Does your business Facebook?

I had two more Facebook ignorers this week.  First was an old friend who didn't use Facebook, and could not imagine how it would be beneficial to his business.  I responded with "that's kind of like the folks who didn't use a telephone saying that they didn't see any value in it for business."  When you don't use a tool, it's easy to pretend it isn't valuable.  Makes life easy on your competitors who do give it a try.

The second was a business that recruits people under 30.  The top marketers at this company are still doing all their efforts with newspapers, radio and typical broadcast forms of media.  They said they couldn't use social media to reach their base "because you can't control the message on Facebook."  OK, so  they don't use social media, and their focus is on message control so they don't intend to use social media.  But their target is a population that every month uses less traditional media, and more social media.  And these folks are wondering why media costs are up, and their success is way, way down.  Uh huh.

At MediaPost.com "Avoiding Social Media Malpractice" Chad Cappellman tells the story of a hospital division that gets more people coming for insight through Facebook than come through the highlighted links on the hospital's own web site!  People use Facebook today – a lot.  We all would prefer a personal referral when we have a question.  Often, a referral is better than 10 Google search hits at pointing you to the service provider or product which really fits your needs.  And Facebook is a fast way to generate referrals.  As is Twitter.  So when you want potential customers referred your way, why wouldn't you try to maximize the use of social media?  As the story above discusses, people would rather get info about a hospital (an example) from friends than from about any other source.

As for implementation, social media is part of the more sweeping market shift affecting all businesses.  Historically, business people thought in terms of "control."  The business had communication walls, internally and externally.  More time was spent making sure information wasn't passed around than making sure communication was fluid and accurate.  But in another MediaPost.com article "Twitter and Facebook Could Get You Fired" we see that approach simply won't work any more.  We live in a "connected" and "networked" world today.  There are precious few secrets when everyone has a mobile phone, and most of those have cameras, and texting is ubiquitous, and the vast majority of people under 35 have multiple social network locations. 

Today, you can't win by limiting communications.  That is a failed approach.  Nor is it possible to "control" what is said about your business or its products and services.  What you can, and increasingly must, do is monitor the chatter and be part of it.  Of course some things will be inaccurate, so its now your role to help move the message in the right direction.  Don't think about control, think about helping the message move toward accuracy.  And leverage all the chatter to help you sell more stuff!

We live in a fast shifting world.  That is not going to change.  Slow moving traditional media is gradually dying.  No competitor can succeed by avoiding the shifts.  Those competitors that win will use scenario planning to help anticipate the shifts, and focus on fringe competitors to learn how to do new things which can create advantage.  Success isn't going to come from trying to Defend & Extend the "core" – but rather by rapidly adapting to new market needs even if it means changing your "core."  And the best way to stay connected to shifting markets today is through social media.  It not only gives great, and timely, feedback but offers everyone the chance to enter into a dialogue with potential new customers at remarkably low cost.  And in remarkably powerful ways.

Go where the growth is – Sara Lee, Motorola, GE, Comcast, NBC

If you can't sell products, I guess you sell the business to generate revenue.  That seems to be the approach employed by Sara Lee's CEO – who has been destroying shareholder value, jobs, vendor profits and customer expectations for several years.  Crain's Chicago Business reports "Sara Lee to sell air care business for $469M" to Proctor & Gamble.  This is after accepting a binding offer from Unilever to purchase Sara Lee's European body care and detergent businesses.  These sales continue Ms. Barnes long string of asset sales, making Sara Lee smaller and smaller.  Stuck in the Swamp, Ms. Barnes is trying to avoid the Whirlpool by selling assets – but what will she do when the assets are gone?  For how long will investors, and the Board, accept her claim that "these sales make Sara Lee more focused on its core business" when the business keeps shrinking?  The corporate share price has declined from $30/share to about $12 (chart here)  And shareholders have received none of the money from these sales.  Eventually there will be no more Sara Lee.

Look at Motorola, a darling in the early part of this decade – the company CEO, Ed Zander, was named CEO of the year by Marketwatch as he launched RAZR and slashed prices to drive unit volume:

Motorola handset chart

Chart supplied by Silicon Alley Insider

Motorola lost it's growth in mobile handsets, and now is practically irrelevant.  Motorola has less than 5% share, about like Apple, but the company is going south – not north.  When growth escapes your business it doesn't take long before the value is gone.  Since losing it's growth Motorola share values have dropped from over $30 to around $8 (chart here).

