this might not be the most helpful thing for three new businesses about to embark on a whole new choose-your-own-adventure.

2. Lies, Damned Lies, and Marketing.

tl;dr: How much does it matter if a dataset is crappy?

Prof. Byron Sharp, head honcho of that merry band of Australian Marketing Scientists over at the Ehrenberg Bass Institute, popped up last week at a marketing conference to make some pronouncements.

If you’ve paid attention to his previous work over the past 15 or so years, none of what he said will have come as a surprise - mental and physical availability, check. Reach, check. Distinctive assets, check. (And if you haven’t been paying attention, you should, as “How Brands Grow” remains the single most important book in our field, even if I do take issue with parts and remain frustrated that because Prof Sharp is an academic, there’s a distinct lack of practical how-to in a book that purports to be).

Anyway, in what appeared to be a calculated takedown, he stated that the Binet & Field 60:40 “rule” for a media mix, where you put 60% of your budget into brand spend and 40% into activation, is nonsensical, primarily because of two things:

1. The dataset, being built around campaigns that win awards, is crappy.

2. It’s unclear what the difference is between brand and activation activities, so what are we measuring?

Now, before we move on, let me state that at an evidentiary level, I agree with the above two points and have struggled with both myself. However, from a practical standpoint, I disagree with his out-of-hand dismissal.

Here’s why.

First, there’s no such thing as perfect data in marketing since the systems we’re dealing with are complex and adaptive. In fact, the issue I take with academics like Prof Sharp is inherent in the idea that we can perfectly isolate and quantify specifics amid such complexity–reality suggests that it’s not so easy. Worse, all too often, attempts to isolate and quantify qualitative data result in what Tim O’Reilly dubs the “clothesline paradox,” which is our tendency to ignore and label unimportant those things that are hard, or impossible, to measure quantitatively–like how much energy is used drying clothes on a washing line compared to the tumble drier. This begs the question of whether the awards nomination dataset is any better or worse than any other and whether, ultimately, it matters all that much? My take is that roughly right is generally good enough in most instances and that it’s wrong to dismiss roughly right simply because it isn’t perfectly correct.

Second, as a practitioner, there are times when you need to separate yourself from academic rigor in the interest of what’s practically useful.

I’ve had many conversations with clients around 60:40, and it’s been useful every time. When I discuss it, I don’t use it as a “rule” but instead refer to it as a rule of thumb that’s broadly applicable as long as we don’t take it too literally (every client situation is different, I’m not a media expert, you should talk to someone who is, etc.) It’s a general statement that brand building matters. Where this conversation is most pertinent - and has the biggest impact - is when you’re talking to clients where all, or almost all, of their current budget goes toward performance and programmatic activities; in other words, heavily biased toward activation.

With these clients, blending the 60:40 conversation with a discussion of top-of-funnel activities, reach, distinctiveness, memory structures, mental and physical availability, salience, awareness, positioning, etc. all come together to help demonstrate the context in which brands help drive business success.

Sadly, the trade press picked up primarily on the 60:40 takedown, which meant that somewhat hidden was a much more important pronouncement that you’d be forgiven for missing entirely.

And this is that “volume creative,” AKA spam, really is a waste of your budget. That’s right, while Prof Sharp was busy dunking on folks he knows are broadly in line with his own thinking, he was also pointing out something vastly more important - that snake oil sellers like Gary Vee truly are full of shit.

3. “Call it Something New. Call it Innovation.”

I used to joke back in the day that nobody in our business did any actual innovation; we just changed the names of things and called it innovation.

This is one of the reasons that if you get a bunch of agency people and marketers in a room, you need to start the conversation with an agreed-upon glossary of terms because, without it, they’ll all be talking at cross-purposes. It’s so bad that, at times, I’ve found myself walking clients through proposals and sharing all of the other terms that might be used to describe the same deliverable or process step so they’re better able to understand what they’re looking at.

Now, at face value, this is obviously kind of silly, but recently Econometrician Dr. Grace Kite made an important point that this lack of precision can also be harmful.

Here, she points out issues with terms such as ROI, which remains squirrelly when applied to marketing (In any business school, when you mention ROI, the correct next question is “over what time period?” A question marketers would do well to ask more often), and “cost per acquisition,” which she describes like this:

“At best it’s a grave misunderstanding. More likely it’s a flat out lie, told because it benefits the platforms that report it.”

And then goes on to describe issues with incrementality.

While we’re at it, it’s a shame she didn’t hit on things like “performance marketing,” which is called that because it’s paid for based on a measure of performance, like a click, rather than because it performs any better or worse than any other marketing activity. Or “growth hacking,” which I once had a client define as “marketing, just without any ethics,” which I chuckled at.

Anyway, I agree with Dr. Kite. We have a terminology problem; often, it leads to conversations that run at cross-purposes, but more concerningly, the everyday use of inaccurate terminology can sometimes be flat-out misleading.

Volume 107: Live from the 2020 archives.

August 18th, 2022

Still on vacation, so this week we have a trip back to 2021. Normal service shall resume next week.

1. 1984 called. It wants its dystopia back.

Since worker surveillance software is rearing its ugly head again, I figured it might be worth dusting this one off. Microsoft ultimately backed off of its “productivity score,” but that hasn’t stopped myriad others from stepping into the breach. To me, the whole worker surveillance thing says way more about weak management than it does worker productivity. Originally published in Off Kilter 51: 1984 Called, on December 5th, 2020 (OK, I know that isn’t 2021, but it’s close.)

tl;dr: Microsoft goes all in on employee surveillance.

You may not have seen it, but just before Thanksgiving, Microsoft got into a spot of hot water for releasing a new suite of analytics attached to Microsoft 365 under the banner of a “productivity score.” The major problem being less the name and more that it’s a full-blown employer surveillance tool.

Initially promising to deliver a person-by-person dashboard of exactly how many times a named employee attended a Teams meeting, interacted with a collaborative document, or even sent emails. After a Twitter storm blew up, they backed off a little by pledging to anonymize the data, but it’s still a terrible thing for them to be rolling out for three big reasons:

1. The metrics they’re delivering have literally nothing to do with productivity; they’re just measures of a person’s engagement with Microsoft’s suite of tools, so what this actually measures is busyness. And employees are really, really good at gaming daft metrics like that (reducing actual productivity in the process, btw).

2. Productivity is also an outmoded metric for whole swathes of knowledge work, originating as it did with the time and motion studies of the early 1900s, where men with stopwatches and top hats would stand there trying to optimize production line workers to deliver the same amount of work in less time. That just isn’t how we solve problems in the 21st century, where often the problems to be solved are different rather than the same, and nor does it reflect the value of the kinds of problems we’re solving.

3. Finally, productivity is one of those red herring client demands. When you research what businesses are looking for, they’ll all tell you they want to improve productivity. But it’s only a single data point. They typically want to improve other things, too, like engagement, culture, morale, education, trust, and the ability of the employee and their teams to take responsibility and solve problems. All the things that a “productivity score” imposed from on-high is likely to decrease rather than increase.

And really, this is the rub. Microsoft sees itself as “the” productivity company, so it’s looking at a highly complex subject through a very narrow lens. They’re then taking that narrow lens and applying an even narrower set of behavioral metrics to it: did the employee use the tools? Rather than a performance metric: was the challenge tackled effectively? I mean, God forbid, what if an employee was so good that they only needed a single message to solve a problem and not multiple documents, meetings, group emails, sharefile folders, and all the rest? In Microsoft world, you’d be passing that person over for promotion due to their low productivity score and promoting the annoying busybody who schedules the meetings to nowhere and then faithfully shares the results with everyone over and over again instead.

No, this, unfortunately, has little or nothing to do with actual productivity improvements or anything meaningful to do with how we work or how the very idea of work progresses. No, this was only ever about one thing: Showing how much people use Microsoft products through a faux measure of the value of those products to make sure clients keep paying for them and ideally buy more of them.

And, because of this, it’ll probably just end up dying like Clippy did all over again.

2. Citi jumps every shark that ever lived to pitifully pump Bitcoin.

With the crypto meltdown of recent months, I figured this was worth dragging up by its ears, screaming, from the bowels of the archive. Once again, Citi proves there isn’t a bandwagon it won’t gleefully jump upon. Originally published in Off Kilter 61: Airbnb learns $660m brand lesson, March 4th, 2021.

tl;dr: Abysmal Bitcoin report is giant red flashing neon warning sign.

If you read the business press, there’s a good chance you stumbled across this headline about Bitcoin becoming the currency of choice for international trade. The source for the article is this 108-page report by Citi Global Perspectives and Solutions. But you don’t need to read it because it’s filled almost entirely with made-up bullshit.

Take, for example, the following nugget: “36% of small/medium businesses in America already accept Bitcoin”. Umm, no, they don’t. So, let’s do a rabbit hole check and see if we can find out where this comes from. Ah, here we have it. The source? 99bitcoins.com. Hardly an unbiased actor, quoting an insurance company that hired a research company to ask 500 small businesses if they take Bitcoin.

Unfortunately, this is just the tip of the iceberg, as the full 108 pages are riddled with basic errors, outright falsehoods, and charts that make no sense. Most worrying is how it downplays, dismisses, and falsely characterizes a significant legal case happening right now that has the potential to impact the crypto landscape profoundly.

So, what’s going on here? Well, two things worry me. First, this looks suspiciously like the kind of conflict of interest boosterism that previously blew up in Citigroup’s face after the dot-com bubble of 1999. Does anyone remember Jack Grubman? The at-the-time famous analyst whose glowing reports were partly responsible for driving up tech stocks' value and who continued to boost soon-to-be bankrupt companies like Worldcom long after others had become more cautious. In his case, it turned out that he wasn’t an independent analyst at all but more of a salesperson reaping big rewards from the investment banking division behind the scenes.

Well…this feels suspiciously similar. Somebody within Citi will benefit financially from a bit of judicious Bitcoin boosterism; truth and accuracy be damned.

The second thing that worries me is that aside from the last-remaining-great-business-newspaper, I’m the one pointing this out. Why can’t the business press do their job and call out this nonsense for what it is instead of just re-hashing the press release and calling it newsworthy?

Many concerning things are happening right now in the world’s financial system, so having a megabank like Citi put its reputation on the line (again) to boost a spurious narrative about a cryptocurrency that’s risen in value by 2,000% in the past year should be a giant red flashing neon warning sign to all of us.

3. What gets measured gets manipulated.

The likes of Google and Facebook have spent considerable time, energy, and money persuading us that what’s on their dashboards is all that matters to marketers. But as effectiveness declines and earnings calls highlight the rising costs of online advertising, this seemed an apropos reminder that what gets measured gets manipulated—originally published in Off Kilter 67: A day late and a dollar short, April 16th, 2021.

tl;dr: An update for the oft-used management cliche.

One of the more common cliches’ in business is the statement that “what gets measured gets managed.” On its face, it makes sense. If you can measure something, you can baseline it objectively and see whether your management actions have a positive or negative impact. This is why measurement and business metrics are like sports scores. They mark your fitness to perform and thus your likelihood to advance and win.

However, I’ve observed over the years that “what gets measured gets managed” isn’t particularly accurate. The long-winded reality should be “what gets easily measured gets manipulated, sometimes falsified, and what’s hard to measure gets ignored.” I’ve yet to meet a business that, in some way or another, doesn’t manipulate easily measurable metrics to make it look like they’re winning the game. Why? Well, if your career depends on climbing the rungs of any large corporation, the metrics and measures you’re judged by don’t just indicate whether you’ll progress but whether you’ll even have a job.

When looked at through this lens, you see that the temptation to measure and manipulate can quickly become oppositional to good management. Here are three examples from large to small:

1. Many years ago, I consulted with GE, which at the time was the world’s largest corporation by market capitalization. Its primary strength was its scale and scope - it had discovered flywheel effects long before Amazon popularized the concept - but it didn’t compete that way. Instead, GE fragmented into thousands of mini-businesses that often competed harder against each other than they did the competition. Why? Because former CEO Jack Welch had said, GE would “be number 1 or 2 in any market or get out,” which led the organization to drastically narrow its definition of what a market was to ensure it was always “no 1 or 2” no matter how small or insignificant the market might be. Measure meet manipulated.

2. The second comes from a friend who used to work in the automotive industry. The measure to be manipulated was sales volume, which meant working diligently at the end of each quarter to ensure cars were “sold” and then just as diligently, but a lot more quietly, to ensure they were “unsold” at the beginning of the next. How else to ensure you remain the volume leader in car sales?

3. And finally, think about any agency business where you’ve been told to fill in your timesheets only with the hours approved in the budget, irrespective of how long it takes to do the work. This makes the people judged on their ability to manage a budget look great but wreaks havoc on the business's ability to accurately price future work and understand how busy the agency is. (As a side note, if you’ve ever been asked to do this, you’ve almost certainly found yourself working crazy hours because the people in charge of resourcing are working from manipulated data and think the agency is a lot less busy than it is).

It isn’t just easily measured and manipulated metrics that are the problem. It’s the deliberate ignoring of difficult-to-measure metrics too. Beautifully illustrated by Tim O’Reilly when he talks about the clothesline paradox: As a society, we only measure the energy used by dryers and entirely ignore the washing that gets hung on the line.

The reason this matters is that as marketing has become vastly more technology-driven and embraced an unprecedented level of quantification, it’s also become ground zero for manipulated, downright falsified, and largely ignored measures, which have led to all sorts of unintended consequences, such as the effectiveness of marketing going into a ten-year decline.

This is why performance marketing (easily measured, manipulated, and falsified) often gets budget preference ahead of brand marketing (hard to measure, typically ignored), even when the evidence points to a requirement for both.

It’s why we create bizarre and arbitrary attributions across the customer buying journey through surveillance that gives us a tremendous understanding of correlation and almost zero understanding of causation, excellently illustrated through this story of attributing a % of sales in a physical store to the door you had to open to enter. Or the observation that a significant % of digital advertising doesn't have an advertising effect at all but at best acts like wayfinding signage (thus suggesting the cost of things like Google AdWords are vastly greater than they should be based on actual commercial impact).

This neatly brings me to the dominant advertising platforms themselves. Google & THE FACEBOOK now control the vast majority of US digital advertising and a good chunk of total advertising. Both provide powerful black box measurement tools that drive marketing management toward measures that reinforce their platform dominance rather than what’s right for the marketer and have proven extremely difficult to audit independently. Concerningly, both seem to have problems telling the truth, as multiple lawsuits continue to demonstrate.

My final point, inspired by Ben Evans, is that no amount of technology, digitalization, and quantification of marketing changes the fact that marketing has and always will have marketing problems to solve. When technology points itself at a market, it moves in, destabilizes it, and then moves on. And when it moves on, it becomes apparent that those things that were being framed as technology problems often were not. In retail, we are left with retail problems. In banking, banking problems. Entertainment, entertainment problems, and so on.

And this is where we are at. For the past ten years, technology has destabilized the market for marketing, showering us with black box insights, surveillance ecosystems, rampant fraud, hucksterism masquerading as intelligence, and a broad swathe of automatically measured, easily manipulated, often falsified, and sometimes downright dangerous metrics combined with the hard to measure things that we completely ignore because they don’t fuel ad-tech or mar-tech monetization.

But, as technology moves on from marketing to bigger and more profitable arenas, I believe marketers will begin rediscovering the fundamentals of marketing again, which will mean less time spent worrying about click metrics and more spent creating customers, delivering on their needs, and creating value for them.

Volume 107: Live from the 2020 archives.

August 11th, 2022

This week and next, I’m getting a little R&R by the beach in Maine. While I’ll mostly be ambling around in flip-flops and a T-Shirt with a lobster roll in one hand and a beer in the other, I figured it was also a great opportunity to share some things from the archives. Normal service will resume in a couple of weeks. I hope you have a great summer. (My apologies if some of the links no longer work. I did clean up some of the more egregious grammatical errors)

1. 21st Century branding is being held hostage by 20th Century modernism.

Since I’ll be talking at the Brand New Conference in October on this topic, this piece, originally published in Off Kilter Volume 46 in October 2020, feels like an apropos place to start.

tl;dr: It’s not that we can’t; it’s that we choose not to.

In hindsight, it was entirely predictable that branding would respond through a lens of minimalism and reductionism when faced with the complexities of a fast-evolving digital environment. After all, when the sheer complexity of channels, screen sizes, resolutions, software limitations, UX considerations, usability and accessibility, data, and 3rd party design and layout rules must be navigated, the most obvious response is to boil everything down to its most basic component parts in order to ensure both consistency and compliance.

Unfortunately, this has also served to create two interrelated problems. The first is that brand design has regressed to a place of blandly austere and joyless modernism in pastels that’s become way too comfortable to be useful. The second is that this comfortable approach directly impedes any hunger to push the boundaries of what is possible and create new voices for a new time.

The result? A sea of beautifully designed brands paying homage to the mid-20th century that are entirely undifferentiated from each other aren’t particularly distinctive in any way and that we cannot for the life of us remember from one day to the next. And while we may laud the standard of design craft on display, if the results are consistently commodifying even as the volume of direct competitors explodes, have we created something of value, or are we simply talking to ourselves?

Put simply; good design is the new bad design. Good design has never been more available to more corporations for less money, which means it’s no longer a differentiator in its own right. Instead, it’s 21st Century table stakes. That doesn’t mean it’s unimportant. Like all things table stakes, you have to have it, and it has to meet expectations. The problem is that a judicious application of design craft simply isn’t enough to make any brand stand out today in the same way that it did even five years ago.

As a result, craft alone is no longer enough when considering any company's branding. Instead, we require a much greater emphasis on conceptual creativity, cut-through thinking, and deliberate breaking of the so-called rules across the breadth of the designed experience.

And that will be hard because there are few things as conservative as a design community that is both cutting in its criticism and narrow-minded in its idea of what’s acceptable. But our problem today isn’t designing something suitably acceptable; it’s designing something suitably different.

Now, designing different is far from a new idea. The London 2012 Olympics logo was designed as a deliberate response to the narrowing of design taste, and while excoriated by the usual suspects at the time, it’s almost certainly the only Olympic logo you can remember amid the stultifying schmaltz that came before and after. Before that, while Apple’s approach to design might today epitomize the acceptable mainstream, in 1998, it was daringly and strikingly different from the norm. And long before either of these, Coca-Cola created its iconic bottle as a direct response to a sea of copycat cola’s that consumers couldn’t tell the difference between.

So, it’s not that we can’t design brands to be radically and wonderfully different from each other. Or that we can’t embrace richness in digital. Or that we can’t elevate cohesion over rigid consistency. Or that we can’t embrace code and motion and sound and interactivity. Or that we can’t insist upon vastly bolder ideas. Or that we can’t deliberately test the edges in order to be as unique to our time as what came before was to its.

It’s simply that we choose not to.

2. McKinsey places the cherry atop bullshit mountain.

As we loosely enter a post-pandemic phase, bullshit mountain is getting bigger, actively peddled by the likes of McKinsey, where change-porn is necessary to create the FOMO they sell against, exacerbated by the shift from thought leadership (published occasionally, thoughtful, demonstrative of expertise) to content (published often, paper-thin, driving for clicks). Unfortunately, these proclamations are little more than thinly disguised ads. Originally published in Off Kilter Volume 31 in June 2020.

tl;dr: “Performance branding.” Sounds great. Is utterly nonsensical.

Part of the reason I started this newsletter was to call out ‘bullshit mountain.’ The sheer, unscalable mountain of crap that surrounds marketing specifically and business more generally. So, imagine my delight when McKinsey chose to place a cherry on it with a recent thought leadership piece on branding.

Under a title clearly designed for search engine glory, “Performance branding and how it is reinventing marketing ROI,” I found myself reading this steaming pile three times in the vain hope that I must have missed something the first time round, but no. At no point anywhere do they reference anything relevant to or pertinent to the field of branding. Not once. Nothing about building distinctiveness, salience, permission, creating a differentiated experience, the value (or not) of positioning, the importance of repetition, managing and periodically reinvigorating long-lived brand assets, the importance of reach as a counterpoint to personalization, how to manage brand activities v’s activation activities, or how to establish emotional meaning rather than just rational ‘buy now’ promotions. Not even a mention in passing of brand purpose (thank god). Literally none of it.

Instead, we get an incoherent discourse on surveys, analytics, and data counterpointed by their belief that performance marketing will give marketers an edge amidst the unknowns of Covid (a particularly jarring contrast given their otherwise focus on data) and the usual claptrap about agile testing of every nuance of every nuance, etc.

But, the most obvious and egregious error considering this comes from McKinsey is their core conceit about measurement and analysis. The authors fail to understand the fundamental reality that brand effects and activation effects show up across very different timeframes, so seeking to define a “single source of truth” for both via short-term measures designed for activation literally makes no sense. Chopping and changing your brand the way you chop and change your activation campaigns is a surefire recipe for branding chaos and market-mush, not performance branding nirvana.

So, why put their name on it if it’s all such obvious nonsense? Simple. It’s a cynical play from a strategy consultancy that’s increasingly renowned for it. The real problem with marketing today isn’t the ability to utilize performance marketing techniques; it’s the declining strategic value of marketing within the organization. As marketing departments get re-tooled and resources are piled into digital programmatic media and direct response promotions, the remit of marketing is becoming ever narrower and more tactical in nature. As a result, there’s now a generation of marketers who know a lot about tactical activation and very little about what it takes to build a brand strategically. So rather than help them establish a credible knowledge base and understanding of how to make a case for and then actually build a brand, McKinsey says to go ahead and use the tactical techniques you’re already comfortable with. Win! Well, after they’ve sold you a $3m+ consulting contract, it is for them to build out a performance branding stack that’ll get you precisely nowhere. This is such a cynical charade of feeding people what they think they’ll want to hear rather than what it’s important for them to actually know.

Oh, and to put a cap on it, I checked out the bios of the four authors. Not a single one has any branding experience at all. Not one.

Don’t waste your time with this shit. Instead, if you want to know more about how to balance brand and activation, read Binet & Field. If you want to know more about how brands grow, read Byron Sharp. Or, if you need a basic introduction to branding, start with Robert Jones. All are light years more cogent than this nonsense.

3. Brand building: Still a critical competitive moat.

As we witness the likes of P&G and Unilever successfully raise prices in response to/furtherance of inflation, while venture-backed DTC implodes due (partly) to an over-reliance on ad-tech driven discounting to make the sale, I figured this was worth rinsing off. Originally published in Off Kilter 34 in July 2020.

Tl;dr: Don’t believe the mar-tech industrial complex hype.

I commented on LinkedIn a while ago that the “marketing of modern marketing is mostly bullshit,” so I was quite heartened to see this report from Google make a few good points. I’m not going to review the whole thing because it’s quite long. Still, I want to focus on one of the underlying core elements hidden in the downloadable PDF - that brand strength acts as a powerful barrier to entry against new competition.

Why is this important? Well, for a couple of reasons. First, it suggests what we’ve already seen. Namely, that over-hyped VC-backed DTC startups often dramatically misinterpret the markets they enter. So rather than the established brand “ripping people off” with high prices that make it vulnerable, there’s a preference-premium for that brand, making it very difficult to compete against. Second, it’s yet another demonstration of how the marketing of modern marketing is mostly bullshit.

One of the most egregious elements of the shift to bullshit is the idea that the primary goal of marketing is not to build brand strength and establish a hard-to-compete with preference-premium but instead to focus religiously on transactional metrics around short-term campaign ROI and customer activation masquerading under the guise of “performance.” A focus that demonstrably has the dangerous side-effect of a harmful, sometimes fatal, spiral of discounting and price promotion.

Why is that important now? Aside from the chart in the Google report showing that people are more likely to search for the “best” product rather than the “cheapest,” the pressure is going to be on for many brands to compete on the basis of price. That’s the nature of recessions, after all. But the problem with the wanton pulling of the discounting lever is threefold: First, you train your customers to delay the gratification of purchase until the inevitable discount promotion is running, which kills your margin. Second, you accidentally optimize for the least loyal and most price-sensitive customers, which messes with your data-driven segmentation and renders customer lifetime value assumptions moot. And third, you can cause real harm to your brand that’s very difficult to repair. (I’ve worked with more than my fair share of clients looking for a brand revitalization caused by the realization that price promotion has caused real harm to their brand).

The true measure of the marketers who most effectively make it through the recession we’re in today won’t be those who discount their way to marginless oblivion, but those who resist the shiny promises of the mar-tech industrial complex and focus instead on building and sustaining a preference-premium, even if it is only a slim one.

