The long tail opportunity

Today, The Hindu Business Line is carrying my latest column in which I explore 'long tail' markets, a concept that was first made popular by Chris Anderson at Wired magazine. Link to the article on the Business line site: The long tail opportunity.

Here's the full text.

-----

We live in a world of infinite choices. Yet traditionally, mass media and mass marketing have always trained their attention on ‘hits’. The reason why they do this is the prohibitive cost of distribution of goods and services. Thus, an average bookstore owner needs to decide exactly which titles to stock in order to optimally monetise the limited shelf space that he has available. In other words, he needs to clearly identify the ‘hits’ which would s ell enough copies to justify their existence on his shelves.

This notion of ‘hits’ extends to all other types of products — music albums, films, fashion, retail stores and so on. So is there a market beyond these hits? Traditional wisdom would suggest that ‘non-hits’ is not a market worth chasing. The facts, however, prove the opposite.

With the advent of the Internet, limitations such as distribution costs and shelf space have ceased to exist. Thus, an Amazon.com can offer an unlimited choice of books by an unlimited number of authors that traditional bookstores cannot offer because the sales of such books would not make up for the cost of printing and distributing them. In theory, Amazon can make a book available on its Web site even if less than 50 people eventually buy it.

The long tail as a concept was first elucidated by Chris Anderson in his bestselling book by the same name. The long tail refers to the tail of the demand curve where infinite choices exist. The head of the demand curve consists of all the ‘hits’ which are very popular, and the tail extends infinitely to cover infinite ‘non-hits’, i.e. products with niche consumers. Earlier, marketers ignored the tail because they did not have the means to make the products in the tail available to their audiences, but today the Internet enables them to do so profitably. An analysis of Amazon’s sales by Chris Anderson indicated that a large proportion of its income actually came from obscure titles and not bestsellers.

Mass customisation

One major advantage of using the long tail benefits of the Internet is that it enables producers — of products, content and so on — to offer truly customised products to their target group. Apple’s iTunes, for instance, can offer songs by totally unknown artists who may not have a market in traditional mass media. YouTube offers small filmmakers the opportunity to showcase their content to the whole world. Self-publishing tools such as blogs allow you to write about extremely esoteric topics and still have a global audience for your offering.

The tail of the demand curve explains why small budget films such as Khosla ka Ghosla and Bheja Fry managed to become ‘hits’ in the face of competition from traditional big budget films. These smaller films managed to find an efficient distribution channel (multiplexes that screen many movies and hence diversify risk) to reach their small target audience (possibly educated urban youth who frequent multiplexes and prefer meaningful cinema to blockbuster entertainers). Such examples also prove that to tap into long tail markets, the Internet need not be the only medium.

The Indian context

Is Indian business geared up to the long tail opportunity? Sadly, the answer seems to be a big no. Not enough companies are actively using the Internet as a significant distribution channel for their products. In a market with about 50 million Internet users that is growing faster than ever before, it is critical for companies to have a significant footprint in the online world too.

Some players use the Internet as an online replica of their offline offerings. Big retail chains have launched such e-commerce portals that mirror their store offerings. A better strategy would be to use the Internet to purely tap into long tail markets. Companies in the financial services space can allow their customers to buy customised products that would otherwise cost a lot to launch due to the prohibitive costs of training intermediaries (this sector is today dependent on intermediaries). Telecom companies could use the Internet to launch a number of niche tariff plans. (I’m imagining a slider-based interface that allows me to precisely set my rental, STD, local calls and SMS tariffs).

The traditional argument against such ideas is that you need a critical mass of customers to launch a product. Yet, the magic of the long tail is precisely the fact that you are targeting customers who are not usually on your radar, but rather the small number of customers (which we could call micro-segments) who buy niche offerings. Multiply an infinite number of such micro-segments with the small volumes associated with each micro-segment and you have potentially huge revenues. The possibilities are endless at the tail of the demand curve and it can no longer be ignored in the midst of the noise generated by ‘hits’. What remains to be seen is how innovative we can get with tapping these micro-segments of the market.

(The writer, an alumnus of XLRI, works with a multinational financial services company.)