And so now we need to worry about GE, while being excited about Comcast.  GE got into trouble under new Chairman & CEO Jeffrey Immelt because he kept investing in the finance unit as it went further out the risk curve extending its business.  Now that business has crashed, and to raise cash he is divesting assets (not unlike Brenda Barnes at Sara Lee).  Mr. Immelt is selling a high growth business, with rising margins, in order to save a terrible business – his finance unit.  This is bad for GE's growth prospects and future value (a company I've longed supported – but turning decidedly more negative given this recent action):

NBC cash flowChart supplied by Silicon Alley Insider

Meanwhile, as the acquirer Comcast is making one heck of a deal.  It is buying NBC/Universal which is growing at 16.5% compounded rate with rising margins.  That is something which suppliers of programming, employees, customers and investors should really enjoy.

Revenue growth is a really big deal.  You can't have profit growth without revenue growthWhen a CEO starts selling businesses to raise cash, be very concerned.  Instead they should use scenario planning, competitive analysis, disruptions and White Space to grow the business.  And those same activities prepare an organization to make an acquisition when a good opportunity comes along.

(Note:  The President of Comcast, Steven Burke, endorsed Create Marketplace Disruption and that endorsement appears on the jacket cover.)

The Myth of Market Share – Motorola vs. Apple

The Myth of Market Share by Richard Minitar is one of those little books, published in 2002 by Crown Business, that you probably never read – or even heard of (available on Amazon though).  And that's too bad, because without spending too many words the author does a great job of describing the non-correlation between market share and returns.  There are as many, or possibly more, companies with high profitability that don't lead in market share as ones that do.  Even though the famous BCG Growth/Share matrix led many leaders to believe share was the key to business success.  Another something that worked once (maybe) – but now doesn't.

"Moto Looks to Sell Set-Top Box Unit" is the Crain's Chicago Business headline.  Motorola's television connection box business is #1 in market share.  But even though Motorola paid $11B for it in 1999, they are hoping to get $4.5B today.  That's a $6.5B loss (or 60%) in a decade.  For a business that is the market share leader.  Only, it's profitability + growth doesn't justify a higher price.  Regardless of market share.

Kind of like Motorola's effort to be #1 in mobile handset market share by cutting RAZR prices.  That didn't work out too well either.  It almost bankrupted the company, and is causing Motorola to sell the set top box business to raise cash in its effort to spin out the unprofitable handset business.

On the other hand, there's Apple. Apple isn't #1 in PCs – by a long shot.  It has about a 14% share I think.  Nor is it #1 in mobile handhelds, where it has about a 2.5% market share.  But Apple is more profitable than the market leaders in both markets.  Today, Apple's value is almost as high as Microsoft – historically considered the undisputed king of technology companies.

Apple valuation v MS
Chart source Silicon Alley Insider 11/12/09

While Microsoft has been trying to Defend & Extend it's Windows franchise, its value has declined this decade.  Quite the contrary for Apple.

Additionally, Apple has piled up a remarkable cash hoard with it's meager market shares in 2 of 3 businesses (Apple is #1 in digital music downloads – although not #1 in portable MP3 players). 

Apple cash hoard
Chart Source Silicon Alley Insider 11/11/09

"While Rivals Jockey for Market Share Apple Bathes in Profits" is the SeekingAlpha.com headline. Nokia has 35% share of the mobil handheld market.  It earned $1.1B in the third quarter.  With its 2.5% share Apple made $1.6B profit on the iPhone.  While everyone in the PC business is busy cutting costs, Apple has innovated the Mac and its other products – proving that if you make products that customers want they will buy them and allow you to make money.  While competitors behave like they can cost cut themselves to success, Apple proves the opposite is true.  Innovation linked to meeting customer needs is worth a lot more money.

Bob Sutton, Stanford management professor, blogs on Work Matters "Leading Innovation: 21 Things that Great Bosses Say and Do."  All are about looking to the future, listening to the market, using disruptions to keep your organization open, and giving people permission and resources to open and manage White Space projects.

If your solution to this recession is to cut costs and wait for the market to return – good luck.  If you are trying to figure out how you can Defend & Extend your core – good luck.  If you think size and/or market share is going to protect you – check out how well that worked for GM, Chrysler, Lehman Brothers and Circuit City.  If you want to improve your business follow Apple's lead by developing thorough scenario plans you can use to understand competitors inside out, then Disrupt your old notions and use White Space to launch new products and services that meet emerging needs.

Skating to where the puck will be – Apple and advertising

I was intrigued to read about Apple proposing to rebuild a mass transit stop in Chicago in exchange for naming rights to the stop, as well as permission to advertise in the stop (Crain's Chicago Business – "Doors will open on the right at Apple stop.")  Most people would ask "why?"  And it's because Apple is moving toward a very different advertising future.