Volume 106: Whiffing on post-pandemic demand.

August 4th, 2022

1. Whiffing on post-pandemic demand.

tl;dr: When smart people get delusionally greedy.

A couple of years ago, we were entirely in the grip of the COVID-19 pandemic. Most places were locked down, governments around the world were pumping stimulus into the financial system, and demand patterns across the economy had shifted radically–most obviously from services, which were shut, and thus unable to be purchased, to goods to make the homes we were locked down into cleaner and more comfortable.

Now, while some correctly identified this phenomenon as “demand pulled forward,” others, primarily the executive leaders of major global corporations and their advisors at McKinsey, made the mistake of viewing it as a “new normal,” which, with the clarity of 20:20 hindsight, we now know to be utter bullshit.

How do we know the new normal was not, in fact, a new normal? Well, we’re in earnings season. One of the most notable things being reported by corporations as varied as Peloton, Netflix, Walmart, Target, and Shopify is how many completely whiffed on post-pandemic demand. And when I say whiffed, I mean really and truly whiffed. (If you’re considering a new TV, now is probably a good time because Walmart and Target have loads of them)

As a few folks have pointed out, if you look at current consumer demand for goods, you see total volume looking rather similar to pre-pandemic numbers. Likewise, if you adjust the total value for inflation, you see something similar. In other words, we aren’t living in a new normal. Instead, it’s the old normal, with higher inflation and a newly endemic disease. Oh goodie.

Take Netflix. The most interesting thing about the subscriber losses that sent the stock nosediving wasn’t the decline itself but the abject failure to set expectations ahead of time. Instead of identifying pandemic-fueled demand as unsustainable and making the case that subscriber declines were likely once the world began opening up again, the executive team predicted continued super-growth, which led to an inevitable shareholder panic when subscriber numbers went in the opposite direction. This is a shame because if you control for both the super-growth and the subsequent declines, the long-term growth curve of Netlfix is pretty consistent. (Same with Shopify, btw)

Now, it’s easy for me to identify this in hindsight, but it’s also hard to imagine that this conversation wasn’t happening internally at the time. After all, it’s not like declining demand wasn’t a predictable outcome of lockdowns ending. (Granted, inflation may have been less predictable, and that is having an impact on “luxuries” like Netflix)

So, why do we think so many corporations whiffed this badly, set unattainable expectations with shareholders, and then paid dearly in rapidly declining stock prices?

Well, in two words: delusion and greed. As I’ve mentioned before, human beings are terrible at predicting the future. And when times are good, there’s a tendency for what Alan Greenspan labeled “irrational exuberance” to kick in. We’re used to seeing this in consumer markets like housing and crypto, and less so among the top echelons of corporate leadership–until now.

Here’s why I think this happened. First, a pandemic demand spike was a major contributor to unprecedented stock-price growth, leading to an untethering of market capitalization and the future performance necessary to justify it. (The poster child for this is Tesla, where market capitalization and short-term business performance have diverged to such an extent that a company with just 0.8% of new car sales globally is valued more highly than the next five largest car companies combined–and would essentially need to become the only car company on earth to justify its valuation).

With executive teams heavily incentivized to raise the share price, often by hook or by crook, this unprecedented untethering likely did three things. First, it juiced their own net worth, making these executives extremely wealthy. Second, they began to believe these rises were due to their brilliance rather than a unique moment in macroeconomic history. And third, they loved watching their net worth increase so much that they weren’t exactly willing to listen to anyone suggesting it couldn’t, or wouldn’t, last.

In sum, we entered a fantastical world among the upper echelons of business, where the desire for continued stock-price growth outweighed any suggestion of a dampening effect as pandemic lockdowns ended, government stimulus funds dried up, inflation rose, and people decided they’d rather go on vacation than buy a new TV set.

Now, it’s doubtful any of the leaders of these businesses will pay with their jobs, but this will go down in history as a poster-child example of irrational exuberance leading to a failure of strategic judgment. Unlike the surprise of the pandemic to most businesses, a dampening of post-pandemic demand, especially demand for goods and stay-at-home services, was entirely predictable as the world came back on stream.

2. “We let the work speak for itself.” Unfortunately, it has nothing to say.

tl;dr: Designers often their own worst enemies.

Catching up with a former colleague the other day led me to dig around a few design agency websites, and I have to say it was a singularly depressing experience.

It’s become such a boringly predictable formula. Rigidly grid out your site using the same wireframe as your competitors, show pretty pictures of your work across this rectangular grid, and…that’s about it. Occasionally, you might show something in motion to spice it up a bit. Sometimes, as a giant screw-you to the site visitor, you’ll have a seizure-inducing montage of fast cuts, motion graphics, and color that, far from being either enticing or intriguing, makes people immediately click off the site and go somewhere else.

Now, I know the justification for these generic, value-minimizing site experiences. It usually goes along the lines of “the only thing anyone cares about is the work, so we let the work speak for itself.” I suppose this would be fine, except for the sad reality that the work rarely has much to say. Especially if all you’re showing are pictures without context.

You might think I’m having a little anti-design agency rant here, but I’m not. Here’s why. While this stuff might not have mattered much over the past ten years where there’s been more work than designers to do the work, it might very well matter over the next little while, where it looks likely things will get more difficult in the new business stakes.

In crude terms, the impact of rising interest rates has shifted the world from a place where free capital drove growth to one where money is expensive; thus, the focus has shifted from growth toward profits. This, in turn, will have a big knock-on effect on the service provider ecosystem, of which design is a part because there’s less money to go around.

As a result of there being less money to go around, design firms are going to have to compete harder for attention, differentiate more effectively, and find ways of maintaining their own margins as the laws of supply and demand kick in and clients play designers off against each other to drive down prices on what they otherwise perceive to be a commodity.

As I sometimes joke, good design is $23/month. Why are you worth more?

Now, let’s, for a moment, put the pieces back together. To make websites for design agencies better means focusing on things that aren’t actually about the website itself. Like figuring out your value proposition, how you intend to position your own brand, how that differentiates you from the competition, and the kinds of work (and clients), you want to be doing more of.

Here are some tips:

First, if you’re going to show pictures of your work, adding words will help immeasurably in telling a story of value-creation in a business context. What was the problem you were solving? (Design problem and business problem) What was the before-state that wasn’t working? What drove the solution you created? Why is it differentiated/distinctive relative to the client’s competition? What commercial impact did it have?

Second, unless you exclusively sell to other designers (possible, if unlikely), don’t assume your audience knows anything about design, its role in business and consumer culture, and how it can aid their success. So you’ll need to lead them by the hand a bit in describing your approach and the kinds of problems you solve. For example, if you’re adept at using design to help brands deliver a more premium experience that helps maintain pricing power, then you need to be explicit about this. Don’t make the mistake of simply showing a picture of some premium-looking packaging and thinking someone will make the leap all by themselves. They won’t.

Third, define your points of difference. Perhaps this is your design ethos; maybe this is embedded in your process; perhaps it’s inherent in your deliverables or the tools that you create. It doesn’t really matter what your points of difference are. What matters is that you have some, that you clearly understand what they are, that you demonstrate them consistently, that they’re hard for others to replicate, and that they overlap with something clients find valuable (Points of difference that have zero bearing on client value are irrelevant).

Fourth, try not to fall into the “what have you done for me lately” trap. It’s a common refrain to think the only thing clients care about is the last job you did, but that isn’t true. Prospective clients don’t care about any of your work; they only care about which partner they believe will do the best job of solving their problem, of which your past work is simply a proxy. Every year, one or two agencies get hot because they were fortunate enough to do great work for one or two high-profile clients, but it’s rarely sustainable, and they tend to fall back to obscurity within a fairly short time. So don’t define yourself by the last job you did. Instead, define yourself by how you tackle the work, think about client problems, the nature of your creativity, or a unique approach. Design Thinking might be a swear word to many designers, but as a brand-defining method, it did more to drive the success of IDEO than any case study.

Fifth, and make of this what you will, one of the biggest gripes I have, especially with identity-focused agencies, is the deliverable theater of brand guidelines. Everyone hates them. You hate them, your client hates them, their designers hate them, and the advertising agencies don’t even bother looking at them. But, it’s an easy deliverable you can charge a lot for because it’s sizable and detailed, and it’s easily templated and churned out.

Thus, innovation becomes an opportunity. What if brand guidelines, instead of a lazy profit pool, were to become a combination of software tools, inspirational artifacts, and education, all built with that particular client’s capabilities and needs in mind? You could highlight this as a key point of difference and why you might be more expensive (higher cost being offset by greater effectiveness). This is also a metaphor for innovation in general - either in the deliverables, as above, or perhaps in your process, or wherever.

Anyway. Many will fail to get this right. Many will continue churning out their bland, generic Helvetica in Pastels crap, neatly lined up on a precisely gridded website. They’ll fail to understand that good design is the new bad design (yours for just $23/month, remember) and think they can get by with pretty little photoshopped pictures of their boring work on Times Square billboards their clients will never buy. And that’s great because you’ll be right there to pick up the business when those others fail to adapt.

——————————

Oh, before anyone comes back at me and says the Invencion website is crap. I know. I need to take my own advice and do something about it.

3. Losing a billion on Bitcoin.

tl;dr: A bizarre tale of Microstrategy deja-vu.

Until this week, I can honestly say I’d never heard of a company called Microstrategy. But after reporting a billion-dollar accounting loss on its Bitcoin holdings, I decided to do a little digging, and what I found is, well, more than a little bizarre.

Let’s bring you up to speed. Nominally, Microstrategy is a business intelligence firm founded in 1989 by two MIT grads named Michael Saylor (more on him in a second) and Sanju Bansal. It went public in 1998, saw a meteoric rise in value in 1999 to $3,300 p/share in early 2000, before immediately plunging to just $4 after announcing that revenues were considerably lower than previously reported, and the profits from 1999 were actually a loss. Oops.

Now, before we move on, please note the timing. 1998/99 was the height of the dot-com boom, a time of great hyperbole, much corporate hot-air, and a seemingly endless bull market run. The collapse of Microstrategy stock in 2000 was thus at the forefront of the dot-com crash. A bit like…oh wait a minute.

Anyway, after the lightest of slaps on the wrist from the SEC, the market value of Microstrategy stayed resolutely, boringly, consistent from 2000 to 2020, as what seems to be a resolutely, boringly, consistent business went about its business. And then, in 2020, in the face of declining revenues, founder and CEO Michael Saylor announced an intention to shift treasury holdings from cash to…Bitcoin. This then became a broader strategy, where the company was not only putting spare cash into Bitcoin but borrowing money to buy more.

Everything looked rosy. The stock price spiked in a way it hadn’t since that fateful period 20 years earlier. (Hey, why grow the stock price the hard way when you can spike it with Bitcoin speculation instead) And through a combination of cash created by the business and loans, Microstrategy now has around 120,000 Bitcoins on the balance sheet. Then the price of Bitcoin collapsed, causing a threatened margin call in May, and then last week, the company announced a loss of $917m on revenues of $122m, primarily from the decline in Bitcoin value.

This precipitated Mr. Saylor announcing that he’d be stepping down as CEO to take on a new role as Executive Chairman, with company President Phong Le taking on the CEO mantle.

In any normal company, a shift from CEO to Executive Chairman means said CEO is out; they just need to save face first. But, no. Not in the case of Microstrategy, where Saylor remains the controlling shareholder. He says his focus will now be 100% on the Bitcoin strategy while somebody else runs the business.

Aside from the potential risk of continued declines in Bitcoin value, here’s where this will probably go pear-shaped. On the one hand, you have a new CEO at a company that’s taken its eye off the ball of its (nominally) core business over the past two years, which was already seeing declining revenues, has now missed earnings expectations, and needs to find a way to turn an operating loss into a profit. On the other, you have an Executive Chairman and controlling stockholder who’s focusing all of his energy on crypto speculation. So, what happens if the CEO requires financial resources to invest in righting the ship? Or what appens if operating losses continue and Bitcoin holdings need to be liquidated to cover the losses?

Oh, I really don’t want to be in the room for those meetings. They’re going to be ug-ly.

And what on earth are customers of the business intelligence business thinking amidst all this? I know I’d be looking for a different partner because in that business, being resolutely, boringly, consistent is a major part of why people want to do business with you in the first place, and being exposed to crypto-risk is far from that.

And considering that business intelligence only reflects around 20% of the company's total value (80% tied up in Bitcoin), you’d be forgiven for thinking you’re not a priority. Because you’re not. You’re simply a cash pool waiting to be converted into BTC.

Anyway, who knows where it’ll net out? Maybe Bitcoin will boom again, and maybe it’ll crash. But I will say that I doubt the business intelligence business of Microstrategy will be in very good shape for a long time, if ever. And I certainly don’t think it’ll have the funds to replace that godawful logo anytime soon unless, maybe, there’s a designer that’ll take Bitcoin.

Volume 105: A lost decade of unproductive capital.

July 28th, 2022

1. A lost decade of unproductive capital.

tl;dr: VCs, startups, financialization, Meta, and more.

One of the most immediate effects of rising interest rates was widespread panic among the investor class. VCs immediately penning screeds such as this from Sequoia Capital, which across its 52 pages essentially says, “Growth is out, profits are in, capital is more expensive; get ready to cut spending now.” Ironically, this is eerily similar to how they reacted to the early days of the pandemic, which immediately preceded a valuation boom. This shows that no matter how smart we think we might be, we remain appallingly bad at accurately predicting the future. I suppose that if Sequoia Capital predicts the sky is falling often enough, it’ll eventually get it right.

Anyway, the backdrop to this is years of commoditized money. While none would admit it, the venture capital industry has been engaged in a years-long knock-down, drag-out, price promotion war. With interest rates at zero, vast amounts of capital flowed into VC coffers, seduced by the valuation growth of prior generation wins like Google and Facebook. As a result, VCs were competing to fund the “best” ideas (Best, in this case, meaning ideas brought to them by wealthy white male Ivy League graduates, irrespective of that idea’s actual business viability). Now, because there were fewer wealthy white male Ivy League graduates with startup ideas than there was capital to invest in these ideas, the VCs found themselves fighting each other for the right to invest in even the silliest and most unproductive of companies. A battle fought by offering founders more capital for a lower ownership stake at a higher company valuation. In practical terms, this is the same as you or I clipping coupons and then pitting Walmart and Target against each other on price.

To set the elevated private market valuations necessary to justify these capital infusions, VCs (loosely) use public companies as their benchmark. Something that works out awesomely when publicly traded tech firms rise in value because you get to increase the value of your VC portfolio businesses and neatly hide the fact you gave them a whole bunch of money at a huge, whopping discount. However, publically traded tech firms are now sliding, which means VCs can no longer justify fantasy valuations, which means the money is drying up.

Where once the candy jar was left out at reception for any Ivy League grad to gorge themselves, today it’s hidden away, and only the most ruthless will be allowed to have any.

Now, let’s look at an interesting second-order effect. Estimates are that 43c of every VC dollar ends up in the hands of Meta and Google. This means the more money VCs give to startups; the more revenue is generated by two of the world’s largest tech firms. This, in turn, increases their valuations, bringing other publicly traded tech stocks with them. As publicly traded tech stocks increase in value, VCs can then value their portfolios more highly, which justifies handing out more money at ever-increasing valuations…I think you can see where I’m going here. The interdependence of the whole system acting like a financialized Ponzi flywheel for the VCs, the startup founders, and Meta.

Well, that was then, and this is now, and the whole interdependent system has gone into reverse. Yesterday, Meta reported Q2 numbers, and they were ugly.

The why is simple. Startups are following VC advice and cutting spending, Apple privacy changes continue to play merry hell with the Meta business model, TikTok is eating its lunch, it’s distracted by disembodied cartoon characters with no legs, and it’s busy destroying the only good product it has by making it feel like Facebook and TikTok had an ugly baby called Instagram.

Bad results will drive Meta’s valuation down, dragging other tech stocks down too, which means the value of VC portfolios slide further, meaning less money for startups and, thus, less revenue for Meta…

Anyway. I bet you never thought an answer to Meta’s uncoordinated flailing would be increasing VC capital to startups. But there you go. Long may the world’s most dangerously unethical corporation struggle.

On a more serious note, the sad thing is that it represents the end of a decade-long infusion of what we now know to be unproductive capital. We didn’t get the next value-creating tech behemoth like Google, Amazon, or Meta. Instead, we got profitless (and likely never to be profitable) dross like Uber. Now that the antibodies in the financial system are beginning to kick in, we’ll see any number of such profitless businesses going bankrupt or getting snapped up for pennies on the dollar. And what will remain? Few built any meaningful new technology, few innovated breakthrough new business models, and few built brands with long-term value. So it’s actually kind of sad when you consider what all that capital could have gone to be long-term productive.

As an aside, this is an excellent dive into the unproductive reality of the past ten years of startups. The author points out that 67% of publicly traded former “unicorns” are so unprofitable that their cumulative losses exceed yearly revenue. If these businesses were to magically achieve 10% profitability today, it would take them until 2032 just to get out of the red. And most are nowhere near hitting 1%, let alone 10% profits.

2. Like a phoenix from the flames, the store brand rises.

tl;dr: Inflation, recession & big brand price increases = opportunity.

When I first moved to the US in 2004, I remember being struck by the awful supermarket experience. Grubby, poorly lit, narrow aisles, lousy signage, illogical layouts, and horribly designed store-brands. (I also did what I subsequently found every British ex-pat does, which is buy half & half thinking it’s half fat milk. It isn’t; it’s half milk and half cream. So let’s just say it doesn’t taste great on cornflakes and leave it at that.)

Unlike in the UK or across Europe more generally, where the most common approach to store brands has been to prominently showcase the store name via a clearly labeled cross-category approach, this didn’t seem to be how it worked in the US. Instead, the approach is more commonly one of copying the category leader and hoping the consumer doesn’t notice, which CVS, among others, still does, having launched “Gold Emblem” just last year.

At the time, I remembered what I’d been told about Tesco Value years earlier, where the point had been made that “Kellogs might be bigger than Tesco in cereal, but it isn’t bigger than Tesco,” which was a justification for the idea that copying category leaders is almost certainly the worst way to leverage a strong retail brand.

Which is a roundabout way of saying that I think most American retailers fundamentally get their store-brand strategies wrong. It’s crazy not to leverage your biggest and best-known brand inside your own stores, especially since it’s almost certainly the only brand you’re spending any money on building. (As an aside, I’m not surprised to see rumors of Amazon shuttering gazillions of its sub-scale brands as a sop to a government pursuing them for anti-competitive behavior. It’s a strategy that didn’t work for pretty obvious reasons. I guarantee, however, they won’t be killing Amazon Basics)

Anyway, the reason I’m talking about this right now is that with inflation running hot globally, big brands responding with price rises to maintain margin rather than share, and many consumers facing an unprecedented cost of living crisis, the conditions are ripe for store brands (and value brands more generally) to take advantage.

Which is exactly what’s happening. According to recent figures from the Wall Street Journal, store brands have lifted market share by over 1% to now sit at just over 26%. This suggests that an even greater shift toward value is likely if/when we slide further into a recessionary cycle.

So far, the big CPG/FMCG corporations have responded bullishly by claiming to have learned from a Latin American playbook vis a vis inflationary conditions. Now, that’s all well and good as long as the margin they maintain more than makes up for the share they’re losing. But, if history and this cycle’s earnings reports, which show a load of businesses completely whiffing on post-pandemic demand, are any guide, this bullishness will likely switch quickly once retailers take advantage of the opportunity to increase pressure by promoting their own brands, and value brands more generally sense an opportunity to grow.

More broadly, what’s interesting about market shifts driven by changes to macro-economic conditions is how quickly some companies sense opportunity while others get stuck playing defense. For example, during the financial crisis, Hyundai took advantage of GM and Chrysler going bankrupt to launch a program allowing customers to give their cars back if they lost their jobs, doubling global market share. At the same time, Italian wine growers used the financial crisis as an opportunity to reposition Prosecco from cheap fizzy plonk to an alternative to Champagne.

Looking forward, I’ll be curious to see how the value landscape shapes out, which brands take the opportunity to re-position, make brave moves, and grow their businesses, and which get caught flat-footed playing defense and losing as a result.

3. One Prime PillPack Medical is a very big deal…Assuming it can deliver.

tl;dr: One Medical puts another piece in the Amazon jigsaw.

You’d think a business like Amazon would have tremendous strategic flexibility, having such scale, scope, and incredible resources that it can do pretty much anything it wants. But that isn’t really how it works. The truth is, when you reach its size, your options become heavily limited by the scale of the opportunity. Put simply, when you’re valued at $1.2trn, you need opportunities that will add hundreds of billions in revenue because a few billion here or there won’t make a difference.

This is why Amazon is buying One Medical and getting even more serious about healthcare; it’s one of the few market segments representing a $100bn+ opportunity.

Now, I need to do a quick level-set on why this is such a big deal for anyone outside the US. American healthcare is a massive, massively inefficient, massively bureaucratic, complex, and uniquely American mess. To put it in perspective, this is the only country in the civilized world where you can quite easily end up bankrupt if you get cancer due to the cost of lifesaving care. And that’s with good insurance.

The numbers are truly staggering. Between 1960 and 2020, healthcare as a % of GDP rose from 5% to 19.7%. By 2028, this is expected to rise to $6.2 trillion. To put this in perspective, yearly healthcare costs are predicted to rise by the equivalent of the total market capitalization of Apple over the next six years.

As anyone who’s ever had to use the healthcare system in the US knows, it’s unfathomable. It’s so backward that I once had to write and then mail a paper check to my son’s doctor for $2.56. This was the only payment method they’d accept, and the first I knew about it was a threatening letter from a collection agency 18 months after we’d been to the Dr. It’s just a downright nutso, bizarro mess of an experience.

But, and it’s a ginormous but, nutso, bizarro, inefficient messes are like mana from heaven for a business as ruthless and ruthlessly efficient as Amazon.

Now, there are many questions about whether we think it ethical, or even acceptable, for a business like Amazon that already knows so much about us to have access to our medical records. But, there’s no doubt this is a market desperate for a disruptive shakeout. And Amazon is one of the few businesses with the scale, technology chops, and infrastructure to make it happen.

It’s not hard to predict where this might end up. Having already purchased PillPack (and others), Amazon can mail prescriptions anywhere in the country. Adding One Medical brings the ability to see a doctor, either in person or, more likely, via telehealth. Plug in 200 million Prime members, and the potential is…significant. If they can deliver, which many doubt. (Please pardon the pun)

I can see people asking Alexa to re-up their prescriptions or schedule an appointment with a doctor to check on their child’s cough. I can see Amazon Prime Medical becoming a low-cost GP service covering all your basic needs. I can see a marketplace much like their retail marketplace for more specific medical or cosmetic care. And I could even see Amazon getting into the drug manufacturing game to drop prices further (hey, if California can make Insulin, why can’t Amazon? And if the only thing stopping them is the law, lobbying money changes laws.)

We might even see some weirdly dystopian stuff going on. Like wearers of the (already dystopian) Halo band getting a cheap insurance package in return for constant monitoring of their fitness and activity levels…and price increases if they forget to go for a jog or decide to smoke a cigarette.

On balance, though, aside from all the very real ethical concerns, it’s probably a good thing Amazon is doing this. It’ll force innovation into a space that has none and might shift an increasingly bleak cost curve in a direction that favors the consumer.

Welcome to America.

Volume 104: An obscenity of strategy.

July 21st, 2022

1. An obscenity of strategy.

tl;dr: An attempt at greater clarity.

Spend any time among self-labeled strategists, and you’ll quickly realize a fairly disturbing reality: a disproportionately large number are pretty uninformed about what strategy is. Some know they don’t know; some pretend they know; some even think of themselves as masters of the art. But dig a little deeper, and you’ll understand that strategy is little more than a paint-by-numbers exercise for many—something you do before moving on to the next client and doing the same thing all over again.

Thing is, it’s not entirely their fault. Most work within an agency ecosystem that has an institutional allergy to training and full-time hiring, meaning they’re left to figure it out for themselves. Exacerbated by the fact that client organizations often have a less than stellar understanding of strategy too. Part of the problem is that strategy can be hard to pin down. There isn’t a single, easily understood definition of what a “good” strategy looks like compared to a “bad” one. It’s a bit like the famous non-definition of obscenity - I’ll know it when I see it. So, to help us understand strategy better, it isn’t really enough to try and define the term; we should instead consider its hallmarks.

