Volume 40: Jilted by Apple, Palantir woes & the candybar problem.
1. Jilted by Apple, Intel buys frumpy new outfit in desperate attempt to feel hot again.
tl;dr: An unintentionally risky re-brand.
Last week, Intel rebranded with a new logo, visual identity system, and mnemonic sound as a part of what appears to be fairly comprehensive brand overhaul, its first since 2006.
I’ll leave the design commentary to designers, but I do think it’s worth trying to understand some of the strategic context we see embedded in this change. It’s an excellent illustration of rebranding in action and is in direct contrast to a client I’m working with right now, which I’ll be able to talk more about in a couple of weeks.
When looking at any rebrand and, in fact, any strategy that leads to a rebrand, we must think about risk. Since strategy directly addresses the future and since that future is largely unknowable, strategies are always about managing risk. Put simply, any strategy aims to balance the risk the organization is willing to bear relative to the reward that it seeks within the context of the situation in which it finds itself.
If we start with this in mind, it’s not uncommon to find a disconnect between risk/reward decisions at the corporate strategy level and how marketing departments interpret this in the context of a brand change. More specifically, the tendency to marry transformative business strategies to incremental and non-transformative brand strategies. Usually because of a pretense of risk minimization.
The challenge is that when an organization is undergoing major change, it’s entirely possible for the biggest risk to be taking no risk at all. A too-incremental and too-conservative brand strategy becomes a material barrier to transformative success rather than the enabler that it should be.
So, what does this have to do with a new Intel logo? Well, this is a business with some stark challenges ahead. While I joked about Apple above, the reality is that the Apple/Intel breakup reflects a world in which ARM-based silicon increasingly matches and even surpasses what Intel chips can do. Worse, continuing manufacturing woes now mean rivals such as AMD and Nvidia have surpassed Intel at a price/performance level in its core business.
This is likely why the CMO describes the new branding as a reflection of a transformative reimagining of the future and the spark of innovation that Intel so clearly needs. Unfortunately, the manifestation of this in the brand appears to be much more conservative than is almost certainly required. While they claim a desire to honor the past (why, if the goal is a transformative re-imagination?), Intel is being fundamentally hindered by it instead. Rather than a uniquely bold perspective on the future of innovation, we see an incremental, conservative, and strangely old-fashioned rebrand that will likely have little more than a marginal impact.
2. Demand woes at Palantir? Sure looks like it.
tl;dr: Tell-tale signs in their leaked S-1 filing.
As a company, Palantir has become somewhat notorious for its secretive nature, government contracts and outspoken cult of personality leadership.
With its S-1 filing leaking, we can now look at the business behind the notoriety. And standing out like a sore thumb is that in addition to massive losses, it looks like it has a significant demand problem too.
I’ve done much work with technology companies that suffer from demand problems. These businesses tend to place an inordinate amount of their go-to-market resources and energy at the bottom of the funnel. They focus intently on performance marketing, account-based marketing and lead-gen activation to directly service large and internally powerful sales teams. Sales teams that are well trained and resourced and that typically outperform their peers in closing leads. However, while this might look good at first glance, these businesses often stall-out somewhere in the middle of the competitive pack and can’t quite fathom why. The reason is that while they’re good at driving leads to a close once they’re in the funnel, there simply isn’t enough demand going into the top for them to lead the market. This is typically because the business is culturally dominated by sales, engineering, and/or finance at a leadership level and struggles with the idea that in addition to efficiently serving leads to sales, marketing also has an enterprise role in expanding overall demand by building the brand.
Looking at Palantir’s numbers, I was struck by how concentrated their revenues are. There are only 125 customers, the top 3 representing 30% of revenue. 90% of sales comes from existing customers, which means their growth is largely from selling more to the people they already do business with, e.g., bottom of funnel. Attracting that business costs them $540m annually in sales and marketing expenses. Adding up to revenue of around $742m and total losses of around $500m. Put simply, this is not a recipe for a healthy business. Instead it looks suspiciously like a business with constrained demand and a bottom of funnel obsession. So, what to do?
Their opportunity is threefold.
First, they have a positioning job to get past their reputation as a secretive provider of technology to government and instead focus on success outcomes for potential clients, especially those commercial clients they’ve struggled to achieve growth with to date. Achieving this is certainly possible, because their biggest brand challenge likely isn’t their reputation for secrecy but that they’re so secret they aren’t even in the consideration set right now.