Most people think of advertising as the ads in newspapers and magazines, as well as on the radio, or television, or possibly billboards.  Only we know that newspapers and magazines are failing because fewer people read them every month.  Advertising in print media has limited value if there aren't any readers.

Likewise, people under 30 are watching a LOT less TV than the older generation.  Whereas I grew up with my eyes on the "boob tube," increasingly I watch a lot less TV as I spend more time on the web.  But my web use is nothing compared to people 17 to 34, who have almost abandoned television. They go to the web for entertainment.  And they increasingly only watch TV shows and movies when they can download them – or possibly watch via DVD.

And Apple is at the forefront of killing the radio businessWith iPods and digital music now cheap and plentiful, why listen to somebody else's programming?  When you can program your own music, radio becomes less interesting.  And if you want news there's the iPhone, Blackberry or similar mobile device to access the web – so why listen to talk radio? 

Advertising as it was is gone.  Coke, Pepsi, Procter & Gamble, Kraft, etc. built huge companies via media advertising.  But media usage is declining sharply.  So how do you get the message out to people who increasingly get their entertainment without using most of the traditional media?

And that's where Apple's move makes sense.  By rebuilding a train station, they help promote their brand.  It reminds me of when Hooters offered to fill the potholes in Chicago (a big problem) if they could put their company logo over them.  This week I noticed that in the Newark, NJ airport the jetways had big billboards on the outside.  And the TSA bins (for shoes, coats, laptops, etc.) had ads printed on the bottom.  It's getting harder and harder to reach customers when they don't need traditional media.  

So if you have historically been a big user of traditional media advertising, you'd better be rethinking that strategy.  What worked in the past isn't going to work in 2015. Staying Locked-in to old ad budgets, and approaches, is going to keep producing declining returns.  Traditional advertising won't even maintain current positions – much less work for new product launches.  As ad costs go up, they are less effective.  To reach customers requires shifting with the market.

If your new business plas is to use advertising as a way to grow your business, think again.  While advertising isn't gone – it is a lot less effective than it was when traditional media was widely the source of information and entertainment.  If you want to get people to recognize your brand, you have to start being a lot more clever.  You have to find new ways to get in front of customers.  You have to use your scenarios of the future to help you find the best way to promote your product.  Because the old channels, and the ad firms that used to supply them, increasingly are an ineffective answer.

“I don’t get it” is no excuse – Facebook, Linked-in, Twitter, MySpace, Plaxo

Lock-in causes us to keep moving in the same direction, to continue behaving the same way, even when competition and market shifts makes it a surety that the direction we're heading will produce poorer returns.  Blacksmiths who ignore the shift to automobiles.  Printers who ignore the shift to photocopiers.  As I often point out, unless something attacks the Lock-in, we are amazingly able to keep right on going the same direction – blithely ignoring the inevitable problems.

"I read Playboy for the articles" is a Harvard Business School Working Knowledge article which outlines just how far we all will go to avoid dealing with internal conflicts caused by undertaking behavior we know is unjustifiable. (Download full pdf text of White Paper here.)  According to the article:

  • Because people do not want to be perceived as (or feel) unethical or
    immoral, they make excuses for their behavior—even to
    themselves.
  • People cope with their own questionable actions in a number of ways by rationalizing, justifying, and
    forgetting—a remarkable range of strategies allowing them to maintain a
    clear conscience even under dubious circumstances.

Which leads me to the #1 excuse I hear.  "I don't get it."  I bring up to people – especially those who are over 35 – the power of modern technology tools.  For example, ask a 40 year old why two 20 year old girls sitting across a table will text each other and the answer is "I don't get it."  Tell them you know teenagers who spend more time at the computer monitor on-line than watching TV and the answer is "I don't get it."  Hear someone say "my cell phone is more important than my car" and you hear "I don't get it.'  And the biggest one of all, tell this person they need to open up accounts and go everyday to Facebook, Linked-in, Twitter, MySpace and Plaxo and you hear "you're kidding – right?  Why anyone spends time on those – I don't get it." 

Every time I hear "I don't get it" I wince.  Because that person just admitted "I'm willing to get out of step with the market, and risk having my skills become obsolete.  I'm happy doing what I do, and I don't see why I need to doing something new and different.  I'm sure the world is not evolving away from me, and I've chosen to remain Locked-in to where I've been rather than learn what's going on with these new solutions."  See what I mean?  When you read my interpretation makes you wince, doesn't it?

Our parents used to tell us when we talked on the telephone "Why don't you just go to their house, I don't get it." When we listened to rock-and-roll "Your music makes no sense, I don't get it."  When we thought everybody needed a car they'd say "We always walked, why do you need a car?  I don't get it." 