Three hallmarks make strategy unique compared to every other business activity:

1. It deals solely with the future

2. It dictates resource allocation choices

3. Its focus is on how the company can win

Let’s walk through these things in order. First, strategy deals solely with the future. Here’s a very oversimplified view of this. The future is the one aspect of business that’s fundamentally unknowable. We can analyze what happened yesterday and monitor (increasingly in real-time) what’s happening today. But we can’t know what will happen tomorrow; we can only infer what we think will most likely occur, often by analyzing data from the past. However, even though the future is unknowable, businesses must still make decisions that impact their future every day, so to maximize their chances of success, they rely on strategy. (As an aside, this is why I believe strategy is fundamentally a creative exercise. As Roger Martin points out, it requires imagination to picture a business operating along what might be a very different trajectory than it does today).

Now, the above might seem conceptually esoteric, so here are two examples, one of bad strategy and one of good. Something we can only really understand in hindsight.

Kodak famously invented digital photography. However, they chose not to embrace the technology. Their strategic focus was instead placed on film. While this was logical at the time based on an analysis of past data, it ultimately proved to be a bad strategic choice. Rather than consider what might happen if digital photography became the norm, Kodak leadership looked backward at how to maximize its existing investment in film production. (There’s a lot more to this example, apologies for oversimplifying to make a point)

Apple famously did not invent the MP3 player. However, its leaders saw the potential and made a strategic bet on creating the iPod, which they then doubled and tripled down on before using what they learned from building small devices to develop the first iPhone. While many would see this as a product win, it was first a strategic choice to allocate resources to the product. The iPod didn’t magic itself into existence.

These examples also give us insight into the second hallmark - resource allocation. Every business, even the very largest, has resource constraints. As a business school professor taught me many years ago:

“Strategy is resource allocation. If we had infinite resources, there’d be no need for strategy. We’d just try everything and double down on what works. But, since no company has infinite resources, we have to make choices. The sum of these choices is your strategy. [whether you realise it or not]”

In the case of Kodak above, the choice was to allocate resources to the production, innovation, marketing, and sale of film, which meant not allocating resources to digital photography. In the case of Apple, the choice was to allocate resources to the iPod's production, innovation, marketing, and sale. It was in a position to do this because Steve Jobs had previously decided to eliminate 70% of Apple’s products because he did not believe Apple could win in these categories. As an aside, something often missed in strategy formulation are the things you will stop doing to free up resources for the things you intend to do. A lesson I learned years ago from a client whose response to pretty much every idea was, “This sounds awesome. What will we stop doing so that we can do this instead?”

This neatly brings me to my third point: Strategy focuses on how and where the company can win, which is the most important single aspect, and why companies like McKinsey are paid so much money to do what they do. They aren’t being paid solely for data analysis. They’re being paid to help the c-suite figure out how the business will win in the future because that’s what the c-suite is paid the big bucks to do. Never forget that the value of any business is based on expectations for future success and not just current operating performance.

There’s a lot inherent in the question of “how the company can win.” Winning can come in different forms - it might mean being the biggest, most profitable, most valuable, the most salient, the highest quality, etc. It also requires us to consider what the organization is capable of and how it can best leverage its assets interestingly and uniquely. As a result, while I’m giving it short-shrift right now, it’s here that most of the heavy lifting of strategy falls.

So, let’s quickly get back to self-labeled strategists. If this is what you do for a living, the hallmarks of strategy are a great tool to help you think about your work. Irrespective of frameworks, approaches, or outputs, ask yourself:

1. Am I focusing on the future and not getting dragged into immediate-term concerns?

2. Which resource allocation choices will my work dictate, and am I making that clear to others?

3. Am I clear about how the company can win, what it will take to win, and am I articulating this compellingly?

2. Planned, emergent, unconscious, and post-rationalized.

tl;dr: A brief walk through common forms of strategy.

In recent months advertising Twitter discovered the concept of planned versus emergent strategy, presenting it as something profoundly new and groovy in marketing-land. This made me chuckle because it’s a debate that’s been raging since the 1990s.

This long-running battle started when Henry Mintzberg (among others) criticized the scenario planning approach to strategy pioneered by the military and then adopted by major global corporations to plan out multi-year strategies because it turned out that these massively complex multi-year planned scenarios rarely turned out to be accurate in reality, which meant rigid strategic plans established on the basis of inaccurate predictions ended up being highly wasteful. (I’m massively oversimplifying here, apologies)

By contrast, Mintzberg celebrated what’s now referred to as emergent strategy. He observed that, in reality, strategies emerged more often than they were planned. Which meant the key to emergent strategy lay in fluidity, as businesses monitored the environment in which they operated and then quickly synthesized emergent factors - doubling and tripling down on things that work, killing things that didn’t, and pivoting as new and sometimes unexpected opportunities emerged. OODA Loops, another “newly discovered by advertising” strategic framework, is a means of formalizing emergent strategy. Also originating with the military, this time as an approach to air-to-air combat, it’s now being embraced by corporations to rapidly respond to competitive maneuvers in a fast-moving market.

I find the planned versus emergent battle to be of little practical usefulness. In reality, you need a little of both, which I’ll come back to later.

A third form of strategy, which is frighteningly common, is what I refer to as an “unconscious strategy.” In an environment with an unconscious strategy, resource allocation decisions are being made, but nobody can really articulate why they’re being made or the strategic intent they’re meant to support, and often they’re at cross-purposes with each other. Equally, there tends not to be a strategically conscious synthesis of emergent factors; there’s just a reaction. Often, a panicked and highly tactical one. But, just because the strategy is unconscious and the business operates tactically doesn’t mean it won’t be successful. Many are. It’s situation dependent. One observation I’d make is that companies with unconscious strategies tend to be fairly common in stable, predictable categories, and these businesses tend to struggle as volatility increases. They also tend to be exhausting to work with and work for due to their prioritization of tactical action over everything else. Companies with an unconscious strategy love to throw around terms like “agile marketing” to justify acting without thinking.

Finally, we have another common form of strategy you won’t find mentioned in textbooks: the post-rationalized strategy. Here, you look backward, rationalize what happened, and call it your strategy. This tends to be common under two circumstances. First, where there isn’t a strategy, but you need to create the impression that there is. For example, I once worked with a cloud computing business that talked about having a “full spectrum strategy,” which sounded good until you realized it was just their post-rationalization of a messy, complex, and largely un-competitive product portfolio. The second type of post-rationalized strategy comes from companies that have been successful but don’t know why. This is common in startups, where luck and good fortune are often post-rationalized as a strategy the founders then package and promote to others. Often, this ends up being little more than an exercise in survivor bias, as demonstrated by a common inability to replicate their own success twice.

If you’ve made it this far, you might wonder why this matters. Well, for a very simple reason. When you start working with a new client, or if you join them for a job, their approach to strategy tells you a lot about the organization. Organizations with heavily planned, deliberate strategies tend to be quite rigid. Change here is hard. Organizations with emergent strategies tend to be quite fluid. Change here tends to be easier but typically requires clear synthesis first. Organizations with unconscious strategies tend to have leadership teams with differing strategic agendas and are tactically reactive and chaotic as a result. And finally, organizations with post-rationalized strategies could be any of the above, which means you require a little more questioning to figure out if they actually have a strategy versus a beautiful articulation of something that made them successful once.

3. Putting brand strategy into context.

tl;dr: Fitting it together.

OK, so this is all well and good, but how does any of this talk of strategic hallmarks, emergent strategy, post-rationalization, etc., have any practical impact?

OK. So, let’s look at a few things. I’m sorry, there are only a few; I’d have to write a book or a lesson plan if I wanted to cover everything that matters.

First, it’s important with any new client to get a sense of two things that will dictate everything that follows. First, what’s their business strategy? Second, how strategically do they treat their brand?

Sometimes the business strategy is directionally obvious. This is great, as it provides a clear foundation and set of guardrails upon which to work, and the job is primarily focused on what the brand needs to do to help deliver. (At least until your work starts to identify holes in the business strategy, which does happen upon occasion) Unfortunately, clarity of business strategy is a fairly rare occurrence. More likely, you’ll find the business strategy falling somewhere between emergent and unconscious, which means your first job is to identify what it is and articulate it back to the client in a way they can all agree on. Because without this clarity and agreement, you’ll be working atop foundations of sand.

How the business thinks about and treats its brand internally is also very important. For some, it’s a genuine strategic asset. The business leaders see it as a critical customer and employee-facing component of their broader strategy. They’re keen to understand how the business, product, and experience will need to change over time to deliver on it and are engaged at both a resource allocation and how-to-win level. These are the best clients, but they’re also quite rare. More common is the opposite: the client that limits brand strategy to communicating what they’ve already got rather than how they intend to do business in the future. It’s hard to be truly strategic when you’re limited to “rearranging the deckchairs” via messaging. And while communication and framing are critically important, it’s hard to find satisfaction when the only thing you can influence is a message and how it’s written.

Assuming you navigate these things and you’ve developed your brand strategy, what form does it take? Well, I mentioned before that I find the battle between planned and emergent strategy to be pretty much useless in practical terms. This is because you need a little of both. Great strategies set direction, but they shouldn’t be so prescriptive that they act like a straitjacket. (As an aside, this is one of the bugbears I have with the deliverable-theater of visual identity guidelines. It should be a strategic tool that inspires people to act in a certain direction. Instead, it’s usually hundreds of pages of prescriptive grids and things you shouldn’t do. No wonder the ad agencies ignore them.)

But as much as the strategy can’t be a straitjacket, it can’t be completely emergent either because that typically ends up in a highly stressful situation of fire, ready, aim, where any cohesiveness of direction gets lost to chaos.

This is why, as I think about brand strategy, the most helpful metaphor is that of setting direction without getting too prescriptive around specific actions. There’s a modern military sensibility that’s useful here. It starts with the observation that “no plan survives first contact with the enemy.” To paraphrase an article I once read, complex military plans get boiled down into simple directional guidance for soldiers with boots on the ground, who then have tactical freedom to get the job done. Thus a complex plan to “take the hill” might boil down to directional advice as straightforward as “Platoon 6, it’s your job to move straight toward the hill. As you do so, don’t fire or move left. Another platoon will be there. You can do anything you want on the right. Everything else is fluid and up to you.”

This is a great analogy. No brand strategy survives first contact with the market either, so you need to be able to give people on the ground the tools they need and the direction they require to do their jobs well, cohesively, and without accidentally shooting each other in the process. In my experience, no matter how compelling the brand strategy might be, it’s rare to find an organization adept at translating this strategy into clear directional guidance for individual teams within which they’re given the tactical freedom to execute.

So, while I advocate for a deliberate strategy to set direction, I wouldn’t advocate for it to be so prescriptive that it acts as a straitjacket. It also has to be used in such a way that it can flex in response to change. It might seem like a subtle difference to be responsive rather than reactionary, but it’s huge in practical terms.

Being a consultant, this is the least satisfying aspect of my work. While I enjoy setting direction with my clients, there’s rarely an opportunity to work on what I’d refer to as “applied strategy,” which means establishing the direction and then working to see it through in application via action and tactics. Responding to change, doubling down on successes, learning from doing, synthesizing, and then bringing it back up to the strategic level to subtly reset direction.

Anyway, I hope some of this has been useful. Off Kilter shall return to its usual programming next week. I’m sure somebody somewhere will have done something daft enough for me to rant about.

Volume 103: From Ultimate Driving Machine to a total bag of...

July 14th, 2022

1. From Ultimate Driving Machine to a total bag of dicks.

tl;dr: BMW holds customers hostage, dilutes brand.

OK. So, nobody ever got rich by claiming car companies were the most customer-centric operators on the block, but the news that BMW is turning its cars into a microtransaction subscription platform truly turns them from the ultimate driving machine into a total bag of dicks. Apparently, getting a heated seat in the UK, Germany, New Zealand, South Africa, and South Korea isn’t just an optional extra; it’s now a microtransaction. For $18/month, you get a warm butt. And, if that indignity wasn’t enough, they also charge a subscription fee to access map updates, “iconic sounds” (whatever the hell that is), auto-headlight switching, safety camera information, cruise control, and more. What’s worse is the smarmy way they communicate all this:

“The hardware for this feature has already been installed in your vehicle during production, at no extra cost.”

WTFF? No extra cost? I’m hitting the roof and don’t even want a BMW.

Let’s break this down a little. You’re going to go out and buy a new car. You’re looking at BMW, and you’ll pay, I dunno, anywhere from $50k-$100k+ for the privilege. But, to access basic functionality, you must choose from an a la carte menu of monthly subscription options? Ummm, no. In fact, HELL NO. There are plenty of other cars out there. So why be held hostage by Bavaria’s finest?

I suspect that I’m far from alone in thinking this way. This is a classic example of a business decision being made without a thought for the customer or the brand. It’s so dumb; McKinsey probably recommended it.

Before getting into the brand impact, let’s first go through the logic of the spreadsheet-based decision-making process. While I’m paraphrasing here, it almost certainly went along the following lines: There isn’t much profit in the car business. It’s costly to produce multiple versions of the same vehicle, and once a sale is made, there are no recurring revenues beyond spare parts. But…what if we could make a single version of every car and then have its functionality turned on and off through software? Then, they’d be cheaper to make, and we’d get a recurring stream of profits for the vehicle’s lifetime, which, based on the valuations of other businesses with recurring subscription revenues, could multiply our market capitalization by up to 8X.

Sounds tantalizing. But, here’s the problem. The car industry is one of the few major consumer industries that are still relatively competitive, so this plan only works if customers choose to accept it, and many won’t. You don’t have to buy a BMW; you have a bevy of other choices that aren’t nickel and diming an $80,000 purchase. Moreover, this industry is undergoing a rapid shuffling of the deck as electrification goes mainstream.

This month, the US hit the 5% milestone for EV sales. This matters because, in other countries where 5% of new cars sold were EVs, it precipitated rapid hockey-stick-like growth, where EV sales quickly rose to 25% or more.

And, who’s best poised to take advantage? Well, in two words, not BMW. Tesla has already eaten heavily into their market share, they’ve been slow to electrify, and Hyundai, Ford, Mercedes, and VW Audi Group are all ahead, which is creating what looks like a generational shuffling of the competitive pack. Now, add what looks like a set of short-sighted, anti-customer, and brand-diluting behaviors, and well, I can easily see BMW losing share as others gain.

That’s not to say they’ll be the only car manufacturer going subscription. McKinsey advises all of them and achieves economies of scale for itself by selling the same strategy multiple times. Still, the truth is that it might be a compelling value proposition for a lower-cost player.

If the purchase price is low enough, the idea of turning features on or off as needed or as your budget allows is really interesting. Just not when you’re dealing with a premium product that costs a fortune already. I mean, bloody hell. It’s like Nordstroms charging you for customer service.

2. The first SaaS recession?

tl;dr: I’m not sure we fully understand what might happen.

Over the past twenty years, one of the singular shifts we’ve seen is from on-premise software and services to software as a service (SaaS) delivered via the cloud. This hasn’t just changed how businesses and individuals use software. It’s also had a fundamental impact on business models, capabilities, and cost structures as software has shifted from something you buy to something you rent, blurring the boundaries of what’s inside and outside the corporation in the process.

To date, the markets responsible for valuing businesses (both public and private) have been extremely bullish on this trend, valuing SaaS software businesses with strong recurring subscription revenues more highly than their more transactional forbears.

What’s interesting today, though, is that assuming we are entering a recession, as looks increasingly likely (some believe we may already be in one), it will be the world’s first SaaS recession. Using 2008 as a proxy for the last significant downturn, the SaaS industry is approximately 28 times larger today than it was back then. That’s a massive shift with potentially significant consequences.

There are two things I’m keeping an eye out for. First, how many businesses will choose to turn off SaaS services? And second, how many companies will depend on them, even if prices rise? Let’s take each in turn.

First, one of the major reasons for bullish valuations for successful SaaS businesses has been how low their churn rates are. Typically, a successful SaaS business adds a healthy number of new customers while at the same time retaining 93-95% of existing customers, which is an almost ideal model for growth. However, I’ve seen observers note that while many SaaS businesses are still seeing healthy customer acquisition, the churn side is starting to look a lot more volatile, which is precisely the kind of problem that could leave many businesses in much trouble, especially if they were profit-challenged to begin with. The real question, though, is going to be just how easy it is to turn these services off, how mission-critical they are, and how readily available cheaper substitutes might be. Look out for easily substituted, easily turned off, non-critical SaaS businesses to potentially be in trouble (likely leading to further market concentrating M&A activity as the strong snap up the weak).

On the flip side, one thing that symbolizes “born in the cloud” businesses is how asset-light they are—typically built atop an array of SaaS services. Just take an average DTC retailer as an example, which is likely renting everything from its storefront to its credit card processing, to its customer care, its warehousing, delivery, etc—in this case, turning off parts of the stack, whether something as fundamental as the storefront or seemingly esoteric as deep learning algorithms, will be hard, if not impossible. And here’s where there’s likely to be a squeeze. Here, SaaS businesses that feel they have power over their customers, for whatever reason, will be tempted to raise prices to offset declines or weaknesses elsewhere. And, if enough of them do this, it might result in some customers no longer being viable as their cost of doing business rises.

So, what’s the net, net? Well, I don’t think valuations have traditionally considered how prone some SaaS services might be to being turned off. Equally, we haven’t considered the knock-on effects within an interdependent ecosystem of essential SaaS services raising prices to offset weaknesses elsewhere.

So, watch this space.

3. The Creative McKinsey? Sure, but at least be a little thoughtful first.

tl;dr: Everyone gets this one wrong.

If I had a dollar for every time an agency CEO told me they intended to build the “Creative McKinsey,” I’d have, I dunno, about $20. Which doesn’t sound like much until you realize how few people I talk to in an average day. From this small sample, I suspect that being the Creative McKinsey is a much more prevalent aspiration than anyone realizes.

Of course, you can see why. McKinsey is a $10bn behemoth of a management consultancy that works heavily at the top echelons of business and government, sometimes both at the same time (neat trick being both poacher and gamekeeper), and they’ve built the pre-eminent global advisory brand, even as they’ve done their level best to tarnish the crap out of it.

However, saying you want to be the creative McKinsey is a bit like saying you want to be the Die Hard of Consulting. And therein lies the inherent problem, which is one of strategic laziness.

The aspiration is fine; what is lacking is any diagnosis of why McKinsey is as successful as it is and a complete lack of strategy to achieve a similar outcome. As a result, this becomes a compelling metaphor for the problem of non-existent diagnosis combined with a lack of imagination in strategy formulation.

Here’s what typically happens. The CEO of said agency articulates their desire to be the Creative McKinsey. They mistake this asinine statement for true strategic insight and immediately get on the blower to their top recruitment consultant, where they say. “We’re going to transform this industry by building the creative McKinsey. I need you to find me the finest management consulting talent my agency dollars can buy.” So off the recruitment consultant goes and rustles up a few MBA types.

Spotting the problem yet?

Well, if you haven’t, here’s a tip. You don’t end up as the Creative McKinsey by drop-shipping expensive management consultants into a creative business and hoping it’ll all just work out. In the best-case scenario, you end up with a McKinsey-lite management consulting practice with a thin layer of creativity sprinkles over the top. In the worst, you end up in chaos as sparks fly, cultures clash, and DNA gets rejected right, left, and center. I’ve experienced both in my career. Both are exhausting, and I’ve never seen it work. And by work, I mean last more than a few months before the consultants either leave or get fired.

Here’s a tip. McKinsey is successful because it pioneered the kind of management science and analytical management techniques that today serve as the foundations of modern management. Everything they’ve since become over a hundred years or so is built atop this foundation.

This means you can’t just analysis your way to becoming the Creative McKinsey. Instead, you must do what McKinsey did for analysis 100 years ago, but this time for creativity in the current context. You must make creativity intrinsically valuable to business leaders, fundamental to how they view the future of their businesses, and something they view as a critical set of capabilities to be brought in from the outside that they do not have and cannot easily buy from others. And you need to show why it’s a real alternative or complement to McKinsey and not just McKinsey-lite.

Now, this is a tall order. I’m not going to pretend I have the answer. (If I did, I’d be building it, not writing about it in a newsletter). But, I do want you to take away the importance of having a clear diagnosis before jumping to a solution. And the need to embrace imagination in formulating that solution, rather than simply repeating the mistakes of others over and over again in the magical hope of a different outcome.

The problem with Creative McKinsey = hiring McKinsey consultants has always been one of no diagnosis leading to an obviously and unimaginatively lousy solution.

Volume 102: A future made by design.

July 7th, 2022

1. A future made by design.

tl;dr: A prediction from the Nostradamus of Business, aka NoB.

OK. So, I’m not generally in the business of making predictions. Because, as I’ve pointed out many times, the only thing we can predict with absolute certainty is that humans are consistently awful at predicting the future.

But, a few things I’ve predicted have come to pass. I first wrote about brand purpose in 2009, and we know where that ended up. Around that time, I also predicted that digital advertising would become a subset of sales rather than marketing, which played out. And finally, I predicted that marketing automation would be transformative, just not necessarily in a good way. And that also panned out (basically, the more you can automate, the more spam you can execute because the cost of doing so essentially drops to zero. Cough, email marketing, cough, cough).

Anyway, since I have selective memory and have conveniently forgotten all the predictions I made that failed, I now get to present myself to you as the Nostradamus of Business (NoB for short). So what does this NoB think comes next?

First, let’s quickly look back to look forward. In the run-up to the dot com crash of 2000, there were a bunch of speculative businesses - remember Boo.com or Clickmango - that collapsed spectacularly. This was often because the vision outstripped the available infrastructure, while others - Google, Facebook, Amazon - went on to thrive, often because they were building the infrastructure as they went. We then went through 8 years of consolidation until the 2008 financial crisis drove interest rates to zero. We didn’t know then, but zero percent interest rate policies (ZIRP) were about to fuel another huge speculative bubble in tech, where profitless businesses, often with negative unit economics, became the norm. And while WeWork was the poster child for this speculative nonsense, Uber is perhaps the most salient example of a huge non-tech tech business (it’s a taxi company) using technology to scale negative unit economics into a business that’s never likely to make a profit. (Although its CFO has a great future as a fantasy fiction writer.)

Behind all of this free-money-fueled speculation, however, there was an unprecedented and transformative shift in the infrastructure of the Internet. A shift, I believe, is the foundation for what happens next.

Because businesses like Boo.com couldn’t exist if the infrastructure to support them didn’t exist, we spent over twenty years investing heavily in engineering as a driver of competitive advantage, which ultimately metastasized into where we are today: A world built by engineers.

But, as the old saying goes, “the seeds of future destruction are sown in today’s successes.” In other words, will engineering continue to drive competitive advantage in a future where the infrastructure has largely been built, or will it fall back toward being a commodity again?

As a metaphor for this future, let’s compare Netflix with Disney. For Netflix to be Netflix, it had to build everything necessary to deliver streaming, which required a boatload of technical staff and resulted in a heavily engineering-driven culture. Disney didn’t need to build this same infrastructure; it just had to plug it in. Disney isn’t an engineering-driven culture; it’s an IP and consumer experience-driven culture. So, who’s going to win?

I like Netflix very much, but it’s clearly floundering, unlike Disney. What’s most apparent as they throw shit against the wall in the hope that some of it might stick is that the engineering and data-driven culture of Netflix is holding it back. Fundamentally this is not a creative company; it just threw a lot of money at storytellers who were.

Its UX stinks, its content discovery is awful, its data-driven stories are unwatchable, its foray into gaming is a bust, it’s playing at experiences and merch, it’s now making cheap and lousy reality TV just like the networks, and it’s about to do the brand harm by launching an advertising-driven tier. (Which is the laziest monetization strategy possible. This isn’t innovation; it’s the equivalent of an airline charging baggage fees) And, all the while, it burns through CMOs like my dog goes through chew toys.

One of the things the great Roger Martin says is that data can only get you so far. By definition, it’s backward-looking, and no amount of agile engineering fiddling around the edges will change that. His view is that the key to great decision-making lies in the imagination: Specifically the ability to picture something new and different that will change the trajectory of the business.