Previously published articles:

• Leaderless Groups - a case against hierarchy
• Free riding and social loafing
• Decision making in groups
• The networked marketplace
• The spiritual organization
• Interactive Brands

Social Graphs and Vanilla Networks

Jyri Engestrom has an extremely interesting post on where social networks are headed. In this post, he points out Brad Fitzpatrick's views on how the social graph (the map of how users are connected to each other) should be made universal.

Brad's solution is to create a service where people go to aggregate all their networks into a master network, and then let other services check against that to automate friend discovery. The outcome to the user who signs up to a new service should be "These 8 friends of yours are already users here, would you like to share your books / music / pictures / trips / etc. with them?"

I'm not so convinced due to the following reasons:

1. Firstly, 'friends' is a nebulous concept and it varies from network to network (my Linkedin friends may not be the same as my Orkut friends), thereby making the whole idea of having a universal social graph quite impractical.

2. Secondly, Brad assumes that all the competing services will actually cooperate with each other to share their respective social graphs. I doubt that will happen. If it did, then it would be equivalent to voluntarily reducing exit barriers for its users.

But it looks like the problem that Brad is addressing is one of singular identity (say a Google Account or a Hotmail Passport) that uniquely maps people across applications. That's a separate problem in itself. Anyway, here is what I think will be the future of social graphs and networks.

Where I see this heading
I forsee that in the future there will be two kinds of 'social network' services:
1. A plain vanilla social network with the usual friend of friend and profile features.
2. Satellite social applications like say a photo sharing service, a book sharing service etc.

My guess is that there would be about 3-4 major plain vanilla networks. The satellite services would then sit on top of these networks and share their social graphs. So say I signup on Facebook (the plain vanilla network), and then I feel like signing up at Shelfari.com to share books with friends. I would just activate Shelfari inside Facebook. The Shelfari-Facebook tieup would not be exclusive. Shelfari could go and signup with all the other vanilla providers too. Facebook has already moved in this direction by allowing 'applications' by independent developers to hook into Facebook. The next level is for all these 'applications' to have their separate identity in the world outside Facebook, thereby allowing users of other vanilla networks to use them too. The following image should help clarify what I'm trying to say.

Thus, the vanilla networks would serve the purpose of being repositories of social graphs that independent developers of services can tap into.




An arrangement like this would be very useful for all web applications with a social dimension to them. The major vanilla networks house the social graphs, and the independent guys hook in as satellites and share revenues with the parent network.

Business Today's idiotic b-school rankings

Business Today's annual practical joke entitled 'India's best b-schools' is out. The preliminary evidence is as follows:

SIBM is India's number 4 business school

MBA wannabes prefer ICFAI to FMS Delhi

Welingkar Institute of Management is India's number 3 b-school under the parameter 'Functional Head'. Under the same head SIMSREE Mumbai and ABS Noida are amongst the country's top10

Recruiters voted Welingkar as India's number 5 b-school

'Young Executives' ranked SIMSREE and Welingkar at joint number 3. If this is any consolation, these two b-schools managed to beat IIMC.

Without going into the merits and demerits of the aforementioned schools (I'm sure they are reasonably good places), let us now examine the methodology adopted by Business Today and AC Neilson that enables reality to be twisted and turned in any manner deemed fit by the editors of the magazine. The BT ranking claims to be based on the winning brands model i.e. it asks 'consumers' about their preferences with regard to certain brands (in this case b-schools) on certain pre-defined attributes with pre-defined weightages. Hang on. Winning brands? Do prospective MBA students pick their b-schools based on brands as opposed to facts? If that were the case, these applicants would surely flunk the Marketing Research course when they join b-school.

Imagine you have applied for a job, and the interviewer calls up 30 of your friends to find out their 'perception' of your academic performance, intelligence etc instead of objectively measuring it by asking you what your marks were, and verifying supporting documents. Such an interview would be a waste of time to attend - after all the interviewer is not interested in that trivial thing called facts. He is more interested in the feelings that your friends have about you! Your friend Mr.A might 'perceive' you as being a poor student, but 'facts' may indicate that you actually scored 95% in your boards. This is precisely the model that BT has used to rank business schools. They asked random respondents about what they 'felt' about the b-schools in question, and completely disregarded facts - facts such as average salaries, faculty count, published papers produced by the b-schools, infrastructure, exchange programs, international placements etc. Facts that are easily measurable if you get out of your Mumbai office and conduct a survey by actually talking to b-schools as opposed to conducting an inane perception survey with whoever you found at the water cooler. George Bush would love to commission a survey by BT-AC Nielson on the Iraq war - because like him, the BT-AC Nielson guys too hate facts - the prefer feelings.