"I don't get it" is the proverbial excuse justifying Lock-in.  It allows us to walk away from a shift that's right in front of us, and remain stuck.  It allows us to feel like we're OK to remain – well — ignorant

So, the next time you hear yourself saying "I don't get it" it's time to stop, Disrupt yourself, and find some time to get it.  It's time to review your willingness to remain Locked-in, and invest some resources in trying new stuff instead of Defending & Extending.  Because if you do create some White Space you can learn – and the first who "get it" will be the ones who do best in the market, getting the best results.

PART 2 – a personal extension for those with time to read.

When my son died last week, at age 21, he left a brother age 20 and a brother age 18.  He also left hundreds of friends his own age.  These people shared what all of us shared at that age – a deep desire to talk to each other, to communicate, to cry in groups, to grieve, to find things in the past that made them happy.  To capture time in a bottle by reflecting on Alex's life.  And they also shared the simple fact that they have almost no money, precious little time, and a host of responsibilities to school, family and work.

30 years ago my generation would have made a few phone calls.  Maybe a few of us gotten together for an hour.  But our talks would have been mostly a small group, and for a short time.

The last week I've been living on Facebook, Linked-in, Twitter, et.al.  I have used all these tools for at least several months, and in some cases years.  But I used these through the filters of my history.  I saw them as extensions (D&E) of old ways I communicated.  Finally, now, I get it.  These communities are an entirely different way of communicating.  I different way of building a community.  And in many ways, it is MORE vibrant and more honest than anything ever before.  LIkewise, it is real time.  And it is open to everyone. It is extraordinarily effective.  And it is unbelievably healthy.

For those who question their child's life on-line, you are looking from your historical reference.  What happens in this environment is incredibly open – thus very informative.  It is remarkably honest – in ways everyone finds very hard to be face-to-face.  And it is very fast.  There are no boundaries – no race, no origin questions, no location questions, no income questions.  It is the most egalitarian, comprehensive method of creating a self-forming community to accomplish a goal I've ever seen.  Way beyond anything I've ever seen my generation accomplish by developing plans and subsequently focusing on execution. 

Within hours, my son's friends found out he had died 500 miles away – and his Facebook page exploded.  It became a central hub to exchange information of all kinds about his accident, his life, his funeral.  Within hours almost his entire world new what happened – far faster than any "family call chains" we ever created.  As they searched to learn more, within a day someone found a video of the accident scene and the helicopter whisking him away —- something that would have taken my generation weeks to find (if at all) and share.  And the videographer was put in contact with me, able to give me first-hand info about the accident scene. 

His brother created a new Facebook site dedicated to honoring Alex the next day.  Within hours 200 people were hooked up.  Before week end the number went to 400.  This became universe central for this topic.  There was no CEO.  No Director of communications.  Just a self-organizing activity that brought together hundreds of people who wanted to talk about Alex.  Very effective discussion.

Since Alex's 22nd birthday is 9/30 – some spontenous person said a birthday party should be thrown.  Within hours an event had been created, and hundreds were talking about whether they could attend or not (by the way, it's going to be on 10/2 in Chicago.)  All kinds of talk about who had to work, who could come, what to bring.  Again, self-organizing and spontaneous and remarkably effective.

By the time the newspaper published an article on the accident, and my son's obituary, it was so old news I don't think anybody cared.  And certainly the only people who learned this way were those who were – over 40. 

If you aren't using these tools – if you don't "get it" – this is one place I would recommend some personal White Space investment.  If you do, the payoff is extremely high.  If you don't, you're likely to find yourself as out of date as cobblers and blacksmiths faster than you think.

Moving Forward vs. Moving Backward – Pepsi vs. P&G

"Pepsi Launches Own Music Label in China" is the BusinessWeek headline. Clearly, the Pepsi staff has some new ideas.  Recently Pepsi's Chairperson, Ms. Nooyi, made a trip to China for 10 days.  Apparently frustrated, she commented to the Wall Street Journal in July that she didn't see enough Disruptive thinking on the part of her folks in China.  She indicated the market was robust, but it was different and would take a different approach.  It now sounds like her China leadership got the message.

In addition to launching a music label, Pepsi is producing a "Battle of the Bands" show in China.  It's almost like a reformatted page from the aggressive growth years of Starbucks.  Instead of just expanding into a new geography (China) with the same old playbook (like the floundering WalMart), Pepsi is figuring out how to be a big success.  And that may mean producing television, producing music and making people into stars.  China's culture is unlike anything in the U.S. or Europe.  So doing new and different things will be critical to success.  When you see a business developing its own scenarios about the future, taking actions its competitors (Coke) are too hide-bound to try, acting Disruptively to compete and using White Space projects to test new ideas you simply have to be excited!