I think he’s right but on an even bigger scale. Imagination will define the future in a world where the infrastructure has already been built. This means the competitive advantage driving business skills of tomorrow likely won’t be technical, won’t be software engineering, AI, or data-science, or anything like that. Instead, it’ll be those with the imagination to piece a myriad of components together into a compelling experience for which people are willing to pay good money. In other words, we’re likely leaving behind a world that engineering built toward a future that design will make.

Just think of all the experiences that need superior design rather than superior engineering. Try buying ads on Facebook. There are pages and pages to wade through on targeting and almost nothing you can do with the actual ad. Or look at Shopify, which I don’t think has ever hired anyone who understands retail to work on its product. Or any banking app, which all look and work exactly the damn same, or the broader shift toward digital utilitarianism, which is a sure sign of the hand of engineering on the tiller. Or literally anything in healthcare, which remains the land that design forgot. I’ll just leave that there.

But, and it’s a big but, we need to get out of our own way first. Stop shooting our own feet off. Stop wallowing in the crumbs left by engineers and calling it a meal.

In order for design to transform business, it must first transform itself. It must leave behind the language and mindset of engineering. Get past scalability and extensibility. Systems and components. Agility and usability. Usefulness and seamlessness. Efficiency and friction. Data and metrics. Patterns and code. It’s impossible to be the force of imagination if the language you use forces you to think along straight lines and across grids.

We must also leave behind our obsession with small problems and even smaller solutions. The kerning doesn’t matter when we’re thinking bigger about business and more broadly about society. And we need to fear less about what other designers might think of our work in order to be more fearless in expanding the scope across which that work can happen.

And finally, we must stop doing boring shit and pretending it’s transformative. There’s nothing transformative about minimal utilitarianism. There’s nothing transformative about an experience without any aesthetic qualities to speak of. There’s nothing transformative about an idea without imagination.

So, yes. The future will likely be a world made by design. But it won’t be made by any old designers. It’ll be made by those few who stand apart. Who choose to question the way things are. Who apply their skills to big business problems. Who step out from under the thumb of the engineers. And fundamentally, those that stop worrying about what other designers might think. Because design, to its long-standing detriment, remains a deeply conservative field of the small-c variety.

But these designers will come. And I literally cannot wait. And to quote my 14-year-old son, “LET’S GO!!!”

2. Lying cheating cheaters gonna cheat.

tl;dr: Accountants fined for cheating & covering it up.

OK. So there are loads of things corporations do that could become an Onion headline, but it’s rare that one does something that’s literally an Onion headline. Until now.

Because EY (formerly known as Ernst & Young), one of the “Big 4” accounting firms trusted to verify the accounts of our largest and most important publicly owned corporations, just paid a $100 million fine for their accountants systematically cheating on…wait for it…their ethics exams. And then the company tried to cover it up.

Ha ha ha ha ha. Oh, my God. I’m crying here. I’m laughing so hard. This is just so ridiculous. If it weren’t so serious, I’d be laughing even harder. What’s frightening, though, is they’re not alone. This cheating scandal follows a previous case by KPMG in 2019. And PwC was recently fined in Canada for doing exactly the same thing.

And that’s the point I really want to make. As the old saying goes, power corrupts, and absolute power corrupts absolutely. When any industry concentrates down to just a few players, those few players obtain massive power. Oligopoly is the economic term for any market where only a few players matter. And oligopolies of the powerful tend toward bad behavior. Just look at the oil majors, the tobacco companies, big tech, or the airlines as just a few examples.

So, let’s drill into the Big 4 accounting firms for a second. As I mentioned, this is an oligopoly trusted to audit the financial records of publicly traded corporations. Their work is extremely serious. Trillions of dollars of market value depend upon what they say being true. Yet, these firms appear riddled with scandal and incompetence. Let’s look at a few examples.

The Public Company Accounting Oversight Board (PCAOB), a joint US/UK pseudo regulatory board, stated in 2019 that the big four screwed up public company audits about 30% of the time. Sometimes leading to fines. For example, in the UK, KPMG was fined for falsifying documents after Carillon’s collapse and for failures in their audit of Rolls Royce. A couple of years earlier, Deloitte was fined for audit failings following the collapse of Autonomy, and PwC were recently fined for their shoddy auditing of UK construction firms. And EY, again, is currently being investigated in Germany for its failure to identify fraud at Wirecard.

The above was from a 2 minute Google search. Unfortunately, their fraudulent and incompetent behavior is so systemic that I don’t have room to list every example. However, according to Good Jobs First, since 2000, EY has had to pay $165m in fines for accounting fraud and related offenses, KPMG $91m, Deloitte $68m, and PwC $49m. (They’ve all been fined much more than that overall; I’m just focusing on accounting fraud). Now, I’m going to guess that these are only the examples where they were caught red-handed, so this may be the tip of the iceberg relative to everything that happens.

So, when put into the context of such systemic issues, accountants cheating on their ethics exams and their employer covering it up doesn’t seem even remotely out of character.

Worrying for the Big 4 is that their scale, power, and seemingly systemic ethical issues are leading to louder and louder calls for them to be broken up. A call that started in the UK then spread to Germany, and which a current SEC investigation might soon support. This investigation asking whether there are conflicts of interest in providing consulting, tax, and other non-audit services by firms that also act as independent auditors. (Let’s cut to the chase, of course there’s a conflict).

So, while it’s fun to laugh at accountants cheating on ethics exams, the implications of this and other bad behaviors are potentially severe. It might just lead to them being broken up. Which, of course, sounds good until you realize the profit potential. Recent reports of a pending IPO suggest EY partners might reap as much as $8m each.

I’m in the wrong damn business. Should’ve become an accountant. An easily bought look-the-other-way unethical one.

3. Blessed are the liquid, for they shall inherit the earth.

tl;dr: FTX sweeping up crypto exchanges for pennies on the dollar.

As I’ve written before, Crypto might be one of those situations where two things are true simultaneously. It might be exactly the kind of fraudulent Ponzi scheme the naysayers say it is, and it might be just as revolutionary as the true believers believe. We simply don’t know yet.

What we do know is that the past few months have been a crypto bloodbath. And, because of opportune timing on the fund-raising front and conservative cash management, FTX is looking like the biggest net gainer, using its liquidity to snap up competing crypto exchanges for pennies on the dollar. The most noteworthy thing being, of course, how truly fantastical VC-driven private market valuations have become. Highlighted with great clarity by BlockFi, valued at $4bn just a few short months ago, now on the block for a sum reputed to be as low as $25m.

Of course, while crypto exchanges were melting, stablecoins collapsing, crypto-centric hedge funds folding, and used Rolex prices falling, we still had to listen to Gary Vee hyping NFTs as the great disruptor of advertising at the Cannes Festival of Creativity last week. Oh my God, please just kill me now.

You’d think that as the fraudulent and shady world of NFTs literally fell off a cliff that perhaps this kind of talking head boosterism would’ve let up. But nope. Apparently, consumers don’t engage with advertising (tell us all something we’ve never heard before, will ‘ya), but we’re all going to save our artistically designed one-of-a-kind NFT gig tickets. Or something. Because, of course, everyone will want that NFT collectible from when you went to see Duran Duran arthritically stumble around the stage. But, what I really want to know, is how you found out about that gig in the first place? I mean, come on. Gary Vee has been full of shit for years, but this takes the biscuit. Only he could conflate a niche opportunity in digital collectibles with something that will “disrupt” all of advertising.

But of course, this brand of non-ironic boosterism can mean only one thing. And it didn’t take long to find. Gary Vee owns an NFT company. Because as sure as the sun rises in the East and sets in the West, any advice from Gary Vee will line his own pockets first and foremost.

But while the Gary Vee brand of bullshit-hucksterism fits right into the crypto landscape, he appears positively normal relative to the odd and scary you find at its heart. The publicly weirdest, and definitely the one with the most HR-related lawsuits in his future, is Jesse Powell, CEO of crypto exchange Kraken. In a bizarro document entitled “Kraken Culture Explained,” he recently laid out a set of “crypto cypherpunk libertarian values,” and well. It’s a doozy.

To save you the time, I read this hateful screed of drivel masquerading as an amusing guide to the company so that you don’t have to. Here’s the cliff-notes version: We’re libertarian white men, and we’ve had it up to here with your DEI bullshit. So check your woke privilege at the door because your identity doesn’t matter. From now on, you will give everything in pursuit of The Mission. Oh, and if you’re offended by any of the horrendous shit we might say to you in pursuit of The Mission, that’s on you, snowflake.

As an aside, there’s a particular hypocrisy rampant right now, where certain people claim that it’s a perfectly reasonable privilege for them to offend anyone else whenever, and howsoever they please. But then have such thin skin that even tiny things, like someone asking to be called they instead of him or her, seem to trigger an immediate frothing meltdown.

Anyway, the only good thing about reading a document that’s so icky I had to shower afterward is that:

1. I now know never to do business with Kraken, and

2. A whole array of workplace discrimination lawyers are literally salivating at the possibilities.

Anway, FTX. Here’s a thought. If Kraken finds itself in the shit, don’t bother bailing it out. It just ain’t worth it.

Room 101: The Bruce Willis of pharma.

June 23rd, 2022

1. The Bruce Willis of pharma.

tl;dr: The last refuge of lazy strategy.

Once upon a time, Die Hard was the world’s biggest movie franchise, and Bruce Willis was the biggest movie star. Famously, this led to a slew of “Die Hard” themed pitches to movie studios - “Die Hard with trains,” “Die Hard with snakes,” “Die Hard with planes,” “Die Hard with snakes on a plane,” “Die Hard with puppies,” you know the drill.

This became famous for two reasons. First, for making the pitch instantly understandable, and second for making it so lazy and cliched the movie studio execs just tuned it out.

Now, don’t for a second think that scriptwriters are the only lazy purveyors of cliche. We in the branding business have been doing it for years. How many times have you heard that a company is going to be the “Uber of air travel” or the “Amazon of logistics,” or the “Google of waffle fries,” or whatever. (I just wish someone in the airline industry would front up and say they’re the Die Hard of air travel, but I think that’s all of them).

Anyway, this brings me neatly to the recent rebrand of pharma company GSK by Wolff Olins. Since I used to work at WO, my LinkedIn feed is currently wall-to-wall orange as a slew of former colleagues proclaim variously their pride/humbleness/excitement/inspiration/dedication/obsequiousness at having worked with GSK. My primary reaction after throwing up in my mouth a little was, “oh, this client must’ve paid you a lot of money.” Why else prostrate yourself like that on behalf of some fairly average identity work. (granted, pharma isn’t exactly an easy field to be super creative in, so don’t take that as too much of a criticism). But, what really struck me was the lead statement in the GSK PR that this is about being “The Tesla of pharma.” Oh God, shoot me now.

What’s awful about this, just like the folks pitching movie studios, is that it’s the last refuge of lazy strategy. Don’t focus at all on what you’re bringing to the table; just compare yourself to something else that’s modern and successful and job done. Sheesh.

And in truth, I’m pretty sure GSK doesn’t actually want to be the Tesla of Pharma. I’m guessing they aren’t planning on having a carnival barker shitposter as CEO, or a product that spontaneously combusts, or software that disengages 1 second before impact to prevent liability (although, this is a pharma company we’re talking about, so maybe they do want that), or appalling quality control, or racial discrimination lawsuits, or hiding workplace safety incidents, or announcing products that are never likely to get made, or declining market share, or halving in value in a matter of months.

Clearly, they don’t want to be that Tesla of pharma. They want to be the other Tesla. Which Tesla is that you might ask? Oh, the innovative one that dodges paying tax. Oh, why didn’t you just say so?

Anyway, as I looked through the work and watched the utterly vapid launch video, I realized that lazy strategy seems to be a theme across this job because outside of a desire to be the “Tesla of pharma,” there doesn’t seem to be much at play here.

As a side-note, please branding consultancies, have an actual creative idea for your logo launch videos. I promise it’ll make a universally shitty genre where all you do is animate your guidelines to music so much better. And please don’t feel you have to tell us the new identity is “in motion.” It’s a video. We can see that it’s moving, thanks.

2. Unconscious minimalism.

tl;dr: AKA the desire to be as inoffensive as possible.

Last week, I stumbled across this brilliant little thread on Twitter. And while the author was focused on minimalism in our built environment, I can honestly say it struck a chord with me relative to our penchant for minimalist branding. (There’s so much out there that this link just sends you to a Google search page. Take your pick).

What particularly resonated were two things. First is the idea of “unconscious minimalism.” That it’s something that just happens rather than being actively thought through. And second, what defines unconscious minimalism is the removal of detail. And the reason we remove detail is that some people don’t like it. This means that when we follow this path, it isn’t about doing something that some people will love; it’s about doing something that nobody will complain about because most people won’t even notice it. (because, by definition, if we neither love it nor hate it, and it has nothing to characterize it, we’re most likely not noticing it at all).

And, well, it got me thinking. When we work with brands, we’re always talking about how it matters to mean something to somebody rather than nothing to anyone, but that isn’t what we’re actually doing. Well, rarely in identity design these days anyway. Instead, we’re busy removing detail, and whether consciously or not, rendering the work not just less offensive (some people don’t like detail, remember), but largely unnoticeable.

And that’s a problem. You see, the whole point of this stuff is to be noticed, and ideally, remembered, and sometimes offending some people is a good thing. God knows it’s hard enough to catch anyone’s attention these days, so why make it harder through an exercise in unconsciously removing the stuff that matters just because some people might not like it?

Now, we shouldn’t expect our clients to understand this. They’re not branding professionals. That’s why they hired us, which means we need to explain, and then demonstrate, why standing out and being memorable matters. It’s a part of the value they’re paying for.

This is why having a client look at the work and say, “I like it. Clean and modern,” is actually a sign of failure rather than success. It’s not the feedback we should be looking for. Instead, the conversation should be around how the work makes this particular brand stand out, why it’s different from the competition, how it stands aside from the category, how it uniquely builds from the idea of the brand, and, importantly, what makes it memorable. If the work also happens to be clean and modern, then great. But that’s a side benefit, not the main event.

Of course, the work itself must be memorable before we can have that conversation. And different. And stand out. And not be unconsciously boring AF.

3. The £30m answer to the meaning of…something.

tl;dr: Econometricians work through some whizzy optimal numbers.

Right now, somewhere in the South of France, there’s an advertising event happening that I never, ever want to be anywhere near. It’s rather grandly named the “Cannes Festival of Creativity,” although the incomparable Bob Hoffman has rather more accurately labeled it the “Cannes Festival of Sickening Self-Importance,” where:

“Wankmasters from across the globe will gather in Cannes to gulp putrid rosé, snort coke, and be fellated by the adtech industry.”

However, in addition to the putrid rosé and coke and self-importance and mutual back-stabbing/fellating, there’s the occasional nugget of gold to be found off in a dusty corner somewhere.

This year, that nugget came from a gaggle of econometricians who’ve been squirreling away trying to figure out the optimal amount of money to spend on advertising to maximize ROI. Now, while I really wanted this to be £42m, for obvious reasons, it’s actually a relative bargain at £30m

Now, a caveat before I get into this. The data is UK-specific, so if you aren’t in the UK, please take the numbers with a pinch of salt. However, I’d be willing to bet money that the pattern is replicable across markets.

Anyway, what they found after crunching many numbers is this. The optimal UK spend is £30m. This is the number at which you maximize ROI. Below this, your return will be lower than optimal because not enough people see your ads. Above this, ROI drops as you’re hitting the same people repeatedly and/or reaching people who aren’t going to buy from you anyway. The second thing they found is that more channels work better than less. This makes sense as you’re increasing the surface area across which you’ll be noticed.

Now, this is pretty timely data, as we’re maybe/certainly entering a recession (depending on whom you ask), and whole sections of the economy are currently cutting back, especially those in startup-land.

But, here’s the thing. The reason startups, in particular, are cutting back might have less to do with their business trajectory, and more to do with the trickle-down effects of VC panic at the end of free money and the halving of the value of their portfolios.

As I see it, the problem with this wild swing of the pendulum from VCs who’ve shifted from “grow at all costs” to “save every penny” in a matter of weeks is its complete lack of balance.

According to that merry band of Australian marketing scientists at the Ehrenberg Bass Institute, we already know that while cutting advertising for a big brand is harmful, for a small one, it can be terminal.

This suggests that every startup needs to look at this through its own specific lens. Plenty of VC-backed startups will go down in flames in the next year or two, not because of a recession, but because they were daft investments in the first place that were only funded because money was free and VCs had a tonne of it to throw around.

If that isn’t you, then you need to take a more balanced view of how you move forwards. For example, what’s going on in your market, what opportunities open up when others cut back, which counter-cyclical moves can be made, and how can you more cheaply grow your share of voice and ultimately share of the market?

Because, yes, all the press will be about the startups that run out of money and fail. But if you’re a good business with a clear runway and a solid cash position, then not spending and not doubling down on growing when the opportunity presents itself might kill you just the same. It’ll just take longer and be a lot more painful.

Volume 100: Super Bad Feelings.

June 10th, 2022

1. Super Bad Feelings.

tl;dr: Musk takes a break from shitposting to can some people.

Depending on whom you ask, Elon Musk is either the most singularly brilliant innovator of our age - pioneering vehicle electrification, solar power, and commercial spaceflight, or an egomaniac, shitposting bully-troll, prone to extreme hyperbole and fits of impulse who has been credibly accused of sexual harassment.

Who knows? Maybe he’s all those things, none of them, or somewhere in the middle. What I do know is two things:

1. His public persona is more deeply interconnected with the Tesla brand than any equivalent CEO.

2. That public persona has shifted hard from techno-utopianism to trolling across a wild array of topics, from crypto to Bill Gates, to working practices, to politics.

In addition to the “will he, won’t he” narrative around his attempted purchase of Twitter (currently, we’re in the “won’t he” part of the cycle as he accuses the company of breaking its contractual obligations), I can’t help but wonder what, if any, impact his public trolling might have on Tesla?

I wonder how many people have recently had the same conversation my wife and I had. As our aging vehicle slowly falls apart, we’re likely in the market for a new car soon and have already decided our next will be electric. Yet, as we discussed options, we immediately rejected Tesla for a single reason - neither of us wants to put a single cent into Elon Musks’ pocket, no matter how good the car might be.

Take his recent behavior. First, he derogatorily slaps down his employees by saying anyone who wants to work from home must be in the office for a minimum of 40 hours p/week, or they can “pretend to work somewhere else.” (Ironic, coming from a man so prolific on Twitter that shitposting looks suspiciously like his full-time job). Then claims that because of a “super bad feeling” about the future economy, Tesla requires a 10% across-the-board headcount cut.

Take these two statements together, and what are you left with? Simple, he wants those who’ve decided to work from home to leave so he doesn’t have to pay them severance. Sprinkle a dash of praise for Chinese Tesla workers “burning the 3 am oil” as they’re forced to live on the factory floor due to zero-covid government policies, outstanding court cases for institutionalized racism, ongoing workplace safety and injury coverup scandals, and this does not appear to be a particularly well company or culture. And you know what they say. The fish rots from the head.

I can’t help but wonder at the timing. For the first time, Tesla faces meaningful EV competition. Ford has beaten it to the truck punch with the F150 Lightning, which includes the ability to, drumroll please…recharge a stranded Tesla (meanwhile, the much-hyped Cyber Truck is…nowhere), while the likes of Mercedes and Audi are competing hard at the luxury end with vastly better quality than Tesla can manage (those panel gaps, OMG), GM prepares an assault on the mid-market, and Ford (again) sells every Mustang EV it can make.

Meanwhile, the Tesla “built with zero advertising” brand remains worryingly dependent on a PR halo created by a CEO who’s given up on techno-utopianism to instead revel in political shitposting, market manipulation, and bully-trolling his employees. All while very publicly trying to/not trying to buy Twitter.

It’s all very bizarre. Were there anything approaching good corporate governance at Tesla, I’d have expected the board to lay it on the line for their brand-defining CEO by now - perhaps insisting he keep his phone in his pocket or delete the Twitter app. But, since there isn’t any corporate governance at Tesla…buckle up.

Meanwhile, I’ll be curious to see how many other folks look elsewhere for that new EV as quarterly sales data comes in over the next 12-18 months.

2. Desire as strategy.

tl;dr: Mercedes Benz outlines its non-strategy strategy.

Sticking with the motoring theme, Mercedes recently announced their new global strategy, “The Economics of Desire.”

Get past the hype, and the basic gist is pretty straightforward; profits over volume. They intend to do this by doubling down on higher profit luxury vehicles and eliminating models that sell in greater volume but lie at the cheaper and lower profitability end of the scale.

Upon seeing this, my first reaction as a brand guy was basically one of “finally.” Mercedes is finally reigning in a bloated product portfolio that had them competing in segments of the market that are quite different from their brand perception as one of the world’s most premium marques.

And it makes sense. One of the most dramatic economic trends we continue to see is economic inequality, as the hollowing out of the middle classes leads to wealth gathering at the top and people gathering at the bottom. Mercedes narrowing their portfolio toward higher-priced vehicles is simply a response to increasing inequality, albeit not the kind we might immediately think of. Equally, we’re also entering a profit over volume stage of the industry cycle. Led by VW Audi Group, there’s now a recognition that volume as a goal has driven stagnating company valuations because they aren’t accompanied by decent profitability. And finally, it’s also a case of “never let a good crisis go to waste.” Like other car companies before it, Mercedes is using the shift to EV and zero emissions as an umbrella to make bigger strategic changes than they might otherwise have felt they could.

However, all that said, the car industry is notorious for having a lack of anything approaching strategy. So, is desire truly a strategy? While my immediate response is that on its own, no, it is not, how they say they intend to act means that it probably is. In other words, desire isn’t really the strategy; moving the product portfolio upstream to be more exclusively focused on luxury is.

But, the proof will be in the pudding, especially in how they define “entry luxury,” which could cover many sins. How many mass models will Mercedes really eliminate, how will the AMG & Maybach portfolio pan out, and how long will this newfound focus last? Because, for car companies, the temptation is always to build that smaller, cheaper, higher-volume model. I suspect the fundamental question about how valuable “desire” ultimately is as a strategy won’t so much lie in what they choose to make but in what they decide not to make - and how long they can resist the pull of volume models.

If this ends up as nothing more than a rearranging of the deckchairs, where they simply re-label mass-market vehicles “entry luxury,” then it won’t have been a strategy at all.

We will see.

3. What to do if/when things turn downward.

tl;dr: Some thoughts on what it takes to take on recession.

If you listen to most commentators right now, it would be hard not to surmise that a recession is imminent. Potentially an apocalyptic one.

We’ve been here before, and if there’s one thing we can predict with great confidence, it’s that human beings are truly awful at predicting the future. I also find it unsurprising that the folks bleating the loudest are those with the heaviest exposure to asset markets that have crumbled in recent weeks. It’s easy to understand Elon Musk having a “super bad feeling” when his net worth has halved as Tesla stock drops, Sequoia Capital freaking out as their firehose of free money dries up, and their portfolio companies halve in value, or Jamie Dimon predicting a hurricane ahead. (of course, in Dimon’s case there might also be a little market manipulation going on so that he can go bargain shopping later. We’ll see)

However, there’s no doubt that multiple things are happening that make things highly volatile right now. High inflation (although some believe it to have peaked), the end of quantitative easing, rising interest rates, market concentration, drought, Chinese Covid policies, crypto fragility, and war in Ukraine are all having an impact on everything from cars to baby formula, to gas prices, to housing markets, to global wheat supplies…and Sriracha. Anyway, the possible knock-on effects are potentially very dark.

So, what happens if/when things turn down, and you’re running an agency or consulting firm? Well, I’ve been here before, and perhaps by looking backward, I can help you look forward.

In 2008, while I was busy getting married, Lehman Brothers collapsed. The ensuing financial crisis led to our most valuable client disappearing overnight. After that, I discovered we were (knowingly) working with two major global corporations at below cost while also working pro-bono for a major cultural institution. We were deeply unprepared for the financial mess we now found ourselves in. Here are some tips on not finding yourself in the same mess:

1. Take a hard look at your current client list. How likely are they to be exposed to a recession, what are their contractual obligations to you, and what percentage of your revenue do they represent? If you’re heavily exposed to startups, I’d advise you to try and diversify your new business efforts immediately. VC capital has flowed like water for years, but it’s coming to a grinding halt right now, and that portfolio of DTC retail case studies you’ve carefully curated will quickly become worthless as these businesses crater and start going bankrupt. (I learned the hard way that no matter how good the work, a case study is utterly worthless if the corporation fails).