Second, they have a brand-building job to do to grow future demand, which means rethinking marketing priorities to build reach and salience for the brand and drive leads to sales. This likely means expanding marketing capabilities to embrace brand-building and re-apportioning a chunk of that $540m in sales and marketing spend to stimulating future demand and closing immediate leads.
Third, there is likely an internal philosophical job to do on the role of marketing itself. Currently, marketing is almost certainly measured in terms of short-term operational efficiency. With any shift toward increasing demand, this efficiency will naturally decline because it’s easier to sell to a customer who already knows you than one who does not. But don’t be fooled. If you do it well, then increasing top of funnel demand can drive growth of the business at the same time that nominal measures of marketing efficiency might decline. A business that appears to have less efficient marketing because it actively invests in growing demand will almost always outperform a competitor whose marketing is more efficient but where demand is constrained.
3. A critical difference between digital ads and digital signage.
tl;dr: A lovely distinction by a very readable econometrician.
“The Wrong and the Short of it” is an excellent article by Tom Roach. It’s one of those few things you read and wish you’d written yourself. I’ve been toying with the idea of writing something similar for a while now, inspired by the observation that we’ve become inordinately obsessed with the idea that everything is binary and “either/or” rather than the reality, which is much more likely to be “and.” But since this is so much better, I won’t bother.
Within the article, the first chart really struck home for me. Based on the work of Binet and Field, the illustration of how growing companies typically stall out if they don’t broaden their approach to demand building mirrors exactly what I’ve witnessed in practice. So, being the geek I am, I decided to investigate further and learn more about Dr. Park, the econometrician credited in the article.
Focused on marketing economics, she’s an enlightening writer in her own right and is worth reading. What struck me most is this recent article attempting to decipher a digital advertising landscape that her work suggests is largely being mis-interpreted.
In it, she postulates that rather than the task of digital advertising being singular, there are two distinctly differing tasks for digital media. The first is to do what advertising has always tried to do: stimulate incremental demand. The second, she suggests, isn’t actually advertising at all. Instead, she likens it to signage.
The comparison is that the first task is to encourage people to desire brand or product X, and the second task is to guide people who’ve decided to buy brand or product X. But because we’ve built attribution models that overvalue the last click or last few clicks and don’t currently distinguish between the two tasks, we’re overpaying and overinvesting in signage at the expense of building the essential first step of desire.
This is a potentially profound observation. It suggests that if businesses can create a more conscious approach to efficiently and imaginatively creating demand and signposting people toward purchase, they’ll be able to create a competitive advantage relative to competitors who either do not or cannot distinguish between the two.
4. The candybar problem in branding.
tl;dr: Even the best minds fall into the same old trap.
Almost all of the literature on branding, brand management, and brand strategy (especially) has an underlying candybar problem.
What is the candybar problem exactly? Well, it’s the fact that most of how we think about brands today still stems from the growth of branding in post-war CPG/FMCG categories where multi-billion dollar brands were built in categories as varied as frozen french fries, razors, tampons, and candybars.
But, and it’s a massive but, CPG as an overall category represents only a fraction of the economic activity we see in the modern economy and is dwarfed in scale and scope by all of the other types of brands we now see in the world, especially broad-scale corporate brands that bring multiple offers to market, service multiple different customer types, and that represent not just a product but a company, an employer and a human system of innovation and value creation.
I don’t think it should be a surprise that Apple's period of greatest failure was under the leadership of someone who had experience at Pepsico. Apple's resurgence wasn’t just because of Steve Jobs's brilliance but because he understood the fundamental reality that a brand that represents a company, culture, and system of human innovation like Apple is completely different from a brand for soda.
When academics use empirical research to normalize learnings across multiple brand types, a side effect is that the act of measuring makes everything look the same, even when it is not. We strip away differences and complexities because these cannot be measured comparatively. This then tempts us to think that systems of human innovation like a corporation are somehow the same as sugar and hydrogenated fats in a foil wrapper, when they aren’t.
I mention this only because it’s essential to make your own decisions and think critically about the work of even the most storied of thinkers. Right now, there’s an army of visually illiterate strategy talking heads on Twitter wanging on about distinctive assets, logos, identity changes, and such, because Byron Sharp says these things are important. But their fundamental problem is they have no idea what they’re talking about because they’re unwittingly treating everything like a candybar bought on impulse at the checkout. And everything isn’t like that.