On the other hand, "Tide Turns 'Basic" for P&G in Slump" is the Wall Street Journal headline about the latest "new" product at P&G.  Please remember, the departing P&G CEO was lauded for creating an innovative culture at P&G.  But it appears the legacy is a culture of sustaining innovations intended to do nothing more than Defend & Extend the old P&G brands.  Now slumping, P&G needs to identify market shifts more than ever, and create new solutions that help it move with market trends.  Instead, the company is rushing into reverse!  Management not only seem to be driving the bus looking in the rear-view mirror, but actually driving it that way as well!

Tide has been around a long time.  Ostensibly a very good product.  For reasons explained in the article, managers at P&G felt the best way to sell more product was to make it less good.  Really.  They removed some of the chemicals that help you get clothes clean, renamed it "Basic" and launched the product at a lower price It's not "new and improved."  It's not even "better."  It's literally less goodbut cheaper.  Sort of like store brands, or private label – only maybe not as good?  Doesn't that sort of obviate the whole notion of branding? 

People don't ever like to go backward.  We like to grow.  To learn and get more out of life.  When we find a product that works, why would we want a product that works less well?  And the folks at P&G missed this.  Only by being insanely internally focused, terribly Locked-in, can you think this is a good idea.  Looking inside a person could say "well, we want to jam the shelves with more of our branded product.  We want to have the word 'Tide' smeared everywhere we can.  We think people so identify with 'Tide' that they'll take a worse product just to get the name brand.  We're willing to create a less good product thinking that we will get sales simply because it's cheaper than the stuff people really want to buy."  Seem a little mixed up to you?

When you want to grow you figure out new ways to Disrupt the marketplace.  You develop new solutions, new entry points, new connections with shifting market trends.  You figure out how to be the best at the right price.  You don't try to give people less, and tell them they are cheap.  And Pepsi clearly gets it.  They are willing to expand into music recording and TV production.  Stuff P&G did when it was really creative and innovative – after all, that's why we call daytime TV "soaps", because P&G produced them just to sell soap.  Now we see Pepsi applying that kind of scenario planning and competitive obsession, along with White Space, to develop new market approaches.  Unfortunately we can't say the same for P&G — clearly stuck on trying to cram more stuff with the word "Tide" on it through distribution.

Market Shifts and Lifecycles – Playboy, Oprah and Skype

One of the hardest things for leaders to do is recognize market shifts.  The tendency to remain focused on Defending & Extending what was always does is so great that market shifts which demand change are overlooked in the urge to improve what was always done – even as results fade.

An obvious example is Playboy enterprises.  "Playboy denies report of $300M price tag" was a Chicago Crain's headline, as rumors that the company (now publicly valued at only $90M) was being shopped for a new owner.  Playboy was founded as a "lifestyle" media company intended to meet the emerging needs of "sophisticated" adult males in the 1960s.  To the surprise of many publishers and government leaders, Playboy became a huge success.  Its magazines outsold expectations.  The company grew by opening clubs in major cities where businessmen entertained.  Even resorts were founded as vacation destinations.  As the company expanded it moved its headquarters from Chicago, where government officials disliked the hometown anomaly, to LA.  And the company acquired a 727 as the corporate jet.  As revenues and profits expanded, the company went public.  As recently as 2000 the company was worth nearly $1.2billion (chart here).

But, the market changed.  Women entered the workforce as one primary contributor to the clubs becoming passe, leading to their close.  Likewise, the resorts closed as competitors – clubs catering to young men and couples, such as Club Med – did a better job of meeting their needs.  The magazine became less and less viable as market shifts led to a split between pornography magazines for those who wanted photos and serious mens journals ranging from Stereophile and Autoweek to GQ.  Market shifts ranging from America's attitudes about how to treat women, to what was needed in a serious current events or hobbyist journal, left the company's products less and less interesting.   As the founder aged, the company lost track of its primary target and failed to identify a new target market.  And the new CEO, the founder's daughter, was unable to develop future scenarios identifying a viable direction – or products – to keep the company growing

At this point, Playboy has no clear market, has suffered from decades of declining revenue and profits, and investors have no reason to expect an improved return on investment.  Why anyone should want to buy the company, especially as we observe that all print journalism is shrinking dramatically, is unclear.  Playboy is at the vanguard again – but this time of demonstrating the end of print media and the losses capable from ignoring market shifts.  Had Playboy long ago dropped the salatious pictures and moved itself toward a growing readership – providing insights to men's lifestyle issues in sports, fashion, electronics, autos or any number of topics – it had a chance of maintaining its success.  But now the brand represents a complete out-of-synch with market needs and is more likely a negative than a positive; of no value.  Playboy leadership should take the money and run, distributing what it can to investors, from whatever fool is willing to throw away its money on an acquisition.