2. If you have clients you’re subsidizing or working for pro-bono, get on top of that immediately. One of the biggest fallacies is that you can win a client by pricing below cost and then charge more once you’ve demonstrated value. Avoid this trap AT ALL COSTS because it creates the opposite situation - you train the client to expect a certain cost/value equation you’ll never be able to train them out of, but you can’t afford to continue delivering. If you must subsidize, make it clear that you’re making a financial investment in them for that project, and be clear about what it is. Don’t hide it. Equally, if you’re working pro-bono, tell the client what the budget is you’re investing in them, and then stick to it as if it’s a paying job. And if you have any pro-bono jobs happening right now, try to get them to the finish line as soon as possible, so that you can:

3. Over-deliver for your best clients. When things turn downward, your best clients aren’t the sexy ones; they’re the ones that are the most financially stable, the most likely to pay on time, and the ones with the biggest upside potential from a budget perspective. Look after them, put your best teams on their business, and err on over-delivering rather than under-delivering. These clients will give you the best chance of extending the relationship to help get you through the difficult times. However, be extremely disciplined in how you make these decisions. There’s always a temptation to over-invest in sexy clients going nowhere. A big ugly corporation giving you a $50k project might be something you can grow to $500k if you’re smart and diligent. A tiny but sexy company that has to scrimp to give you a $50k project is ungrowable.

4. If you find yourself in a position where you have to make layoffs, cut hard and do it fast. The worst mistake you can make is to take too long to cut too little. Then you have to do it again in a few weeks or months, then again a few weeks or months after that. Nothing kills a culture faster than everyone looking over their shoulders, waiting for the chop. So it’s better to cut hard and fast and shift the narrative toward re-building. The trick is not to cut too deeply into the muscle. The trick, trick, is not to put yourself into that position in the first place. With that in mind, start doing the following:

5. Enhance your new business muscle today. It’s tempting to think you can get through recessionary times simply by growing your relationships with existing clients, but this is largely a fallacy. There’s always a certain amount of churn, and if you cut your new business capacity to service existing clients, you’re putting yourself at huge risk if/when a big client goes away. Instead, you should seek to enhance your new business muscle. Get on top of those case studies you’ve meant to get to. Get on top of your website, Instagram account, LinkedIn, and PR vehicles you employ, do that proprietary research report, write that HBR article. If you have folks on the speaking circuit, get them out more rather than less. In a recession, RFP requests and projects never dry up completely, there are just fewer of them, and they get harder to win. If they’ve never heard of you, clients won’t put you on the list, and if you don’t have a team that impresses them, you can’t win.

6. In addition to enhancing your new business muscle, get tight about your value proposition. If your value proposition starts with a statement like “We believe…” then stop. Nobody cares what you believe; they care about what you can do for them. Get tight about what you’re really good at, how you create value for clients and the kind of value you create. Think about it through their lens rather than yours. What problems do they have, how does what you do help solve them, and why do you do it better than anyone else?

7. Eliminate the lazy response. In the good times, the phone rings a lot, getting business isn’t that hard, and we get lazy. Don’t be lazy. If your typical RFP response is full of boilerplate assembled by junior people, you’re at significant competitive risk. Clients hate responses that are obviously generic at any time, but this is particularly dangerous for you in the lean times. If getting on an RFP list becomes harder, don’t ruin it with a generic response. Instead, put your best minds on it to ensure the response is considered, and inspiring, and is tackled with confidence. This alone will put you head and shoulders above anyone still living in boilerplate land.

8. In hard times, the largest agencies, especially those owned by advertising holding companies, become political shit-shows, while the small become financially fragile. On balance, however, if you can keep a straight head and sustain your new business muscle and focus, then lean times tend to benefit the smaller, nimbler players with lower costs. Larger agencies are likely to take their eye off the value-creation ball as they infight, accidentally fire their highest performers, rely on lazy boilerplate responses for longer, and struggle to offer high-value teams for reasonable rates. Smaller, hungrier, and smarter teams will win.

9. Don’t get stuck in stupid internal arguments about things like utilization and recovery. It’s a trap. Utilization doesn’t dictate profitability; it simply shows how efficiently you deliver work you’ve already sold. Only two numbers matter to any agency or consultancy in tough times. 1. How much revenue are you generating? 2. How much are your costs? Your goal is to ensure that revenue exceeds costs. It is that simple. As a result, beware of circular arguments that do nothing to address these fundamental questions. Here’s a sample or two from my own experience: “We offer too much vacation time. If we reduced vacation time, we’d be profitable.” Bullshit. If you reduce vacation time, you just piss people off while doing nothing to impact either how much revenue you generate or how much it costs to deliver. (Especially since your best people often aren’t taking their full vacation allocation anyway) This can only make a difference if you’re being paid for every hour worked and your people are already fully utilized. Here’s another doozy to look out for: “resource xyz is 100% utilized. They’re our most profitable employees, we shouldn’t cut them, or we lose these profits.” Again, this is bullshit. People who might be 100% utilized today but have zero impact on the amount of revenue coming in won’t be profitable when that revenue goes away. In a recession, you’re better off heavying up on practitioners who are killer at winning and growing new business even if it looks like they have lower utilization. Why? Because the reason their utilization on billable clients is low is that they’re out there winning the revenue you need to survive. And finally, beware of the recovery argument because it’s also bullshit. If you’re selling fixed-price projects (often the case), and it costs you more to deliver than you priced it at, then the idea you can go cap in hand to your client and recover the overspend is ridiculous. No client will ever say, “oh, you accidentally charged less than you should have for that project you delivered inefficiently. Here, let me stump up that money for you.” If there’s something egregious going on that caused it, you might have the occasional case, but overall, recovery is likely to be a marginal pursuit. Don’t get derailed by these conversations to nowhere. Instead, get your most senior people laser-focused on generating the revenue you need to cover your costs. And that comes from only two places. 1/ Selling more work to existing clients, and 2/ Selling new work to new clients. Get that right, and everything else falls into place.

10. Beware burnout. Three years after the financial crisis hit, I quit my job, utterly burnt out. I just didn’t realize it at the time. I’d spent the previous three years pitching my ass off, living on airplanes, flying from my home in NYC to clients in Tokyo, LA, Seattle, and the middle east. I didn’t have a client within 2,000 miles of home, and it simply wasn’t tenable to continue. I knew when I spent my son’s 2nd birthday interviewing a Sheikh in Qatar about a museum that something had to give, and it wasn’t going to be my family. I didn’t have any plans. I just knew I couldn’t keep doing what I was doing anymore. Try not to find yourself in a similar situation. Recessions are hard. They’re emotionally traumatizing. It’s a grind to worry all the time about where the next dollar is coming from, whom you might have to let go next, and whether that person might be you. Find ways to turn off, find ways to spread the burden, and find ways to make sure you’re not spending your entire life on an airplane. Learn to say no occasionally and to take a day off amid the chaos. You’ll thank yourself later.

Volume 99: The age of inconvenience.

May 12th, 2022

1. The age of inconvenience.

tl;dr: A likely end to the convenience arms race.

Probably the least insightful insight in history is that convenience tends to win in any market. LPs gave way to CDs, gave way to MP3s, gave way to streaming. Free delivery gave way to free 2-day delivery, gave way to free same-day delivery gave way to free 20-minute or less delivery.

Across the economy, via startups and large corporations alike, a 20-year push has been toward simpler, faster, easier, and more convenient experiences with less friction and fewer impediments to a transaction.

But, and it’s a big but, convenience comes at a cost. And yes, this cost includes the environment and appalling worker conditions, but that isn’t what I’m talking about here because no matter what we might say, neither of these things tends to change our behavior as consumers. (well, it might for some, but statistically, they’re on the margins)

No, the cost most likely to end (or at least significantly curtail) our fetishization of convenience is that convenience has a nasty tendency to literally cost more to deliver than companies can make back in profit.

A problem that’s being exacerbated by a confluence of factors. First, supply chain issues and war are combining to drive up inflation worldwide (ably assisted by corporate profiteering), which drives up costs. Second, rising interest rates and souring investor sentiment vis-a-vis profitless companies make it much harder for convenience-centric corporations to absorb these costs. And third, a cost of living crisis is driving many to tighten their belts and take on debt just to make do (as an aside, the spectacular growth of non-mortgage indebtedness in the US is a deeply disturbing economic signal), which means the consumer appetite to pay for convenience that had previously been free likely doesn’t exist.

This creates a perfect storm for any business with a history of heavily subsidizing convenience features to grow and compete - higher costs, less consumer appetite, and drastically constrained access to the kind of capital necessary to continue the subsidies.

So what’s going to happen? Well, in a single word, POP. Yes, the convenience bubble is almost certainly about to burst. And it won’t be pretty. Many businesses will go out of business. Others will raise prices steeply and, in the process, become smaller. And some will simply get snapped up by larger, more aggressive predators with stronger balance sheets, which will further concentrate market power and drive up costs to the consumer.

So, what will this mean for you and I? Well, we’re going to have to get used to things not being anywhere near as convenient as they used to be, or pay a lot more for convenience features we used to take for granted, probably both.

2. The clock ticks on purple unicorn farts.

tl;dr: The tide is going out on profitless businesses.

Well, well. After I wrote this, Uber CEO Dara Khosrowshahi sent a memo. The read-between-the-lines is that investors have had enough of Uber fictionalizing its pretend profits and are worried it might run out of money. Anyway, here’s what I prepared earlier:

As the Fed raises interest rates again and signals more on the horizon, it’s worth looking back on the period we’re exiting to ask questions about the profitless brands that have become commonplace. Many will not survive the coming shakeout.

One of the defining features of a fourteen-year-ish period of ZIRP (Zero Interest Rate Policy) was the exceptional growth of profitless, tech-adjacent brands. Including, but not limited to, WeWork, Uber, Lyft, Doordash, Peloton, and almost the entirety of the “revolution” that ultimately wasn’t, namely, venture-backed DTC retail.

And while we all understand by now the breathtaking grift that was WeWork, other profitless businesses have had much less scrutiny. Uber, for example, has demonstrated a spectacular gift for fiction in its financial statements. Utilizing the much-abused “adjusted EBITDA” to magically exclude…almost every cost it incurs to show something they call a profit, but that bears a greater resemblance to a purple unicorn’s fart.

Looking into how these companies grew so quickly, it isn’t hard to understand what was happening. Massive venture funds like the Softbank Vision Fund took huge amounts of capital, mostly petro-dollars, and applied it to fast-growing startups. In the process, engineering one of the largest transfers of wealth in history - from the Crown Prince of Saudi Arabia to American millennials, mostly.

As a result of these huge capital injections, so prevalent that it was given its own name, a few hand-picked businesses grew ultra quickly by heavily marketing low-cost, convenience-driven value propositions that were impossible for the consumer to pass up, yet utterly unsustainable as a long-term business proposition. For example, at one point, I remember a cross-LA Uber ride costing just $8 when an equivalent taxi would’ve been $50+.

Why this happened is all down to ZIRP. With interest rates hovering around zero for so long, it pushed capital toward riskier investments. An oversimplification is to imagine global capital as if it were water - it will always flow to where there is a return. If interest rates are zero, it will flow to riskier alternatives. When interest rates rise, this capital will flow back toward safety again. And that’s exactly what happened. Unprecedentedly low-interest rates for an extended period of time upended investment expectations and risk calculations, which led to capital flowing into every investment type where it saw the possibility of a return (art, stocks, baseball cards, classic cars, homes, crypto, you name it), including the coffers of venture capitalists selling stories of disruption backed by the success of historical value-creating juggernauts like Google, Facebook, Alibaba, and Amazon.

So, what happens now that interest rates are no longer zero and capital is beginning to flow back toward safety? Well, likely nothing good for many of these businesses.

The problem for the likes of Uber isn’t the salience of its brand or its habit-forming product; it’s that its unit economics remain negative. This means it loses money on every ride you take or meal you have delivered, which is fundamentally unsustainable. To date, what has sustained it is investor capital and debt, but as I mentioned before, as interest rates rise, this capital will flow away like water - or in the case of Uber, like the tide going out. This is why the stock is down 50% from its 2021 high and is unlikely to move in the other direction anytime soon. (Not to mention that Uber might well be running out of cash…)

As Warren Buffet once famously said, it’s only when the tide goes out that you see who’s been swimming naked, and Uber isn’t alone in the naked stakes. None of Allbirds, Warby Parker, or Doordash make a profit or even look likely to, and all are way off their IPO prices. Allbirds, in particular, dropping precipitously from an IPO high of $32 less than six months ago to around $4 today.

So, what’s going on? Well, the simplest way to look at this is that because interest rates are no longer at zero, capital is no longer flowing to risky sources of return that bring little more to the table than charisma and a good story, which means fantasy fiction masquerading as “disruption” is vastly less likely to capture investor attention moving forward, and the boring stuff like “does this company have a legitimate pathway to profit?” or “what does the free cash flow look like?” starts to be of much greater import.

And, what does any of that have to do with branding? You might not realize it, but there’s a direct line between zero interest rate policies (ZIRP) and the ultraboring tech-adjacent brands we’ve idolized in the past ten years. Our idolatry of innovators too often being pointed at profitless businesses with unsustainable business models that have been artificially boosted by the capital equivalent of anabolic steroids. Instead, we need to start thinking of them as aberrations created by a now outmoded set of monetary policies, which will be shaken out hard in the coming wash.

So…what’s my very long-winded point? Well, maybe all that capital built things that look like brands, but it happened in much the same way that Uber’s purple unicorn farts look like a profit…they aren’t really real, and as a result, they shouldn’t be something we look to for inspiration.

So, while the coming times will likely be rough for these businesses, it should ultimately be good for us. You can afford to be awfully, terribly, wastefully, ultraboring and still look successful when you have unlimited capital. But, as a counterpoint, now the days of easy money are over, and businesses are forced to outsmart rather than outspend; they’ll be forced to get bolder and more creative at the whole branding thing too.

3. One-to-one personalization at scale, AKA drunk monkeys throwing darts.

tl;dr: The most costly of all nonsensical marketing ideas.

The entire marketing industry is so awash in bullshit that I’m surprised any of us can smell anything over the top of it, even something as fishy as “personalization.”

The first time I heard the term “one-to-one personalization at scale” was approximately 2010 or so, uttered by a tech-savvy client who was completely enamored with a pending partnership with Facebook. Sigh, we now know where that kind of thinking leads.

At the time, I remember being a bit confused because I’d always worked on the basis that the power of brands was largely due to our shared understanding of them. So, to listen to someone waxing lyrical about building a brand via millions of highly personalized messages targeted directly at individuals, exactly at the moment they were going to buy, was, well, kind of breathtaking and scary and a bit “that sounds expensive, I wonder if it’ll ever work?”

Twelve years later, we can definitively look in the rearview mirror and state three things. Yes, it was very expensive, no, it was never going to work, and, yes, a handful of tech people got very, very rich selling the idea to gullible marketers while at the same time building a scarily inaccurate surveillance ecosystem (more on that in a minute).

The first problem is that it’s impossible. For example, take this quote from a recent article on the subject:

In an academic study from MIT and Melbourne Business School, researchers decided to test the accuracy of third-party marketing data. So, how accurate is gender targeting? It’s accurate 42.3% of the time. How accurate is age targeting? It’s accurate between 4% and 44% of the time. And those are the numbers for the leading global data brokers.

Now, let that sink in for a second. If you flipped a coin, your likelihood of accurately targeting by gender would be better than if you worked with the world’s leading data brokers, and if you targeted by age, you’d consistently be much better off with the coin.

Now, how many business leaders in our “data-driven” age do you think would instantly fire you if you turned up and said you were spending millions of dollars based on a decision-making system worse than a coin-flip? Yeah, me too.

Now, there are those out there who view this as a surmountable problem. We simply need more and better data, right?. Well, no. We’ve had approximately 20 years to fix this problem and haven’t, and with shifts in regulatory scrutiny and corporate privacy initiatives, it’s a fantasy that’s looking ever more fantastic.

However, it really doesn’t matter if we can make personalization more accurate because it doesn’t really work anyway.

There isn’t a single brand, ever, in history that was built based on superior advertising personalization because the idea of personalization at this kind of scale is simply oxymoronic (or just plain old moronic). As a tactic, it isn’t scalable because the overhead of all these messages, all this data, and all of the software, hardware, services, and compliance required to knit it all together rapidly rack up costs to an unsustainably inefficient level. The simple fact is that the world doesn’t work this way. The people doing the empirical research show that reach and non-personalized messages are the primary drivers of brand-building success, not hyper-focus and personalization.

But, the problem doesn’t end here. The biggest irony of “one-to-one personalization at scale” is that it isn’t an idea built through personalization but instead through billions of tech and consulting dollars spent to hijack marketing budgets, which has largely been successful. Many marketers today, especially those coming of age in the past ten years, take this stuff as a given, even though it doesn’t work, so unpicking it will be extremely difficult.

But, we should, because in addition to being impossible and not working, it opens companies up to all sorts of bad behavior. Like ad fraud which increases exponentially the more narrowly you try to personalize, or funding hate sites, which happens when you give up on context and instead focus solely on user profiles, and finally, the terrifying idea that in the not too distant future, a not-very-accurate surveillance ecosystem built for advertising will instead become an enabler of fascistic governments in surveilling and then incarcerating its population.

Anyway, I have to not think about that lest I completely explode, so I’ll leave you with this. If there’s anything dafter than a LinkedIn post by Simon Sinek, it’s one-to-one personalization at scale. Don’t waste your resources on it, and don’t accidentally enable hate via your advertising dollars.

Volume 98: Imploding in real-time.

April 28th, 2022

1. JetBlue: Imploding in real-time.

tl;dr: Up close and personal with the worst airline in America.

When I wrote a few weeks ago about Spirit merging with Frontier, I expressed surprise at seeing JetBlue atop the “worst airlines in the country list” because I quite liked them.

Having now traveled with JetBlue for the first time in a while, I have to say that JetBlue isn’t just the worst airline in the country; it’s suffering from what can only be described as a corporate implosion. I can’t imagine how bad it must be to work there.

Let’s walk through a snapshot of our recent vacation experience: a flight booked months earlier canceled without explanation 9 hrs before takeoff, a last-minute 10X more expensive ticket on another airline just to make our connecting flights, an accumulative 6+ hours on hold with customer service that never came to a resolution, flying into an airport 2,000 miles away at 11pm with no idea if we’d have a seat for a connecting red-eye until we got there, getting seats only to be informed on the plane that, by law, our 14yr old son can’t sit in the exit row seat they’d allocated, then being accused of lying about his age (we hadn’t), and then the piece-de-resistance, being threatened with de-planing unless he agreed to sit in a middle row seat at the other end of the plane between two strangers. What a complete and utter shit-show.

So, what’s going on? Well, suppose every airline was similarly bad. In that case, we could chalk this off as a systemic issue as the travel industry gets going again after such a long period of low capacity. However, since that isn’t the case (well, certainly not this badly), the most likely culprit is that JetBlue cut too deeply during the pandemic and then got caught with its pants down when travel demand spiked faster than anticipated, outstripping its ability to hire and train employees and manage continuing staff absences due to Covid.

Which, quite simply, makes this an abject failure of corporate leadership.

Digging into the numbers a little, JetBlue has been accused of misusing the $1.5bn in government payroll assistance it received: taking the money and using it to fund short-term profits rather than maintain payroll as it said it would. And, well, the shitty experience I described above and this week’s dive in stock price is the direct result.

The stock nose-dived again this week as JetBlue announced for the second time this year that it will be reducing flight capacity, now providing a prediction of zero growth, as the CEO stated a need to “Get back to basics and get back to delivering a reliable operation.” Well, he’s got a lot of basics to get back to since, as best as I can tell, JetBlue leads the pack in flight cancellations and major delays. Not to mention the 3+ hour wait time for customer assistance, by phone or via text.

This places JetBlue in a precarious position. They don’t have the scale of a United or a Delta, and they don’t have the low cost of operations of a Spirit. This means that ongoing success as a “mid-tier” operator requires them to be more brand-driven than competitors, where the brand experience is the critical factor driving preference. Unfortunately for them, when this experience fails, preference quickly gets shot to hell.

Let’s recap; they almost ruined my vacation, the stock is down nearly 50% over the past 12 months, they can’t get the basics right, they’re not growing while their competition is, they’re ranked as the worst airline in the country, they’ve been accused of misusing bailout money, and they don’t seem to have anything even approximating a strategy. (Unless you call buying Spirit a strategy. Me? I call it a cynical and lazy attempt to create monopolistic pricing power in the NorthEast corridor that’s likely to be halted by a more aggressive regulatory approach to market consolidation).

Anyway, this isn’t just a real-time case study of how short-termism and lousy leadership can drive a company into the ground; more fundamentally, it’s unclear to me whether JetBlue can even survive as an independent company.

Speaking as a formerly loyal flyer with many JetBlue points and status, I will not be flying with them again for a very, very long time. Perhaps never.

2. Debt will define Twitter’s future, not Musk’s worst instincts.

tl;dr: Mass layoffs and a buffer against saying whatever the hell you please.

So, Elon Musk now owns Twitter (or at least he will, assuming the deal closes). Who knows what this change in ownership will mean once the self-proclaimed “freedom of speech absolutist” starts calling the shots. If you’re interested, just check Twitter itself, as it seems nobody there has anything else to talk about.

However, an easy prediction to make is layoffs—lots of them. To fund the $44bn deal, Musk is taking on a load of debt in various forms. The interest payments on this debt will eat roughly all of Twitter’s current profits, which puts the business in a precarious position. Add to this the fact that Twitter’s revenue per employee remains stubbornly lower than competing platforms, and well, you can see where this is headed.

It’s unclear how big these layoffs will need to be for the business to be able to support itself and its newly acquired debt. Estimates range from 10-20%, with the likely number being toward the high end.

Interestingly, the debt might also act as something of a buffer against Musk’s more anarchic tendencies. It has to be paid back, and as interest rates rise, the debt servicing costs will too. There are limits to the sources of revenue to pay back these debts, namely advertising revenue, direct revenue from users (e.g., subscriptions), and data revenue from selling user data to 3rd parties. Right now, advertising makes up the vast majority of this number.

Now, for a second, let’s imagine a world where Twitter becomes completely lawless, where anyone can say anything they want without limits (and also let’s imagine that both Apple and Google don’t hook it from the app store for doing so). What’s going to happen? Well, first, the advertisers will bolt. Unlike Facebook, Twitter is a nice to have rather than a must-have for marketers, so they’ll go elsewhere if Twitter is deemed to lack brand safety. Equally, if the platform becomes inundated with even more hate speech and misinformation, you can kiss subscription revenue goodbye. We’ve already seen what happens to platforms that proclaim “freedom.” It isn’t gold; it’s tumbleweeds. The reality is that most people don’t want misinformation, disinformation, conspiracy theories, and political hate speech cluttering their feeds. It’s a big reason for subscriber problems over at Facebook, and there’s no reason to think Twitter is any different.

And while Elon Musk is a brilliant innovator, which is potentially transformative for Twitter, he’s also completely full of shit. He promised a self-driving car that doesn’t crash and a Cybertruck in 2019, neither of which has appeared three years later. He pledged to spend $6bn to eradicate hunger if given a detailed plan (which he was given) but is trying to buy Twitter instead. He made a commitment to fix the water in Flint; instead, he sent them some water filters.

All I’m saying is that Elon Musk has a long history of saying one thing and doing another. It’s unlikely Twitter will be any different. In order to succeed, it has to be commercially viable. So, if it comes down to a question of “say whatever the hell you like and damn the consequences” or “pay back the debt,” I’m pretty sure I know where he’ll fall.

3. For Those About To Change. We Salute You.

tl;dr: Accenture gets its Song on. Goes all AC/DC on us.

Oh my. I’m sorry. I. Just. Can’t. Stop. Laughing. I can’t catch my breath. Oh goodness me. Just give me a second. I’ll be OK in a minute. The tears are streaming down my face. Oh, good God. This is bad. This is really bad. Anyone who works there must want a hole to open up and swallow them. Oh my. I think I just snorted some coffee out my nose.