Meanwhile, a recent Wall Street Journal Blog was titled "Skype Gets the Oprah Treatment".  The WSJ blooger seemed perplexed that Oprah Winfrey's show would choose to run an entire episode by interviewing people on Skype.  His implication was strongly that the episode was some sort of technology endorsement in disguise.

But, to the contrary, we can see where Ms. Winfrey and her producers are much smarter than her media CEO counterpart at Playboy.  This episode gave viewers a firsthand experience with new technology which is available and usable by her target audience.  People were able to recognize how the technology works, and why you would use it to communicate with others – possibly in remote locations. 

Although Ms. Winfrey is "50ish" her company is keeping her product very current.  Her audience is learning how to use new technology that will help them be better connected to family or business associates.   And save money doing so, compared to traditional telephonic tools.  Ms. Winfrey and her leadership team could continue to do what they always did, but this kind of new show helps them keep Harpo Enterprises and one of its products – The Oprah Show – in the forefront of competitivesness.  That's why Harpo can lay claim to reaching even more people in Asia and Europe than in the USA!  Thus Harpo keeps viewer numbers high, and advertisers willing to foot the bill

Harpo Productions and Ms. Winfrey are demonstrating their willingness to shift with the marketplace.  They are trying new things, and are willing to branch out with changes to stay connected to markets as they shift.  Doing so is a requirement in lifestyle products, like media.  She benefits her customers by willingly shifting with the market, and those lucky enough to work for Harpo or supply the company, will benefit by its willingness to remain connected to changing markets – by staying on the forefront. 

Many CEOs and their leadership teams would do well to understand the failure of remaining Locked-in, like Playboy did.  And to recognize the value of remaining abreast of market shifts and keeping products current with changing market requirements, like Harpo Productions and is famous CEO.  Sometimes being criticized for being too avant garde is a good thing, because it shows you aren't afraid to change in the pursuit of keeping current with market shifts.

Use White Space to create Social Media Value – Pizza Hut, Sony, Dell, Sears

Where the people go, advertisers will follow.  Why pay for an ad at the end of a never traveled dead-end street?  The purpose of advertising is to reach people with your message.  And now "Forrester: Interactive Marketing to grow 11% to $25.6 Billion in 2009" reports MediaPost.com.  When print advertising is dropping (direct mail down 40%, newspaper down 35% and magazines down 28%), the on-line market is growing and expected to reach over $50billion by 2014. Search ads is the biggest, with over half the market, but social media is expected to grow the fastest at over 34%/year.

Such a market shift indicates that those who buy ads need to be very savvy about what works.  Like I said, you don't want to be the fool who jumps into billboards, only to get placed on the one at the end of a dead-end road.  Success means Disrupting your assumptions about advertising, and learning what work by entering White Space with tests and measurements.

In "Mobile Marketing Won't Work Here" Bret Berhoft explains why GenY simply won't tolerate intrusive ads – especially on their mobile devices.  Social media are different conduits, with different users and different behaviors.  Where older folks (and our parents) were content to be interrupted by ads – such as on TV – the avid users of new media aren't.  And they've been known to create counter-movements attacking advertisers that don't adhere to their on-line behavior requirements.

What won't work is trying to do what Sears has done. Instead of learning how people use social media, and how you can connect with them to meet their needs, "Sears to Launch Social Networking Sites" we learn.  Where everybody is using Facebook, MySpace, Twitter, Linked-in, etc., Sears decided to open two new sites called MySears.com and MyKmart.com.  They hope people will go to these sites, register, and tell stories about their experiences in both retail chains.  Then Sears intends to flow through good comments to Sears.com and KMart.com sites.

The horribly Locked-in Sears management keeps trying to Defend & Extend its outdated model.  As people have left Sears and KMart in droves for competitors, they aren't looking for a site to "connect" with other people who are Sears centric.  People use social networks to learn, grow, exchange ideas, keep up with trends.  They don't register for a site because their parents used to shop there. 

Sears has missed the basics of Disrupting its old Success Formula, so it keeps trying to apply it in ways that don't work. It keeps doing what it always did, only trying to do it in new places. These sites aren't White Space projects trying to participate in the social networks that are growing (like everything from illness questions to home how-tos).  Rather, they are still trying to take the position that Sears is at the center of the world, and people want to be part of Sears.