Yeah, you guessed it, I’m talking about the shiny, newly re-branded Accenture Interactive that will henceforth be known as…drumroll, please…Accenture Song, with the tagline “Let there be change.” If you’re going to rip off AC/DC song titles, they should really have gone with “For Those About To Change, We Salute You.” Although, clearly, “Dirty Deeds Done Dirt Cheap” wouldn’t have worked. Accenture has never done a dirty deed cheaply, and they’re unlikely to start now. I do wish, however, that they’d just ripped the Band-Aid off and gone with Accenture Song: Big Balls.

OK. I’ve had my fun. Let’s get the sensible stuff out of the way first. Was the interactive part of Accenture Interactive looking increasingly anachronistic as they acquired more businesses and interactivity became increasingly commoditized? Yes. Was there likely much wailing and gnashing of teeth and politicking while trying to build custom client solutions out of 40 different acquired entities and all of their independent P&Ls? Almost certainly.

There’s nothing daft at all about moving on from “interactive” and integrating the acquisitions under a single P&L. That demonstrates an understanding of how better to compete and win against the random, financialized portfolio model of the advertising holding companies.

It’s the oh-so-try-hard way they’ve done it that’s cringe-worthy. The name is, well, meh. But, whatever. At a minimum, it’s a bit strange to jam a word like Song beside a made-up name like Accenture. It certainly wouldn’t have been high on my list of recommendations, and it does leave you wondering whether there’s anyone with naming experience in the newly branded entity.

The ultraboring logo is just plain baffling. Why remove the Accenture arrow they’ve spent hundreds of millions of dollars building equity in? Why eliminate the corporate purple? And why use a by now hackneyed and cliched gradient that makes it look like nothing more than a Stripe API?

Then we get to the goldmine that is the press release, which I can only describe as a garbled mess liberally festooned with corporately creative buzzwords, zero narrative arc or clarity, and a distinct lack of opportunity for the reader to take a breath. Here’s a snapshot:

The move reflects the company’s post-pandemic world-class services that reinvent customer connections, sales, commerce and marketing and business innovation to meet clients’ accelerated demand for business growth through sustained customer relevance at the ever-changing speed of life.

Now, I dare you to try and say that out loud without A. Collapsing in embarrassment, or B. Collapsing due to asphyxiation as you try to say the whole sentence in a single breath.

The sad thing is the sheer obviousness of the so-called insight the planning intern working on this piece of internal business came up with. It boils down to the idea that companies don’t think they’re changing fast enough, so Accenture Song will help them move more quickly. More specifically, to stay relevant at the speed of life. Now, I know what you’re thinking. Yeah, me too. The more appropriate song title is probably “The Song Remains The Same,” as this is literally the same insight every consulting company has worked with for, I don’t know, 50 odd years. It used to be the speed of change, the speed of digital, the speed of technology, or whatever. Now it’s the speed of life. Which, I’m guessing, is meant to reflect some kind of humanization of technology but just leaves me thinking of old people, turtles, trees, and the fact that unless you’re a mosquito or a mouse, or an adrenaline junkie, life is generally fairly slow-moving.

So, yeah, it’s unfortunate that more and better thought didn’t go into this. As a result, this is less a strategy and more a random agglomeration of consultingy words. It’s far from inspiring, and it’s very notable that while David Droga has been rolled out across the usual trade rags claiming how groundbreaking this new approach is, the company with his name on it isn’t included. Yes, Droga5 will not be singing from the same sheet as Song. Make of that what you will.

Before I go, I want to leave you with a final thought that I just can’t get out of my head. Yes, I’m picturing how they’ll likely torture the Song metaphor until it bleeds. Can you imagine the client meetings where they introduce their engagement managers as “conductors of the orchestra,” and their consultants as “songsmiths,” and their workstreams as “melodies,” and where they force-fit song titles into the title slide of every deck? Oh yeah, me too.

Oh God, I’ve set myself off again. I’m dying here. This is just too funny.

Volume 97: The idea of the idea.

March 24th, 2022

1. Like a phoenix from the flames, the idea of the idea returns.

tl;dr: Bottom of funnel myopia is bottoming out.

This week, as he eloquently eviscerated Martin Lindstrom’s pandemic pronouncements that “nothing will ever be the same again,” Mark Ritson observed that marketers “are addicted to the pornography of change,” meaning we have a tendency toward making grand pronouncements (and big business bets) based on shallow data, and he’s almost certainly correct.

Because of this addiction, the endless self-promotion cycle of LinkedIn, Twitter, and Facebook has lent themselves toward the perpetual-motion peddling of change-or-die-ism’s, especially from high profile snake-oil sellers like Lindstrom, Vaynerchuk, Sinek et al. And while these three regularly spout utter bollocks, I don’t really blame them. After all, their own commercial relevance rests on an ability to build and maintain celebrity, which all three have proven to be good at, but which requires them to feed the algorithmic beast. (A game Mr. Ritson isn’t averse to playing himself, btw.)

However, what’s particularly interesting about this world of perpetual disruption, is how quickly bad ideas sink while the things that matter eventually bubble back to the surface.

Does anyone remember “growth hacking?” A supposedly superior replacement for marketing that was sunk by its own stink just as marketing itself bubbled back to importance again.

Anyway, an idea that’s bubbling back right now is the idea of the idea itself. When I started in this business, everything was about “the big idea.” For good or ill, people cared deeply about “cracking the idea” and finding that perfect encapsulation of what a brand stands for and how it presents itself to the world to be different and to stand out. This wasn’t the stuff of a couple of hours at a whiteboard; people spent weeks and months figuring it out as they dived into every nuance of customer research, behavioral data, and the internal sense of self within a corporation. Often from the pub.

But, as “digital marketing” and “performance marketing,” and “programmatic media” entered the lexicon, the idea that ideas matter took a backseat. It was all about execution now.

I can’t tell you how often I sat in client meetings, where they boldly proclaimed the entire marketing strategy to be one of “out-executing” the competition, usually programmatically. And for a while there, they were right. There was a genuine arbitrage opportunity in digital media, which at the time was insanely cheap compared to non-digital and was being super-charged by advancements in tech-driven tracking that meant you could farm at the bottom of the funnel in a way you simply couldn’t before.

But, this ability to win via execution has dried up. Bottom of the funnel digital marketing isn’t novel anymore as the skills and tools have become commodified and available to all. And the arbitrage opportunity disappeared as competition for media, platform monopoly, and Apple changing the rules drove up the cost. Worse, the execution-ninjas have found that solely farming the bottom of the funnel isn’t enough. Not only does it become prohibitively expensive, but we now know that it places a ceiling on growth - with previously fast-growing businesses flatlining into what’s been labeled the “CAC valley of death.”

So, what next? Well, as bottom of funnel myopia bottoms out, brands and branding are back on the agenda in a big way, which means that ideas are back on the agenda too. It was always a fallacy that “ideas are easy, execution is hard,” and today’s commodification of marketing execution puts this fallacy into stark relief. The truth is that brilliant big ideas have always been hard, which is why we aren’t surrounded by them every day, all the time. Or even once a year.

But, as is so often the case in business, just because something is hard doesn’t mean you should avoid it. On the contrary, doing the hard things well is often exactly what you want to do precisely because being hard makes it hard to copy and makes you stand out as a result.

And, arguably, standing out matters more now than ever before. Why? Well, there’s more competition for our attention than ever, and consumers have become more attuned to tuning out bland commercial messages than before. And if execution has essentially become commodified, then what are we left with? That’s right, the idea.

So, is The Big Idea back? Yes, I think it is. Maybe not labeled as such, but it’s clear that as marketers pay more attention to the empirical work coming out of places like the Ehrenberg Bass Institute, then the top of the funnel is very much back in vogue again. And if the top of the funnel is back in vogue, then so must the ideas you require to drive success there.

Of course, maybe I’m just being self-serving and seeing a nail to hit with my own hammer. But I don’t think so.

2. A glimmer of “designing for digital” hope.

tl;dr: Instacart work ain’t exactly mindblowing, but it is interesting.

I check LinkedIn maybe once or twice a week. Its combination of nonsensical pronouncements, varied forms of bragging, things you can learn from whatever is the biggest news story of the day, and outright bullshit gives me anxiety.

Anyway, I checked it yesterday, and as I scrolled past a formulaically braggadocious self-promotional post from my former employer, I saw the newly updated identity for Instacart. I have to say; my first thought was there isn’t anything worth bragging about here. Muddy colors, a generic typeface, and an arrow stabbing down into what looks like a bald Oompa Loompa’s head instead of what was previously a happy-looking carrot. Upon seeing that arrow, all I could think of was the direction of the Instacart share price on the opening day of its rumored IPO.

Looked at as a plain old logo and logotype, the work is competent but far from exceptional and leaves one wondering why change at all. But, for some reason or another, I clicked on the case study article and realized there’s more here than first meets the eye. That downward arrow has a simple and elegant use in product UX, something which inexplicably remains a rarity in the branding world, marking this new identity as noteworthy.

Rewinding many years, I remember having a chat with someone at one of the larger branding consultancies. He asked what I thought the most significant issue they faced was, and my response was that they were in a race—the big question being whether the digital agencies would get brand before the branding consultancies got digital.

Now, years later, neither has done a particularly good job. Yes, plenty of digital design shops claim to do branding, but almost to a T, they do singularly uninspiring work. And there have been plenty of branding shops claiming to do digital, only to find themselves woefully underprepared. I suspect that both thought these respective fields would be easy when actually they are hard. Mostly because marrying them requires coming up with something new.

This is why I find the Instacart work so interesting, not because it’s a killer logo (it’s far from that), but because it demonstrates an integration with product that’s incredibly rare, that will hopefully inspire others to take the baton and run with it, in the same way that I hope folks will take the generative design baton from the likes of the San Francisco Symphony and Anchorage and run with that too.

To quote William Gibson, “the future is already here it’s just widely distributed.” Well, the future of identity design is also already here. It just needs to rise out from under the bland monotony of Helvetica In Pastels before we’ll notice.

3. Reading time.

tl;dr: A return to the power of the written word.

I’d happily refer to myself as a voracious reader. I always have at least one book on the go and have done pretty much for as long as I can remember. When the Kindle came along, and I could read on my phone, I read more.

While others might play games or watch videos while waiting in line or sitting on a train, I’ll almost certainly be reading a book. It’s also why I don’t listen to many podcasts or watch all that many online videos.

So, with great joy, I read yesterday that the pandemic has led to a revival in reading. Lifting the average to a whopping 20 minutes per day, a 20% uplift from 2019. As a knock-on effect, ebook sales are up 30%, and print books saw their best sales years in a decade in both 2020 and 2021.

Now, the only sad thing is that comparing time spent reading to time spent on platforms like Facebook, TikTok, YouTube, and suchlike 20 minutes doesn’t seem like a whole lot. But I guess we have to start somewhere.

Now, if only I could get my teenage son to read for even 5 minutes a day, I’d be delighted…

Volume 96: Unbearable

March 10th, 2022

1. Unbearable.

tl;dr: Why?

In the face of invasion and bloody war, pretty much nothing else matters, which goes double for the garbage I write here. It just seems so utterly pointless to wang on about brands and suchlike while slaughter is happening.

I live thousands of miles away and I don’t have any family or friends or even acquaintances in Ukraine, and yet I feel nothing but horror and disgust at the sight of such senseless killing and destruction.

I’m not here to serve up platitudes or tell you what brands can learn from Zelensky (Somebody, please de-platform the SaaS bros on LinkedIn who’ve gone from instant epidemiologists to experts in wartime leadership).

But I will share a few things that I think might be worth your time to take a look at:

First up is a spreadsheet maintained by Jeffrey Sonnenfeld at Yale that tracks the corporations that have ceased doing business in Russia. WeWork is a notable absentee. Why am I not surprised.

Next, we have an article discussing why Russia is having less than its usual success with its disinformation efforts. Note to self - this is likely to change in the future when the wall-to-wall media coverage ends.

Then, in something of a good news story, although it tastes like dust right now, there is a hugely important acceleration of de-carbonization underway, as the world, especially Europe, re-thinks its reliance on hydrocarbons in the face of Russian aggression.

And, in something of a restoration of faith in the human condition, people are booking AirBnB’s they never intend to stay in and buying digital stickers on Etsy.

And finally, here’s a quick article on things people here in the US can do to help.

2. A golden age of flippening. Huh?

tl;dr: Somebody isn’t very good at coining terms.

As part of a seemingly neverending analysis of B2B marketing, that happy band of Australian marketing scientists at the Ehrenberg Bass Institute is, once again, pointing out that the vast majority of B2B companies are doing marketing wrong. Specifically, focusing way too much on short-term lead generation and nowhere near enough on longer-term brand-building. The why of this is pretty straightforward since 95% of market participants simply aren’t in the market for a given product at a given moment. Meaning that your oh-so-carefully targeted account-based marketing is likely to be very wasteful while doing that seemingly inefficient top-of-the-funnel stuff would’ve done a better job at priming the sales pump.

But, what the article doesn’t mention is why this is happening in the first place. Here’s my take. In my experience, the vast majority of B2B corporations are driven by sales cultures. The sales team is usually the most important single group within the company. They’re lauded for their P&L contribution, have a strong leadership voice, and are heavily resourced. Marketing, by contrast, exists solely to service sales. They’re viewed as a cost, judged almost exclusively on leads generated, their primary focus (whether they realize it or not) is sales enablement and support, their resources are limited, and there simply isn’t the appetite for a whole lot of that “wishy-washy” brand-building stuff.

So what happens?

Well, a typical diagnosis goes something like this: The business has stalled, the sales team feels like they’re spending too much of their time explaining who they are rather than selling a product, they aren’t getting enough quality leads from marketing, and worst of all? There’s a competitor with an inferior product that’s sucking all the oxygen out of the room and outselling us. Sound familiar?

Then, the recriminations start flying. Sales are doing everything they can, but marketing isn’t doing its job. The brand isn’t cutting through (without acknowledging the lack of resources necessary to do so), we’re being left behind in the market, and we need to get back on our game. Luckily, we have a new product that’s about to launch, and if our heroic sales team can sell it to all of our existing customers, all of our growth requirements will be met.

But, it never works out that way. You don’t grow by selling to existing customers because they don’t all want your new product (95% not in the market, remember), and even if they did, you still need to compete for that business with those pesky oxygen suckers that are dead-nuts focused on growing their customer base at the expense of yours.

Look, I know it’s not all black and white here, but the dearth of brand-building in B2B is very, very real. And while the diagnosis I laid out above is also very real, the challenge, fundamentally, is that sales cultures find it exceptionally difficult to make investments that won’t pay off until after the current quarter ends. As a result, I’m pretty much convinced that the only way to make the so-called “flippening” happen is to disconnect marketing from sales in such a way that it isn’t beholden to sales, that it isn’t solely judged on its ability to serve up leads, that it is given authority over the marketing mix, and has the resources and skills necessary to build a brand as well as market to an account.

3. Voice builds message.

tl;dr: Voice matters way more than most think.

In the branding business, you hear over and over again the question “what’s the message?” And while having a clear, compelling, and cut-through message is important and good and great even, the message is nothing without the voice it’s communicated in.

When I say voice, what I’m talking about isn’t what you choose to say (that’s the message), it’s how you choose to say it.

A unique voice is what creates a situation where two brands can say essentially the same thing and yet appear oh so very different.

It’s also critical to success in our increasingly fragmented media landscape. In a world with hundreds of customer segments and lots of messages where we can appear in environments as disparate as a long-form whitepaper to a five-second interstitial, the voice becomes the vehicle for both consistency and distinctiveness.

And it isn’t solely about new or old brands or category-specificity. Just think Mailchimp and Nike. Both have a distinctive voice, yet each operates in a radically different category.

So, when you see how powerful a strong voice can be, it remains a mystery to me why it’s the ugly step-child of the branding world. We emphasize the strategy and the positioning, the message and the visual identity, the experience, and the advertising. Yet, voice (if included at all) is typically thrown in at the end. A throwaway deliverable you can charge a few extra dollars for that not a lot of thought has gone into. Now, I know some folks who work in advertising might see themselves as the guardians of a brand’s voice. And that’s all fine and all, but if this voice doesn’t extend an inch beyond the last campaign you ran, your guardianship isn’t really, well, guardianship.

We need to elevate voice and re-think it. Instead of a set of disconnected bullet-points, perhaps we could take inspiration from the world of screenwriting to build something richer and more enjoyable. If the brand is the protagonist within a story, what is its character? What’s the backstory? What drives them? What scares them? What motivates them? What emotions does this character elicit? How do they interact with others? What will their narrative arc be like? How will they respond to adversity, to opportunity, to moments of joy?

It’s not rocket science. We live in a golden age of storytelling and the tools are all around us to make a brand’s voice become so much more unique and interesting and attention-grabbing.

And, if you’ve made it this far, here’s a nice little deck on writing with emotion that I stumbled across that sparked this little diatribe.

Volume 95: Thieving thieves.

February 24th, 2022

1. The thieving thieves who steal other people’s work.

tl;dr: Coinbase brouhaha brings back memories.

Just in case you were living under a rock this past two weeks, Coinbase ran a QR code direct response ad at the Super Bowl. Twenty million people pointed their phones at it, the app crashed, and it became recognized as the “winner” among the ads, whatever that means.

So far, so fair enough, you might think. But you’d be wrong. A few days after the CMO publicly thanked Accenture Interactive for being great partners, the CEO of Coinbase posted a lengthy Twitter thread claiming, among other things, that the work was done internally, that “no agency would’ve done this ad,” and that he’s pretty good at this marketing stuff, even though he has no clue what he’s doing. The Silicon Valley ego truly knows no bounds.

Again, so far, so whatever, until the CEO of the Martin Agency chose to respond by stating that not only was the work done by an actual agency (Accenture Interactive in this case) but that The Martin Agency pitched the QR code idea to the Coinbase team in August and again in October of last year.

Whoo boy.

Here’s the thing. It’s really easy to beat up on marketing partners, especially advertising agencies. Hand on heart, I can definitively state that the worst professional experiences I’ve had have been with advertising agencies and their bizarre blend of extreme ego and extreme obsequiousness. However, we shouldn’t forget that they get the shitty end of the stick all too often. From clueless holding company owners to clients demanding ownership of pitch ideas they haven’t paid for, to “data-driven” short-termism, to a continuing struggle to “prove” their value, and the piece-de-resistance; being told they can’t publicly claim ownership of their own work (The irony that a client chose you because of your case-studies being wholly lost on the majority of clients who then contractually demand that you can’t tell anyone you did the work).

Anyway, much as I find advertising agencies difficult, one of the things I absolutely cannot abide is when someone else claims ownership of your work. Our business is brutal enough, and when you’re only as good as your last cred, having someone else claim ownership of that cred is one of the most demoralizing and destructive things that can happen.

The whole thing immediately made me think of one of the most distasteful pitches I ever experienced, where the client called us out on a case study because “Another agency that just pitched us did that work.” We were just lucky the creative director from the supposedly stolen project was in the room to talk definitively about the work, how it was done, and who it was done for because the way the client interrogated us was frankly appalling. Ultimately, it turned out the other agency in question had done a couple of launch ads, which they felt gave them the right to claim total ownership of everything, including the strategy, name, logo & visual identity system created by us.

So, good on the Martin Agency CEO for calling this out. Shame on the CEO of Coinbase for being a dick, and a note to all of us to be better at both calling out would-be thieves and doing a better job of recognizing the people who do the actual work.

Oh, and as an aside, I’m always scrupulously careful to only talk about work I actually did and to give credit to others whenever I can. It’s the least we can do in a world where the only thing you can lay claim to is your work.

2. ClipArt Fighter 6.

tl;dr: Seriously, Capcom. Come on.

If you’re a person of my vintage, the Street Fighter franchise was a huge deal. Back in the days when the Super Nintendo was the equivalent of today’s PS5, Street Fighter was the game to be good at if you wanted any social currency among your peers.

One of the most iconic things about Street Fighter was the aesthetic, directly referenced through the medium of a flaming logotype. Until now.

For some completely unknown reason, the newest incarnation of the Street Fighter logo no longer looks like it’s going to hurt you. Instead, it looks like a cheap clipart app icon for a developer tool on AWS. (No, seriously, you can buy it for $80 from Adobe). I would call this a part of the Helvetica in Pastels movement, but that would be way too harsh on Helvetica in Pastels. This is just plain old lazy garbage.

If you’re going to walk away from something that your brand is intimately associated with, you’d better have a damn good reason to do so, and the thing you’re changing to better be a whole lot better than the thing you’re switching from. Unfortunately, Capcom answered neither of these questions.

Just think of how much fun you could’ve had with a flaming logotype? How it could’ve worked in motion, how it could’ve interacted with the characters, how they could’ve pushed the cheese factor to 11, and just had a blast with it.

But no. Instead, we get two crappy-looking initials inside a hexagon. FML.

3. Somebody let me loose on another newsletter.

tl;dr: A momentary lapse of judgment from the lovely people at Genius Steals.

If you’re one of the lucky few who subscribe to both the Strands of Genius newsletter and Off Kilter, this is the second time you’ll have heard from me today because assuming everything went to plan, I guest curated the edition that was sent this morning (And if it didn’t go to plan, that’s on me because I’m terrible with dates. Think of this as a preview instead).

Anyway, the lovely Faris & Rosie Yakob and their partner in crime Ashley write a newsletter that comes out twice weekly - the good stuff from them on a Tuesday, and the less good stuff from guest curators like me on a Thursday.

In case you don’t get it, you should sign up and read it here. I chose to write about three things. First, why strategy is a language that we need to learn if we want to be taken seriously at the top table. Second, that critical thinking is now at least as important as curiosity in our snake-oil-fueled world of bullshit. And finally, how we made a massive backward step when we swapped design movements for design systems. (But, I’m hopeful that designers will change that soon.)

Mostly, however, it was one of the ancillary questions, where they ask what your favorite album is that most caught my attention. After feeling a little stumped by the idea that anyone still listens to albums, I couldn't think of just one. But, lightning struck when I answered that anything with a Motown label on it is my favorite because it’s true. But you know what else? It’s not just Motown. Add Stax, Philadelphia International Records, and in more modern times, Daptone and Big Crown, and well, you have some of the finest music ever made, anywhere, to listen to.

Volume 94: Ponzi Capitalism.

February 17th, 2022

1. Ponzi Capitalism.

tl;dr: Crypto smells funny.

The most bang-on tweet following the Super Bowl wasn’t marketing Twitter losing its mind over why a QR Code screensaver was brilliant, or info-sec Twitter losing its mind over that same QR code for security reasons, but that of a wag noting that all the crypto ads reminded him of the egomania of the dot com bubble of 2000 just before it burst.

However, unlike those heady days, one can’t help but feel the Crypto narrative today is more FOMO and less “future is here.”

(As an aside, have you noticed the hypocrisy of tech-driven societal narratives, where the same people who told us ten years ago that nobody wants to own anything are now telling us everyone wants to own pixels? Just in case you didn’t know by now, you should deeply question any societal narrative pushed by anyone peddling a technology that just so happens to fit that narrative).

Anyway, it’s becoming increasingly clear just how much fraudulent behavior the crypto landscape attracts. Just take a look at recent revelations that 80+% of available NFTs infringe someone else’s copyright or are just plain old spam. Or the pumping behavior, where people sell NFTs to themselves for apparently huge sums of money just to set a baseline price for reselling that’s far above what the NFT might actually be worth. A marketing stunt to pump the value of something that’s essentially worthless, and if you’re wondering, yes, it is illegal. (Which someone might want to mention to Justin Bieber, just saying).

However, what’s most concerning is the observation that, in general, crypto bears more than a passing resemblance to a Ponzi Scheme. No matter what the true believers tell us, if it looks like a duck, quacks like a duck, and waddles like a duck, it’s probably a duck. Like Tether, which is most definitely duck-like.

Ponzi Schemes are illegal because they aren’t delivering an actual return. Instead, they create the illusion of a return by artificially shifting capital from newer investors to those who were in early. This shifting of capital means the scheme can sustain itself for a while by offering too good to be true investment returns, which attracts newer investors until it all collapses when the promised returns exceed what is fundable by new money.

This is why, if crypto is a Ponzi Scheme, the Super Bowl is the perfect place to advertise it. Right now, roughly 16% of Americans have invested in crypto in some way or another. To keep up the ‘bezzle, this number needs to grow significantly. And to grow, more people need to know about and trust what they’re investing in. And how do we signal that this is a legitimate investment opportunity? That’s right, we advertise it on the Super Bowl.