Exactly how advertisers will capture the attention of participants still isn't clear.  Some ideas have gone "viral" producing mega-returns for minimal investments.  Other ideas have flopped despite big spending.  The market is shifting, and variables keep changing (Marketers Search for Social Media Metric.)  But for those who Disrupt their old Lock-ins, those who attack their assumptions, they can use White Space to learn what does work

"Pizza Hut 'Twintern' to Guide Twitter Presence" is a great example of creating White Space to study social media advertising by participating.  The new position will interact with Twitter users, and be a leader in how to interact with Facebook and other sites – even the notorious YouTube! where user content can include the very bizarre.  By participating where the customers are, these leaders can develop insights to how you can consistently advertise effectively.  Already Sony and Dell have demonstrated they can achieve high recall (Word of Mouth goes Far Beyond Social Media) beyond Social Media with their on-line efforts.  These participants, who Disrupt their assumptions and bring in others to work in White Space will be the winners because they aren't trying to Defend & Extend the old Success Formula.  They are trying to create a new one to which they can migrate the old business.

Business Lifeblood – Innovation – Amazon Kindle and Management’s role

I recently listened to a great presentation on innovation by Bill Burnett, partner at Launchpad Partners.  I recommend you download the slides to his presentation, "The CEO's Role in Innovation," in order to understand just how important innovation is to profitability as well as the CEOs role in creating the right culture.  I also hand it to Bill that he not only lays out the CEO's role, but discusses what it takes organizationally to implement innovation – including getting the right people involved to go beyond just coming up with good ideas.

Markets shift.  Sometimes there are long periods in which the market is reasonably the same (like newspapers).  And sometimes it seems like new changes are happening rapidly (like computers).  How long between shifts is impossible to predict.  But it is certain that all markets shift.  Some new technology, or a new form of solution, or a new way of pricing, or a new competitor will enter the market and change things such that the profitability of previous solutions declines.  And it is the role of CEOs to create an open culture in which the management team feels it must keep its eyes peeled for market shifts, bring them to the company for discussion, and propose innovations which can increase the longevity of company sales and profits by addressing the market shifts.

Take for example the current shift in the sports market.  This is important, because a throng of businesses advertise in the sports market.  Everything from TV or radio ads during games, to ads inside event brochures, to putting logos on equipment and uniforms, to paying athletes as endorsers.  Being aligned with the right sports, the right teams and the right athletes is worth a lot of money.  You can legitimately ask, would Nike be Nike if they hadn't been the first company to sign up Michael Jordan – and later Tiger Woods?  So the money is very large (billions of dollars) making mistakes very expensive.  But getting it right can be worth billions in returns.

So catching a recent MediaPost.com blog "The Allure of Action Sports" is important.  While most of us think of basketball, baseball, American football and possibly NASCAR – for GEN Y (young folks) sports is taking on an entirely new meaning.  These are sports with almost no rules – just technique.  They pack the stands at events such as the Dew Tour and X Games. Active participants include almost 12 million skateboarders, 7 million snowboarders and 3 million BMX riders.  Not only do people watch these sports, but the most popular performers have their own cable TV shows – like "Viva La Bam.Just like football and basketball overtook our fathers' love of baseball as America's pastime – young competitors are shifting to watch and practice action sportsFor people in consumer goods and many retailers, it becomes critical that the CEO provide an environment where the company can Disrupt its old marketing practices and create White Space to explore how to link with these new markets.  The winners will rake in millions of higher profits.  The laggards will see the value of their sports market spending decline.

Have you recognized this shift in the sports market?  Are you prepared to take advantage of this shift?  Are you considering sponsoring a local skateboard competition – for example – to promote a restaurant, quick stop, or T-Shirt store?  You can react faster than Wal-Mart, Coke or GM – are you considering the options to grab loyal customers when they are still "McDonald's targets"?

A great example of the right kind of CEO has been Jeff Bezos of Amazon.  As I reported in this blog back in January, book sales declined about 10% in 2008.  You would think this would spell a huge problem for the world's largest bookseller.  But SeattlePI.com recently reported "Amazon Profits Jump Despite Recession."  CEO Bezos recognized long ago that book readership was jeapardized by changing lifestyles.  Fewer people have the willingness to buy printed books, carry them around and take time to read them.  So he Disrupted his retail Success Formula and implemented White Space to develop something new.  This led to Kindle, a product which is small, light, can hold hundreds of books, can be read "on the go", accepts downloads of journals (magazines and newspapers) and can even read the book to you (Kindle has an audio feature.)  And that's just product rev 2 – who knows where this will be in 3 years.  By focusing on the future he could see the market for reading shifting – and he created an environment in which new innovation could be developed to keep Amazon growing even when the traditional products (and business) started declining.  Kindle is now outselling everyone's expectations. 

Innovation is the lifeblood of businessesWithout innovation Defend & Extend management leads to declining returns as competitors create market shifts.  So it is crucial leaders, from managers to the CEO, keep their eyes on the future to spot market challenges and obsess about competitor actions that are changing market requirements.  Then be willing to Disrupt the old Success Formula by attacking Lock-ins, and use White Space to test and implement new innovations which can lead to a new Success Formula keeping the business evergreen.

Spend on what pays off – not what your used to spending on – movie studios

How do you pick a movie to see – whether at the theatre or at home?  The movie studios think you pick movies by what you see on TV ads, according to the Los Angeles Times "Studios struggle to rein in marketing costs." 

I remember the old days when my friends and I grabbed a newspaper and shopped the ads looking for a flick to go see.  And we were influenced by television ads as well.  But, as time went by, we started asking each other, "Is that movie any good, or are all the best parts in the ad?"  (Admit it, you've asked that question too.)  Then we found out we could get sneak peaks from shows like "Siskel & Ebert at the movies," so one of us would try to watch that and see if we liked the longer scenes.  And we didn't ever agree with the critics, but we could listen to hear if they described a movie we would like.  Now, not only myself but my sons follow the same routine.  Only we go to the internet looking for a YouTube! clip, and for reviews from all kinds of people – not just critics.  Mostly when we see a TV ad we hit the mute button.

Everywhere, businesses are still wasting money on old business notions.  For movie studios, they keep trying to get people to watch a big budget by advertising the thing.  (To death.  Until nobody watches the ad any more because they have it memorized.  And get angry that the ad keeps showing.)  But even the above article admits that studios know this isn't the best way any more.  With the internet around, we all listen less to advertisements, and gain access to more real input.  From web sites, or Twitter, or friends on Facebook, or colleagues on Linked-in.  We watch a lot less TV, and what we watch is more targeted to our interest and available on cable.  Or we download our TV from the web using Hulu.com.  Yet, the studios are so Locked-in to their outdated Success Formula that they keep spending money on TV ads – even though they know the value isn't there any more.

So why do the studios spend so much on advertising?  Because they always haveThat's Lock-in.  Lacking a better idea, a better plan, a better approach that would really reach out to potential viewers they keep doing what they know how to do, even as they question whether or not they should do it!  The industrial era concept was "I spent a fortune making this movie, and distributing it into theatres, so I better not stop now.  Keep spending money to advertise it, create awareness, and get people into the theatres."  The studios see movie making as an industrial enterprise, where those who spend the most have the greatest chance of winning.  Spend a lot to make, spend to distribute, spend to advertise.  To industrial era thinkers, all this spending creates entry barriers that defends their business.

And that's why movie studios struggle.  It's unclear how well those ideas ever worked for filmmaking – because we all saw our share of blockbuster bombs and remember the "American Graffiti" or "Blair Witch Project" that was cheap and good.  But for sure we all know the world has now permanently shifted.  Today, small budget movies like "Slum Dog Millionaire" can be made (offshore in that case – but not necessarily) quite well.  The pool of new actors, writers, directors, cinematographers and editors keeps growing – driving production quality up and cost down.  And distribution can be via DVD – or web download – between low cost and free.  A movie doesn't even have to be shown in a theatre for it to be commercially successful any more.  And any filmmaker can promote her product on the internet, building a word of mouth driving popularity and sales.

From filmmaking to recordings to short programs to books, the market has shifted.  Things don't have to be big budget to be good.  The old status quo police, like Mr. Goldwyn or Mr. Meyer, simply have far less role.  Digitization and globalization means that you don't need film for movies – or paper for books.  Thus, democratizing the production, as well as sales, of "media" products.  Thus the old media companies are struggling (publishers, filmmakers, magazines, newspapers and recording studios) because they no longer have the "entry barriers" they can Defend to allow their old Success Formulas to produce above average returns.  And they never will again.  The world has changed, and the market has permanently shifted.

Is your business still spending money on things that don't matter?  Does your approach to the market, your Success Formula dictate spending on advertising, salespeople, PR, external analysts, paid reviewers or others that really don't make nearly as much difference any more?  When will you change your approach?  The movie studios are preparing to spend hundreds of millions of dollars on summer ad promotions for new movies.  Is this necessary, given that the downturn has increased the demand for escapist entertainment?  Is your business doing the same? 

If you want to cut your cost, you shouldn't cut 5% or 10% across the board.  That won't help your Success Formula meet market needs better.  Instead, you need to understand market shifts and cut 90% from things that no longer matter – or that have diminishing value.  Quit doing the things you do because you always did them, and make sure you do the things you need to do.  You want to be the next "Slumdog Millionaire" not the next "Ishtar."  You want to be Apple, not Motorola.  You want to be Google, not Tribune Corporation.  Spend money on what pays off, not what you've always spent it on.