So, what next? Well, let’s hope I’m wrong, and it isn’t a Ponzi Scheme at all, but just in case I’m not, the fallout will likely be grimmest for those least able to withstand the losses. You see, of that 16% of people who’ve invested in crypto, a higher proportion are young people of color, which statistically speaking, means the people with the most to lose might be sitting on a potentially outsized exposure to crypto risk.

Ideally, we wouldn’t be in this position because this whole arena would’ve fallen under some meaningful regulation by now. But, in these times of unprecedented political dysfunction and fast-moving technological innovation, that was never likely.

Anyway, I hope you enjoyed tweeting about that QR code bouncing around the screen and that if you’re heavily invested in crypto-assets that you’re careful about it and haven’t refinanced your home to buy DogeCoin.

2. Economists say marketers good at marketing.

tl;dr: Generating £3.80 for every £1 spent if we’re being precise.

One of the oldest jokes is that if you asked 20 economists the answer to a yes/no question, you’d get 20 different answers. So, when economists start agreeing with each other, it might be worth paying attention.

This is why it’s worth reading this article by economist and studier of all things marketing, Grace Kite. In it, she points out that whatever crisis of marketing effectiveness may have existed is now well and truly over, with all evidence suggesting that our shift to digital channels has matured to a point where effectiveness is no longer in question.

The reason is that, unlike ten years ago, we now have considerable experience in the digital realm and so better understand what works and what doesn’t, and how best to allocate our ad dollars.

And while I’m more than well aware that marketing is more than just advertising, I’m prepared to take positive reinforcement wherever I can get it.

So, next time you’re tempted into one of the silly negative narratives, like advertising is dead, marketing is irrelevant, all you need is a great product, or even de-branding (ugh, the nonsense), please read Grace instead.

3. Turns out we quite like cats and dogs.

tl;dr: Very few being handed back, which is nice.

One of the more heartwarming realities during the pandemic is that people have been rescuing cats and dogs in record numbers. Speaking to a friend just the other day, they mentioned the shelters in New York have been practically empty (which never happens), with people competing for the cutest rescues like they’re rent-controlled apartments (So very New York).

I can certainly count my family among the pandemic rescuers, having added another mutt to our brood. And, while he’s incredibly annoying, he isn’t going back anytime soon, even though he peed on our bed (disgusting, expensive) and howls like a Wookie every time he gets into a car (earplugs, doggie downers).

And that’s the thing everyone was worried about. Not that a dog might pee on an owner’s bed or howl like a banshee at the sight of a gas station, but that they’d pee on the bed and howl at the gas station and then be handed straight back to the shelter in a kind of “thanks, but no thanks” kind of way.

Anyway, it turns out that 90% of all the pets adopted during the pandemic have stayed adopted.

Good.

Volume 93: Slumlords of the sky unite.

February 10th, 2022

1. Slumlords of the sky unite.

tl;dr: Merger makes “worst airline” league table a little easier.

For anyone who doesn’t know, Spirit and Frontier are two of America’s most notoriously lousy airlines, sometimes described as “slumlords of the skies.” So this week, they announced that to avoid competing for the title of the country’s worst airline, they’re merging. Thus putting clear space between themselves and every other awful airline…except JetBlue, which is apparently now the worst. (My, how the mighty have fallen, I quite like JetBlue).

Famous for cramped seats, poor service, ultra-low base fares, and a litany of additional fees for everything from selecting your seat to checking in (seriously), and yes, bag fees, it’s easy to laugh. But we probably shouldn’t.

Pre-pandemic, these were very successful disruptors within a notoriously difficult market. Setting expectations for less than no-frills service in return for cheap fares, they attracted leisure travelers seeking to avoid the higher fares that mergers between larger airlines inevitably led to.

Now, the shoe is on the other foot. Coming out of the pandemic, every indicator is that leisure travel will likely be dominant for years to come, with business travel a smaller segment. With this structural change, the airlines with the lowest cost structures and the keenest pricing are likely to succeed. By combining two of the lowest cost players into what will become the 5th largest airline, the story is that this is a bet on growth.

And while that might be true, it also might not. With mergers like this, the executives in charge are careful to state that it’s about something other than market concentration reducing competition so they can charge higher prices to the consumer. Why they say this is simple - it’s illegal to admit and would guarantee failure to pass antitrust scrutiny.

However, all too often, this story is nothing more than a PR shell game, as the ability to reduce product quality, stall innovation, and raise prices is the real but unwritten reason for a merger or a desirable side-effect anyway.

In the case of Spirit and Frontier, it could go either way. Only about 500 of 2,800 current routes overlap, so there might be a real growth story here for a single ultra-low-cost national carrier. But, equally, it might not, as they will have market power within those 500 shared routes. More importantly, though, is that we’ll have two airlines that are no longer competing with each other. Here’s why this matters. Up until now, they broadly cut the country in half; Spirit in the East and Frontier to the West. To grow, they’d have had to increasingly encroach each other’s turf, which would inevitably have led to a price war since this is the competitive lever low-cost carriers have to pull. By merging, a price war that is shareholder value-destroying but attractive to consumers has essentially been taken off the table.

This leads us to a possible worst-case scenario, where we end up with one terrible discount airline that decides to flex its pricing muscle, leaving us without the low prices to fall back on as the reason for using them.

Ugh. Let’s hope not.

2. Fear and loathing in Menlo Park.

tl;dr: Megadrop at Meta. More to come.

Last week Meta (Facebook to you and I) watched as stalling subscriber numbers led to a wipeout of $260bn in shareholder value in a single day, and still falling. This was the largest single-day wipeout of any company in history, with little or no sign that it’s coming back anytime soon.

Just to put this in perspective, adjusted for inflation, this was a larger dollar number than the entirety of losses made during the “Black Friday” stock-market crash of 1989.

So, why is it happening? Well, there appear to be three reasons:

1. First, global subscriber numbers are now in decline. Likely caused by the toxicity of the Facebook brand combined with more innovative and dynamic rivals, such as TikTok & Snap.

2. Changes to tracking by Apple are eating into advertising profits.

3. Investors view a $10bn investment into “the Metaverse” as a cash incinerator rather than a runway to future growth.

In addition, there are major regulatory headwinds in play for the company:

First, the European Union is getting all feisty regarding privacy laws, which it claims Meta, Google, and everyone else in the AdTech Industrial Complex have been breaking. It also responded to a veiled threat by Meta to stop doing business in Europe with a blunt “Feel free, don’t let the door hit your ass on the way out.” Then there are an array of legal cases in the US, where judges are getting so angry with the way Meta is stalling and obfuscating the discovery process that they’re now demanding executives turn up in court.

And finally, with this huge drop in value, Meta now has less currency with which to retain talent as this massive drop in market value just wiped out their stock options. Mix in a little of the business’s ethical turmoil, and overnight, Meta probably lost a lot of hiring juice. It’s one thing to justify working for a crappy company because it’s making you rich. It’s another to work for a crappy company that’s just plain old crappy.

And finally, Peter Thiel stepping down from the board feels more like the start of a story rather than the end of one. Especially considering a secretive company he’s heavily invested in was found to be hacking WhatsApp, which raises some interesting corporate governance questions relative to his role on the Meta board.

So, where does all this leave us? Well, it shows Facebook isn’t untouchable. It suggests the stock market is more sensitive to its toxicity than anyone thought and that the market isn’t buying the “pivot to the Metaverse” story, which always felt a lot like a “don’t look here, look over there” kind of move.

Things really aren’t looking particularly bright for Zuck and co right now. Losing share, losing hundreds of billions in value, a pivot story the market isn’t buying, a sea of dirty laundry about to be aired in public. And, possibly, personal criminal proceedings to top it all off.

Good. It couldn’t happen to a nicer bunch of people. Meta is a terrible company, and it’s about time it reaped what it has sown.

3. Tools, not rules.

tl;dr: Every model doesn’t fit every brand.

Something that drives me crazy about strategy in general, and brand strategy in particular, is the idea that models and frameworks in and of themselves define the answer, representing rules that you must follow instead of a set of tools to pick and choose from depending on circumstances. Unfortunately, whether we like it or not, our choice of frameworks and models and their underlying assumptions will, to a large extent, dictate what our strategic outputs will be.

It’s a phenomenon particularly apparent at larger agencies, consultancies, and brands where actual thinking has long been collateral damage in a quest to productize the strategy process, but it’s by no means limited to these firms.

The challenge inherent in such dogma first became apparent when I started working in “corporate branding,” where we were defining brands for large, complex entities with hundreds, sometimes thousands of products and tens of thousands, sometimes hundreds of thousands of employees. As I was a voracious reader of all things brand, I quickly concluded that while most of what I was reading might apply to the CPG/FMCG space, what works for oven fries or diabetes in a foil wrapper has only limited value when applied to massive global corporations operating in complex stakeholder environments. And vice versa.

Today, far from this problem getting better, an explosion of social media-fueled snake-oil-selling, opinion masquerading as fact, and a desperate desire to stand out from the crowd, has precipitated an array of competing strategic approaches, all of which claim to be the way instead of a way.

Worse, the current environment seems to have devolved into an exercise in “I’m right, you’re an idiot” instead of any kind of thoughtful discourse.

Take purpose. As a branding concept it’s been talked to death and the battle lines are distinctly drawn between its proponents and opponents. Yet, the reality is that both sides can be right simultaneously. Clearly, it’s a strategy that can work, yet it’s not appropriate for every brand under every circumstance. As Unilever is beginning to find out.

Equally, I look at something like the “4 Cs of modern branding,” and it’s evident that while some or all of these Cs may be valuable to some brands under some circumstances, it won’t be suitable for all. Just take community, for instance. In the abstract, it sounds great, but we see how challenging it might be in application when we get specific. Imagine, for example, Cascade trying to build a community around dishwasher soap?

Or, take an idea that’s done the rounds in recent years that brands are like sports teams in that they need to build fans rather than customers. The truth is, very few brands work like sports teams because very few categories have the innate emotional attachment necessary to create true fandom. Imagine, for a second, referring to the customers of an insurance company as its “fans.” This simply doesn’t make sense and would likely send you down some terribly wrong paths were you to try. A videogame franchise, on the other hand, might be quite different.

It’s not that we should throw away our onions and triangles and models and frameworks and platforms and pillars and suchlike, or that we should ignore the snake-oil sellers and talking heads and book-writers. Quite the opposite, as they might have something we can use. It’s just that we need to mentally re-frame all of this as tools to be used rather than rules we should follow, which requires us to think critically about what we’re looking at, take the time to diagnose our situation, and then think about which of these tools might be the right one for any given circumstance.

Volume 92: Death by a thousand A/B tests.

January 27th, 2022

1. Death by a thousand A/B tests.

tl;dr: Franken-Ad optimization is coming for creative. Oh goody.

Whenever a technology solution comes along, it typically brings a hugely hyped promise of future improvement - what Gartner refers to as “the peak of inflated expectations.” However, once the smoke clears, and the technology matures to the point where results can be analyzed, this promise generally turns out to have been vastly overhyped. For example, CRM didn’t transform customer relationships, the cloud isn’t always better, and machine learning-based HR services haven’t radically improved hiring (possibly quite the opposite).

Now, this same reality is catching up to the AdTech Industrial Complex, where the hype that surveillance-based tracking and targeting would radically transform advertising performance is proving to be more aspirational than promised.

As a result, rather than admit they’ve been overhyping this stuff for years, they’ve decided to shift gear and say tracking and targeting alone isn’t enough; what we need now is quality advertising creative too. Excuse me for a second while I cough out my coffee because anyone with a brain has been telling them for years that no matter how accurately targeted, terrible ads don’t work.

But, better late than never on the quality creative front, right? Not so fast, because the means of delivering “quality creative” appears to be through the testing of hundreds of ad-variants, where every single aspect - from headline to font choice to color to imagery, etc. - is independently tested until you get to the perfectly optimized ad. Sigh.

There are multiple things wrong with this. Let’s walk through a few of them.

First, this “separate the elements and optimize” mentality is the exact same mentality that drove the direct mail business into oblivion. Long before the Internet put the final nails into its coffin, response rates had plunged somewhere south of 0.5%. Why? Because it didn’t matter that you could perfectly optimize the shades of blue or orange, or the type size, or the font, or any of that stuff because the optimization mentality turned the whole category into something so predictably awful that nobody bothered opening the envelope it came in, let alone read it and respond.

Second, this perpetuates one of the biggest myths in A/B testing, which is the idea that tiny optimizations lead to big results. They don’t. Tiny optimizations generally result in tiny results. Does anyone remember Google famously A/B testing every shade of blue they could think of just because they could? It delivered almost nothing and caused their design leader to quit. (It’s not that A/B testing is inherently bad because it can be a powerful tool. It’s how it gets used and abused that’s the problem here. The real potential is when you use it to test big differences that might not otherwise see the light of day, but that’s a different story for another day)

This neatly brings me to my third point, which is that A/B testing hundreds of pieces of dogshit won’t alchemically turn that shit into gold. It’ll still be shit even after you’ve finished optimizing it. This really only works if the creative is of a high quality to begin with, which is a problem when advertising creative is getting worse rather than better.

It’s been widely observed that the quality of creative work in advertising has been declining for years, partly as a byproduct of the AdTech Industrial Complex. So the idea that these same AdTech purveyors will fix this systemic issue by “optimizing” hundreds of atomized ad variants so the piece parts can be reconstructed into a Franken-Ad? Well, that looks like some pretty fantastical thinking to me.

What strikes me about this whole thing is that it isn’t really about making better ads at all. It’s about selling a technology solution to a problem it’s singularly ill-suited to solve.

Sadly, the opportunity costs are deadly when you pursue an optimize everything just-because-you-can approach. Because all the wasted energy spent dancing on the head of a pin could’ve been better spent moving the needle instead.

2. The B2B product delusion is real.

tl;dr: And not just in B2B, if I’m honest.

Of all the marketing think-tank-like objects out there, the LinkedIn B2B Institute is one of the best. Over the past year and a half or so, they've consistently published interesting, well-evidenced, and thought-provoking reports that tend to fit closely with my own real-world experience. And while it's clear they subscribe to the Ehrenberg Bass view of the world, they don't seem to push the more off-piste theories promoted by that merry band of Australian marketing scientists (The claim that differentiation is irrelevant being more a product of poor research methodology and a desperate desire for a soundbite than an actual insight in my not at all humble opinion).

Anyway, in a new article, they point out that B2B companies tend to suffer from what they refer to as a "product delusion," which nets out as a false idea that you win or lose based on product performance rather than brand strength. To paraphrase the article, product performance is irrelevant if nobody knows who you are.

I can't tell you how right this is. While it's easy to picture smaller B2B brands being unknown, I've seen this happen firsthand at even very large companies. For example, when working with GE, they’d invested heavily in building a healthcare business that we found prospective customers didn't even know existed; hospital administrators being more likely to say GE made lightbulbs and kitchen appliances than MRI scanners.

Secondly, the observation that B2B advertising singularly fails the creative test because it emphasizes rational product speeds and feeds is largely accurate. B2B companies are generally driven by sales cultures that think product performance is the key to sales success. After doing many customer interviews across multiple categories, I can confidently state that this is not true. Clients rarely buy based on product performance because they understand that product leadership changes hands more quickly than they intend to change partners. They want a shortlist of products that can meet their needs, but after this is established, the purchase decision is almost always made on the basis of other factors.

Finally, because sales cultures tend to treat marketing as nothing more than bottom of the funnel demand gen, a common complaint is wasting cycles explaining to prospective customers who they are before they even get a chance to talk about the product at all. Meanwhile, a better-known competitor with a stronger brand is sucking all the oxygen out of the room, even though they have what the salespeople view as an inferior product. If this sounds familiar, it's because it's really, really common. (I often joke that salespeople love having a strong brand because it makes it easier to sell, but they're the least likely people in the world to invest in building one).

Anyway, it's well worth reading, although I do have one nit I'd like to pick. While 77% of B2B ads ranking at a 1 out of 5 for creative effectiveness is truly abysmal, it's perhaps even more abysmal that 53% of consumer ads score equally poorly. I mean, most of those B2B companies weren't even trying to build a brand. What's the consumer marketer's excuse?

3. Peloton. A modern-day Icarus.

tl;dr: Probably (maybe) not as bad as it looks.

Peloton isn’t in a particularly good place. During the height of lockdown panic, spiking demand combined with supply chain woes meant they couldn’t meet demand, which meant wait times extending to many months, and notoriously terrible buyer communication. Now, they face the opposite problem, sagging demand and ramped up production, leading to warehouses full of product twiddling its thumbs. In the meantime, Peloton stock, which had soared like Icarus, has crashed to earth and is now ignominiously trading below its IPO price.

The rumor mill has gone wild: McKinsey is slashing and burning, the problem is the unattainable brand image, the product is priced way too high, Big died on a Peloton. You name it, the talking heads are saying it. What on earth is going on?

Well, first, there’s no doubt Peloton is rather more poorly managed than they might like us to believe. Supply chain woes hit them hard, they overproduced in response, and the subsequent price cuts smack more of desperation than an actual strategy (nothing kills a premium brand faster than slashing prices because you quickly trash the price premium you worked so hard to establish) But, the piece-de-resistance of leadership failures has to have been their utterly reprehensible victim-blaming response to toddlers being killed by their products.

Now, while this poor leadership isn’t going to change anytime soon (a dual-class ownership structure means the founder & CEO controls the board and the company), I’m not sure it’s their biggest issue. No, the biggest issue was investors valuing them way too high, way too fast, which created a cascading set of incredibly messed-up incentives.

You see, while Peloton makes little sense as a huge, loss-making, multi-billion $$ company, it makes a lot of sense as a smaller company focused on growing a high-end home fitness niche. But when the market values you at that kind of scale, the expectation is you’re going to keep throwing down the growth numbers to justify it. Which…creates all sorts of weird incentives, like wildly overestimating demand, producing too many bikes, and throwing a last-minute Hail Mary pass of discounting to try and meet targets you probably never could’ve met in the first place.

So, what next? Well, while an activist investor is pushing for a sale and for the CEO to step down, neither of these things is likely to happen. It seems to have enough cash in the bank to weather the storm (at least for a bit), the CEO controls the board, and who wants to sell at the bottom?

Here’s what’s more likely. Peloton weathers the next few quarters and drops out of the media spotlight, then sees its stock trend back up slowly as it matures into the at-home fitness leader it always promised to be. Maybe, if a deal comes along that’s good enough, they sell. But at the end of the day, no matter what’s said right now, it has a good product, quality programming, a well-known brand, a subscription business model with low churn, and plenty of people who seem to love it. This means it’s probably not a bad business as long as we don’t judge it against a crazy valuation that never made any sense in the first place.

Longer-term though, as the market matures? Yeah, then these continued leadership failures will likely cause some bigger issues.

Volume 91: Big tech, big moves.

January 20th, 2022

1. Digital advertising under the looking glass.

tl;dr: Converging narratives accelerate change. It’s coming to AdTech.

If you work in the strategy field in any capacity, you’ll recognize that there’s an acceleration and amplification of change when narratives converge. As an example, just this week, Microsoft made a huge bet on the convergence of gaming with the metaverse, which I’ll talk more about below.

However, in slightly less well-publicized news, another convergence suggests that we might be on the brink of a shift in how corporations view the economics of digital advertising. To understand why, let’s start with canary in the coalmine, Bob Hoffman, self-proclaimed ad-contrarian. Recently, he added the outputs from various research studies into the “programmatic poop funnel” and concluded that only 3 cents of each digital dollar make it to ads seen by human beings. The rest is lost to AdTech intermediaries, fraud, and a digital “angels share” where money simply vanishes into thin air. Even the forensic accountants at PwC can’t figure out where it goes.

Whether or not this 3 cents figure is accurate doesn’t much matter. What matters is a wall of evidence that’s building to support the case that there isn’t just leakage from the system but a veritable flood of digital dollars going to waste. You don’t have to be a rocket scientist to realize that at some point, corporations are going to wake up and start doing something about it.

And what might the precipitating event be that pushes them to do so?

Well, there’s a good chance that anti-trust action against Google and Meta might be it. To cut a very long story very short, there are multiple major court cases against both corporations where legal minds believe them to be “absolutely screwed.” To dive deeper, I’d recommend following Jason Kint, but in essence, Google and Meta are alleged to have, among other things, illegally manipulated advertising auctions and colluded in an agreement to fix prices and defraud advertisers, consumers, and publishers. Oops.

And while the PR chum is already flying in an attempt to “flood the zone with shit,” there’s no escaping the fact that once these cases get going in earnest, it’s going to be hard to miss the narrative that the two most dominant forces in advertising got there via illegal and fraudulent means.

This likely means digital advertising is going straight to the top of the CEO agenda, where otherwise it likely would not. And what happens when firms start digging into how much they’re spending and what they’re spending it on? That’s right; we’ll turn full circle and end up at the conclusion that up to 97% of that spend might, in fact, be utterly wasted.

So, yeah. While this will be particularly painful for Google and Meta, not least because the CEOs of both firms are directly implicated, anyone working in AdTech and digital media better start armoring up. Because it ain’t going to look pretty when the dominos start falling, and clients start asking tough questions like why they’re paying 50c on the dollar for targeting and where that “angels share” is really going.

2. Xbox Activision is more about optionality than just the metaverse.

tl;dr: Microsoft kicks the anti-trust hornet nest to see what happens.

This week, to much metaverse fanfare, Microsoft made its largest-ever transaction, paying almost $70bn in cash to purchase video games behemoth, Activision Blizzard. A deal that likely works for both as it provides Microsoft with strategic flexibility and nets Activision Blizzard shareholders a nice premium over what has been a faltering share price caused by deeply concerning tales of a highly dysfunctional frat-boy culture.

Now, while the press coverage has largely viewed this as a shot-fired moment in the war for the fledgling metaverse, the truth is almost certainly a little more nuanced. Truly, this appears to be more about optionality.

What do I mean by this? Simply put, purchasing a business like Activision Blizzard gives a buyer like Microsoft multiple options and strategic flexibility. There isn’t just a single way to make it successful. Let’s walk through a couple of the most obvious possibilities:

First, as a standalone business, A/B owns a portfolio of valuable franchises in a growing industry, is highly profitable in its own right, and is currently run by a CEO who isn’t particularly popular among either his staff or his customers. By doing little more than running it properly, Microsoft buys growth and gains a valuable contribution to future profits.

Second, Microsoft has Xbox Gamepass, which is its version of Netflix for gaming. Here 25 million customers (and growing) pay a monthly fee to access a library of games rather than purchasing each outright. Adding Activision Blizzard to the mix means Microsoft can now add blockbuster franchises like Call of Duty to this mix. However, the long-term play for a service like Gamepass is to bypass the console entirely to make games playable on any device via the cloud. With its Azure infrastructure, Xbox brand, and growing portfolio of proprietary franchise games, Microsoft is uniquely positioned to make a bet that could potentially add a Netflix-sized valuation ($226bn) to its own market capitalization.

Third, and this is something almost nobody has been talking about, there’s a developer angle here, connecting the dots between Activision Blizzard, Github, and Azure in a play to control a significant part of the gaming developer ecosystem, which will likely be critical as we move toward the building of the metaverse (whatever that ultimately becomes). Not just mining for gold, but selling shovels to the miners, which is a business Microsoft is very familiar with.

Finally, this brings me to the metaverse itself. This acquisition adds core competencies in developing virtual worlds, games development, and the benefit of blockbuster franchises, giving Microsoft greater flexibility in whichever metaverse bets it chooses to make.

So, is this just about the metaverse? No, it’s about more than that. It positions Microsoft for multiple future outcomes, which likely makes it good for Microsoft shareholders…unless it fails anti-trust scrutiny. Let’s see.

3. Competitive disadvantage.

tl;dr: Marketers aren’t the only ones who lack business skills.

A popular trope right now is that marketers lack business skills, which is why the marketing function is slowly but surely being re-engineered into the “shapes and colors” department, with responsibility for little more than the promotional P within the 4Ps of the marketing mix.

While there’s clearly an element of truth to this, what I find more interesting is that while we’re quick to question the business skills of marketers, we’re much slower to question the business skills of the accountant’s marketers are increasingly held accountable to.

Take the dogmatic devotion to ROI. Because of its misapplication, this has become the single most destructive metric in marketing. Why? Because it measures efficiency rather than effectiveness. Attracting customers who’ll buy from you anyway makes for high ROI even though the spend is wasted. By contrast, attracting a customer who wouldn’t otherwise buy from you is expensive yet essential for growth. This means that at some point, ROI will go down as customer growth goes up because you’re attracting customers who wouldn’t otherwise buy from you. It seems logical, but when was the last time you saw an accountant demanding to see ROI go down as an essential part of growth going up?

And, there’s the rub. If corporations viewed marketing as an essential driver of business outcomes like growth, they’d focus on the effectiveness measures and financial modeling necessary to deliver that growth. (As an aside, the closest thing I know of today is what Diageo are doing with “Catalyst” as they attempt to grow market share by 50% over the next eight years)

Instead, many (perhaps most) corporations take a cost-first approach, where the underlying assumption is to eliminate waste rather than grow the business. Why do I say this? Because rather than focus on marketing’s contribution to growth, many corporations use accounting practices as a blunt tool focused only on optimizing marketing costs.

Now, it’s obvious this creates a conflict for marketers if they’re being judged on their ability to drive growth but managed solely on the basis of financial efficiency. However, less obviously, it also challenges the financial professionals they’re being held accountable to because focusing only on the cost side of the ledger does nothing to advance their own ambitions to have a more significant strategic role in directing the organization's future.

Anyway, the solution to this competitive disadvantage creating disconnect seems frighteningly simple. Instead of setting up marketing and finance in opposition to each other, where one believes its job is to “reign in,” eliminate waste, and mandate cost-control, they should instead be incentivized to work collaboratively in driving the growth outcomes the company demands and to work together building the models, metrics and operational KPI’s best suited to deliver them.

Volume 90: Back for another year.

January 6th, 2022

1. Branding friction.

tl;dr: The critical difference between brand design and digital design.

What we might label “digital design,” especially the field of digital product design, has evolved rapidly over the past 5-10 years, firmly establishing itself as the dominant design practice in most corporations. What’s most interesting, though, isn’t that “designing for digital” has evolved so quickly, but the singularly beige blob of genericism it’s evolved into.

This is largely because of three things. First, reusable componentry, pattern libraries, rapid iteration tools, and design systems (think Material Design) narrow the aperture of what’s believed to be possible. Second, a design process that seeks to eliminate friction to make the desired customer flows as smooth as possible tends to mistake familiarity for usability. And third, a kind of collective groupthink FOMO that dictates what’s “acceptable” and “good” that’s aggressively policed online.

Critically, while removing friction and optimizing for familiarity plays a critical role in the successful delivery of the product, if extended too far beyond, it can be terrible for the brand.

This is because the goal of brand design shouldn’t be the removal of friction; it should be harnessing it and turning it into something unique. As a result, a brand designer should strive to accentuate the exact thing a product designer seeks to eliminate.

And the tension between the two is where magic should happen.

This article provides an unwitting example. The author compares Squarespace to Oatly, claiming that Squarespace doesn’t work because it’s about branding, whereas Oatly does because it’s about storytelling. While this is abject nonsense, I’m delighted to borrow from it in order to make my point.

The author correctly reacts to the Squarespace brand being instantly forgettable. However, this isn’t due to a lack of storytelling; it’s due to a product design mentality applied to branding design - simple, seamless, friction-free, and utterly generic. Oatly, on the other hand, takes a brand-first approach to design that stands out uniquely and distinctively on the shelf and in media. This isn’t about storytelling; it’s about friction and placing things into your mind that you’ll remember. Frankly, the Oatly typeface is far more distinctive than anything they write in it. Far from friction-free, Oatly revels in its grit in the oyster status. Just look at how unique the packaging is compared to every other nut-milk on the shelf.

It pains me to feel that I have to say these things because it represents some of the most basic and foundational building blocks of how branding works, but it needs to be said. The overwhelming application of the seamless digital mindset to branding is slowly but surely depriving branding design of everything that makes it special.

Picture, for a second, what would happen if a digital designer designed the iconic Coca-Cola bottle. Would it be “instantly recognizable even when laying broken on the ground?” Not a chance. Instead, it would be the most familiar, generic bottle in existence. Simple, easy, modern, and seamless. And utterly, forgettably, boring as a result.  

The goal isn’t to make everything the same, familiar and comfortable, and remove all friction to the point that your brand becomes so generic that it could be any brand. Instead, the goal is to do the unexpected and create a memorable friction. To actively avoid what everyone else is doing precisely because it’s what everyone else is doing, no matter how nice it might be, how well designed, how aesthetically pleasing, or how comfortable.

Why? Because we’re not in the comfort business, we’re in the branding business. And if we’re in the branding business, we’re in the standing out business.

2. We won’t know what matters until after it all explodes.

tl;dr: A rather important perspective on all things Web3.

With the sheer amount of hype around all things Web3, from NFTs to crypto true believers, to DAOs, to the tokenization of everything, to the decentralization of the web, you’d be forgiven for feeling more than a little confused.

Unfortunately, of all the voices in this space, those in marketing are the worst hype offenders. I’m not sure if you’ve noticed, but the same marketing talking heads always seem to be experts in ESNTTCA (Every Single New Thing That Comes Along). They’re either impressively well-informed polymaths or suffering deeply from the Dunning Kruger Effect. Take your pick, but I’m generally wary of snake oil.

Over the break, in an attempt to pick my way through the maelstrom, I decided to seek out voices I knew to be more thoughtful and found this article by Tim O’Reilly, coiner of the term Web 2.0 back in the day, and a generally brilliant thinker on all things tech.

It’s an excellent read for a backward/forward perspective on what’s going on and how it fits with historical precedent. There are many takeaways, from inflationary bubbles as primers of the infrastructure pump to the tendency of profits to centralize before capital seeks new opportunities elsewhere.

But, the thing that most struck me was the observation that the term Web 2.0 didn’t come about until five years after the dot com bubble burst—designed as it was to make sense of why some firms succeeded despite the bursting bubble, while others failed spectacularly.

Now, I firmly believe in the idea that more than one thing can be true at the same time. We can be in a spectacularly speculative bubble in relationship to Web3 and crypto in general, and these technologies can also be a truly transformative force for change. The problem is that we don’t yet know which bits will be transformative and which we’ll look back on as tulip-mania folly. And we likely won’t know until after it all explodes, and even then, it may take us a few years to pick through the debris to make sense of it all.

Anyway. If you’d like to start your year with a rare and thoughtful foray into a subject so utterly overwhelmed with hype, this is it.

3. The end of one year…and the start of another.

tl;dr: Thank you all. Here’s to a happy 2022.

Well, that was it for another year. Now we’re on to 2022. Let’s hope it turns out to be a bumper year, that pandemic-related issues fade, that we make a breakthrough or two in our fight against climate change, that political dysfunction tamps down a bit, and that everyone gets to be happy and prosperous.

When I started this newsletter, I sent it out to a few friends, former colleagues, and former clients and hoped they wouldn’t unsubscribe or be offended. Most of them didn’t and weren’t. So I added a signup page on the Invencion website and have occasionally posted links on Twitter and LinkedIn, even though I’m terrible at self-promoting posts. And then people like you chose to subscribe from far and wide. Thank you for that. I sincerely appreciate it. Since I started this in November 2019, subscriber numbers have grown by more than ten times. I won’t say how many of you there are because I have no idea how significant that number is. But, I will say that your choice to subscribe and read these scribblings and occasionally email me to say that you like them is what keeps me writing.

I try to stay current, but sometimes client work takes priority, like last month. So, if I miss a week or two, please understand that it’s only because I’ve been too busy, which means Off Kilter had to take a break that week. Sorry.

As we head into the New Year, please let me know if there is anything you like that you’d like to see more of, things you don’t like that you’d like to see less of, or anything else you’d like me to think about or write about. I’ve never really requested feedback, so I’d love it if folks were willing to take a minute or two and let me know. I would offer to pay you, but this newsletter costs me money as it is, haha.

Otherwise, I wish you the very best for a healthy, happy, and prosperous year ahead.

Until next time.

Volume 89: Legitimizing, not just monetizing.

December 2nd, 2021

1. Legitimizing, not just monetizing.

tl;dr: Big brands don’t just monetize hate; they legitimize it.

At one point, it was a joke to say the greatest minds of a generation were wasted getting people to click on ads. Now we find the implications of billions of dollars pumped into adtech are way worse than just clicking on ads (which hardly anyone does, btw). No. We’re now finding that adtech, in addition to consumer surveillance, usurious value extraction, and feeding a global organized crime movement, is also directly responsible for the monetization of extremism.

What’s worse is that while the adtech industry can rightly be criticized for monetizing hate, the brands appearing on these hate sites are complicit in legitimizing it.

Let me explain.

One of the big problems with adtech is that while it claims to be smart, it’s also incredibly dumb. The great innovation behind surveillance advertising was to disconnect advertising from both content and context. In the past, media was purchased contextually. In other words, media was purchased based on where we thought our audience was likely to be and what they were likely to be engaging with based on their interests and content consumption habits, which meant we had to take a direct interest in both the content and its publisher. However, with the advent of adtech, this context became subsumed by an ability to track individual consumers and serve them ads no matter what content they might be engaging with, and no matter who might be publishing it, meaning marketers no longer had to take an interest in content, context, or publisher quality. Instead, they outsourced that responsibility to a complex and opaque array of easily gamed adtech policies and black-box “brand safety” systems that work so terribly they’re vastly more likely to de-monetize legitimate news stories about, say, LGBTQ+ issues than they are to steer brands clear of blatant racism.

Add this all up, and you’re left with ads for brands like Volvo, Land Rover, and Harvard running on sites like Steve Bannon’s “War Room” (I refuse to link to that shit). Yes, the same Steve Bannon banned from YouTube for advocating the beheading of government officials.

And, while it’s deeply concerning that major advertisers are, even unwittingly, monetizing the worst content on the internet, it’s equally concerning that their presence on these sites legitimizes that content. In branding, as in life, it’s an old adage that you’re judged by the company you keep. Simply put, this means the brands your brand associates with have a significant impact on how you’re perceived too. It’s a big reason we’ll never see something like Louis Vuitton associating with Dollar General, for example.

So, while these blue-chip brands don’t want to associate with hate sites because it will have a negative impact on them, it has an outsized positive impact on the hate-spewers when bluer than blue-chip brands like Land Rover, Volvo, or Harvard appear next to hateful content because some of the equity rubs off, in effect saying “Hey, this stuff is fine. Big brands like us wouldn’t be here if this stuff were truly toxic,” even though that’s exactly what it is.

The problem with all of this, of course, is one of incentives. There are no incentives for adtech purveyors (of which Google is the world’s largest) to reign this in because they profit from it. And there’s no eal incentive for brands to do anything about it because they can legitimately shrug their shoulders and say it’s too complex or claim to have outsourced the responsibility to an adtech brand-safety system that they know probably doesn’t work very well.

The bad news is that it really is a complex problem because the only way to fix this and make sure your ads don’t appear next to objectionable content is probably going to require routing around as much of the adtech ecosystem as you can, instead going as close to direct as you can get to quality sites that publish quality content and have a quality audience, which means buying media contextually again. Something a vanishingly small number of brands are set up for in a world increasingly dominated by programmatic buying. The good news is that there’s increasing evidence showing that this doesn’t just insulate your brand from hate but is also the best way to make sure your ads get in front of actual human beings instead of bots and ensure the maximum amount of your media spend is turned into actual ads rather than being lost to extraction fees from the adtech intermediaries.

But, yeah. It’s really sobering to think that just by working in marketing with big brands, we’re complicit in monetizing and legitimizing the kind of content that’s breaking our society and that we’d never want to be associated with in a million years.

2. EV fueled nostalgia? Oh yes, please.

tl;dr: Old cars are way more inspiring than a pseudo-Jetson’s future.

When I was a kid, I loved cars, avidly consuming every motoring magazine I could get my hands on from the front to the back. I distinctly remember aspiring to an Aston Martin or a Porsche or maybe even a Lamborghini (Countach, naturally). But, of course, as I got older, other priorities reared their heads like children and dogs, so nowadays, I drive a battered old Ford Explorer and am perfectly happy doing so, having no real interest in badge snobbery. (As an aside, I’ve never seen anywhere like Cambridge, MA, for car damage. Having lived there previously for three years, there’s now a novel written in braille for giants across my driver’s side door).

Anyway, when EVs first became a thing, the most discombobulating aspect was the way car companies figured the way to telegraph an electric vehicle being an electric vehicle was to make it look like a parody of a pseudo-Jetsons vision of the future. A future where aesthetics and design sensibility and embarrassment clearly no longer counted one whit. In reversing this trend, one has to give credit to Tesla for basing the design of the Model S on an Aston Martin or a Jaguar rather than a “World’s Fair” vision of the future, circa 1939, which meant other car manufacturers have largely fallen in line when it comes to the design of their EV models (Although, seriously BMW, making the wheels on the EV version of the Mini look like wall sockets is pathetic. Mind you, the electric BMW is so ugly it hurts).

Anyway, I’m absolutely in love with the spate of new EV concepts being released (either by the car company themselves or by independent designers) that aren’t mimicking a nostalgic concept of the future but are straight-up drawing on nostalgia itself.

So far, we’ve seen such retro-macho concepts from BMW, Dodge, and Hyundai (twice) along with Ford, which recently demonstrated its aftermarket electric crate motor in a 1970s F100 series truck.

Now, I don’t know about you, but when I look at the results of what happens when smart people rifle through the back catalog majesty of the car industry, I can’t help but smile with more than a little of that “want one” green-eyed envy I last had as a teenager.

So, yes car industry. No more Jetsons. Please bring your nostalgia-fueled retro-macho EV concepts to market. I can’t think of a car I’d rather own than any of the above.

3. IV wellness and DAOs.

tl;dr: A few random thoughts before the weekend.

Last week was Thanksgiving here in the States, which is undoubtedly my favorite adopted holiday. There’s no equivalent in the UK, so the idea of getting together with family and friends to pause and give thanks, eat turkey, drink wine, and then fall asleep on the couch watching sports without having to worry about gifts or religion is really rather refreshing.

We usually spend Thanksgiving with extended family, but this year, due to a rather nasty bacterial infection, I had the joy of spending mine in the hospital on an IV (all good now). Aside from a deep feeling of gratitude toward our medical professionals for working on a holiday, especially during the throes of an ongoing pandemic, I became more than a little obsessed with that joyous bag of fluids. How, I wondered, could something so seemingly innocuous as a hanging bag of salty water make such a difference to how I felt? I’ve never had a headache disappear as quickly. Apparently, though, I’m not alone because IV treatments are the hot new thing in wellness. (If we conveniently ignore that IV hangover treatments have been a thing in Vegas for some time now).

I have to say, I’m not too fond of needles, so being sick and stuck with an IV by a nurse in a hospital is one thing, but I can’t imagine going to a spa and choosing from an array of concoctions to be injected into my arm. But, hey, some people go and have a belt sander applied to their face, so I guess anything is fair game in the quest to look and feel better.

In entirely different news, I’ve been diving deeper down the rabbit hole of Web3, which is about as confusing as anything can be. My curiosity piqued by a spate of talking heads wanging on about what the “metaverse” (a thing that doesn’t exist yet, other than a name ripped off from one of my favorite novels) means for brands. I’m like, please. Stop already. You’ll be referring to yourself as the “Metaverse Prophet” next. (And PS. Coming from a brand guy, the metaverse might be better off without brands ruining it for a while).

Anyway, amidst all the genuine innovation, weirdness, hyperbole, general nonsense, and man-child libertarianism, it’s hard to fathom Web3 and the true impact of crypto, blockchain, NFTs, DAOs, and DeFi. But, what really caught my attention was the DAO formed to try and buy an original copy of the constitution. While a hedge fund mogul ultimately doomed that effort, the principle of establishing a completely decentralized and autonomous organization is striking. And while buying a copy of the constitution was a bust, I think we’re going to see a lot more of this in 2022. For what it’s worth, my prediction is that groups of fans will form DAOs in an attempt to buy sports franchises. And quite possibly a much bigger one than anyone anticipates.

Let’s look at some back of a cigarette packet numbers to see why that’s possible. The Pittsburgh Penguins were recently sold to Fenway Sports Group for around $900m. Their stadium holds 20,000 people. That’s the equivalent of everyone who goes to the stadium paying $45,000 for a stake in the team. And while $45k is a lot of money, it’s not astronomically out of reach. Add more fans to the DAO, and that number drops, add some debt, and it drops further still. I think you see where I’m headed here. Access enough people and get to a place where the choice comes down to spending $100 on a replica jersey or $100 to own a part of your favorite team and have a say in how it’s run, then I’m pretty sure I know what most fans will choose. So, yeah. DAOs will get real big, and they’ll get real weird, and it’s going to happen real soon.

Volume 88: Just Johnson, bankruptcy grifters.

November 18th, 2021

1. Just Johnson, bankruptcy grifters.

tl;dr: Johnson & Johnson to split.

I wrote last week about how GE is splitting into three separately listed public companies. One focused on healthcare, one on power and energy, and one on aviation. In the case of GE, the bet is that these three companies represent hidden shareholder value that will be better realized through independence rather than interdependence.

Hot on the heels of that announcement, we hear that Johnson & Johnson is splitting into two companies (Oh, how badly I want one of them to be called “Just Johnson,” haha). Anyway, while these splits may at first glance appear similar, they are, in fact, very different. Where GE is splitting to try and realize greater shareholder value, Johnson & Johnson is splitting in an attempt to contain exposure to legal risk.

To understand this, we need to know two things. First, J&J today comprises a large and highly profitable pharmaceutical medical company and a smaller and less profitable consumer healthcare company. The former produces prescription medications and medical devices, and the latter things like toothpaste and…baby powder. Second, the baby powder I mentioned is critically important to this story because J&J is currently being sued for billions because this product was (allegedly) laced with ovarian cancer-causing asbestos for decades. Now, that isn’t a particularly good look for them because the risk of paying billions in lawsuits is depressing the stock price, and the reputational risk of losing in court threatens to push it down further. So, what to do to get the stock price back up? Take the hit and say sorry and accept responsibility for the deaths and illness caused? Oh, hell no. Split the company in multiple ways and contain the damage.

Specifically, J&J is engaging in two separate splits. The first is to use a quirk of Texan state law to form a new and immediately bankrupt entity, called LTL, that’s intended to hold all of its liabilities, including some 38,000 lawsuits related to its ovarian cancer-causing baby powder. The second is to split the smaller and less profitable consumer healthcare business from its much larger and more profitable pharma sibling as an extra layer of liability insurance.

It’s a spectacularly cynical act yet has become depressingly familiar in our post-Friedmanist economic system. Let me quickly explain.

Limited liability is a foundational idea upon which hundreds of years of capitalism rests. In essence, it’s a legal construct that says liability lies with the company, thus protecting shareholders. Since its introduction, this separation of liability has been a central facet of capitalism's economic dynamism and everything we’ve reaped from it. However, in recent years, the barons of private equity figured out how to weaponize limited liability to line their own pockets by stripping companies of assets, loading them with liabilities, declaring them bankrupt, and then…walking away. This approach led directly to the path pursued most recently by Purdue Pharma to escape their exposure to the opioid crisis. (The bankruptcy settlement was so pathetic that the Sackler family and their enablers walked away scot-free, as the fine levied over ten years will be more than paid for by dividends on the financial assets they stripped from the company prior to its bankruptcy. Look up the term “evil” in the dictionary, and you’ll see a Sackler grinning back at you).

Anyway, even within the context of these highly cynical legal maneuvers used to pit a foundational idea of capitalism against itself, the approach taken by Johnson & Johnson is noteworthy for its bravado, which might lend further ammunition to attempts to change the law.

Anyway, look for a lot more on the subject of bankruptcy grifters, and let’s see if this sparks any changes in the way bankruptcy law operates. Because if the Sacklers can use bankruptcy maneuvers to get away with the opioid crisis and J&J to get away with cancer-causing baby powder, then we really need to take a long hard look at what’s allowed and to close the loopholes that allow it.

Oh, and don’t believe the PR-media hype. The GE split and the J&J split has almost zero in common.

3. A loot-box approach to retail and other assorted odds and ends.

tl;dr: Stuff I found interesting this week.

Sorry, this week is a little busy as we wind up toward the end of the year. However, here are a few things I stumbled across that might be worth your time:

Ford ran out of electric crate motors for the aftermarket. I love the idea of tricking out old trucks and hot rods with electric motors almost as much as I love the idea of Ford selling electric crate motors in the first place.

Marketers, don’t fear pricing. (Assuming you have any say over it in the first place.) Just don’t, whatever you do, let engineers do it, or you’ll end up with nonsense like $3 Twitter Blue.

DTC darling Casper is being taken private at a fraction of its IPO price. A poorly run company with terrible economics that should never have gone public in the first place. Apparently, it’s the wholesale business rather than the DTC part the buyer is interested in. However, as it’s a private equity deal, there might be a future roll-up plan to combine several struggling mattress and sleep-focused companies under the Casper brand.

Like a bad smell, Fred Reichheld is back with “Net Promotor 3.0” because he has a new book to sell. I have to say it’s hard to trust someone who writes a self-referential article where he constantly talks about himself in the third person. Oh, the ego. Anyway, this one is causing people fits because it hits right at the heart of the grow your customer base/increase the loyalty of existing customers battle-lines. All I’m going to say is the whole concept of “earned growth” versus “bought growth” is almost as brilliant a hook for a book as it will be excruciating to try and deal with in practice. As an aside, publishing this dross in the HBR magazine shows that standards haven’t just dropped through the floor at dumb internet cousin HBR.org, but over at the elitist main event too. Oh, and I love dogs, but WTF is up with that dog pic in the article?

Finally, on the subject of the critical importance of customer-centricity, retailers have decided to fix bot purchasing of hard-to-get items like PS5s and the new Xbox by making human customers join a paywalled service just to have a chance at buying one. This is a real-life loot box approach to retail folks, making you pay just for the chance at buying a product. As far as solutions to a problem go, I’m going to go out on a limb and suggest this is probably the most cynical and least-customer-friendly approach they could’ve chosen. Somebody better send Fred over for a word.

3. Welcome to the Icelandverse.

tl;dr: A timely and much-needed parody.

OK, this is a quick one. In case you live in a cave and missed it, the Icelandic tourist board just released a rather brilliant ad.

Aside from being timely, funny, having a beautiful backdrop, and a scarily Zuckerbergian Icelander, this is part of a trend toward novel advertising that works because of what it’s reacting to, rather than what it has to say.

Actor, entrepreneur, Twitter influencer, and now advertising-savant Ryan Reynolds is perhaps the best known for this approach, especially with the ad for Aviation Gin that immediately followed that Peloton ad.

On the subject of Peloton, what on earth is going on over there? So far this year, the stock price has dropped almost 3x (From $148 on Jan 1 to just $51 as I write this). I guess it must be their many travails, from bad ads to supply chain woes, to killing children, to regulatory spats, and then the piece de resistance: missing its earnings forecast, which it tried, and failed, to fix through discounting. Clearly a lockdown phenomenon, it’s hard to call Peloton a well-run company, which means it’s hard to see it magically righting itself in a much more challenging environment without some major changes at the top…which seem unlikely with a founder CEO who continues to control the company.

Look for the troubles to continue and for it eventually to be bought, probably by Apple or maybe…Disney?

Volume 87: Algorithm? Algo-wrong.

November 11th, 2021

1. Algorithm? Algo-wrong.

tl;dr: Algorithmic failure causes Zillow to lose big.

Zillow is an incredible success story. A true innovator in what was the sleepy category of residential real estate listings. Now, 15 years later, it’s hard to overestimate the impact it’s had on the US housing market since its formation in 2006 by Expedia alums.

By 2018, though, this was a business beginning to look a little stale, so it decided to get in on the iBuying game. iBuying, in case you don’t know, is a business model where institutional buyers use data science and algorithmic pricing to identify homes to buy, undertake modest improvements upon, and then flip at a profit. For Zillow, this looked like a no-brainer. It had access to the best data in the business, its own captive listing platform to sell on, and as much cheap capital as it needed to buy up all the homes it wanted. And buy them it did, expanding their approach in April of this year, before the whole thing spectacularly collapsed in embarrassment last week.

Amid one of the most significant bull runs in residential real-estate history, the Zillow algorithm got pricing so wrong that it now owns over 7,000 homes it acknowledges will have to be sold at a loss. This led them to shutter the iBuying business, reduce headcount by 25%, and watch as the stock price plunged.