I could go on and on, but some reputed bloggers have already trashed this survey in some detail. Do check them out.

Rashmi Bansal: This year, last year

Prof. Madhukar Shukla on last year's rankings:
http://alternativeperspective.blogspot.com/2006/07/b-school-ranking-survey-gets-f-grade.html

Outlook has chosen a fact based approach to rank b-schools. They seem to have done a good enough job for both Rediff and Mint to syndicate their content. Here is the link.

Private Equity Jobs

No, you wont find any of those here. But here's an interesting take on the PE phenomenon by Slate.

Dear Diary:

Whatever possessed me to go into private equity? I was so naive. I thought it was just about financial engineering. That certainly is the impression they give you in the media. But turns out that it's actually about hard work! Who'd a thunk it? Here we are in the last week of summer, and everybody is in the Hamptons or in some villa in Tuscany. Everyone, that is, except for me, Private-Equity Man.

More here

Bonus Link: How to make a powerpoint chart, by Seth Godin, easily the best marketing focussed blogger out there.

Pursuit of happiness

Studies by economists show that money is directly related to happiness until it leads people out of abject poverty. Beyond that point, the marginal utility of money (towards increasing happiness) keeps decreasing. The happiness level of someone making $1 million versus $5million is not too different. This however does not stop people from mistakenly viewing money as a source of happiness, and wasting their lives in it's pursuit, but as Will Smith speculated in the film 'The pursuit of happyness', maybe the whole point of that phrase is that happiness is something to be pursued and never attained?

More on leaderless groups

Forrest Christian has an interesting response to my earlier post on leaderless groups. Do check it out here.

I particularly agree with his views on the 'Big man' school of management that involves people bowing to ONE supreme leader in whom we place our faith to lead us. Such structures may have worked well in colonial times, but certainly have no place in the modern workplace, and indeed society. In this context it is interesting that elections in the US tend to surround the 'Big Man' i.e the presidential candidate, whereas elections in India tend to focus more on political parties and their ideologies. I remember reading somewhere that on 'Individualism', Americans score much higher than Indians. I suspect that the Big Man school of management has it's foundations in individualism.

Personal Leadership

Leadership by its very definition seems to assume the presence of a follower who needs to be lead. However, this follower may not always be another person. One form of leadership that I believe in is Personal Leadership - the ability to lead yourself from your current circumstances or situation to a better future. In other words Personal Leadership means taking charge of your own life or situation before taking charge of other people.

Leaderless groups - a case against hierarchy

My latest article in The Hindu Business Line - Leaderless groups - a case against hierarchy. Full text follows:

In his treatise Dastambu, Mirza Ghalib documents the events in Delhi at the time the revolt of 1857 broke out. He writes: "Band upon band of soldiers and peasants had become as one, and far and near, one and all, without even speaking or conferring together, girded their loins to their single aim... City after city lies open, without protectors, filled with men who have none to watch over them, like gardens bereft of their gardeners studded with trees stripped bare of leaves and fruit." (Ghalib - Life, Letters and Ghazals; Ralph Russell; Oxford University Press 2003)

While Ghalib's political leanings are not the subject of this article, what is interesting is his view that the men behind the mutiny were leaderless and hence not worthy of being taken seriously.

Are there any examples to prove that a leaderless group can actually lead to efficient outcomes? Can independently-deciding individuals help a group achieve its goal?

History suggests that in certain situations leaderless groups can indeed achieve a stated objective. Leaderless resistance movements such as guerrilla warfare are a good example of this. Terrorists too tend to operate in independent cells (and not hierarchies). This probably explains why they manage to escape from beneath the eyes of hierarchical intelligence agencies.

Key advantages of a leaderless group include the fact that there is no centralised command and control system, which is vulnerable to attack. Each small group or individual behaves independently based on some shared values. This means that the group is not burdened by traditional hierarchical chains of command, bureaucracy and red-tape in its decision-making. Additionally, affinity of group members towards the cause is likely to be much higher since there is no central authority who forces membership and neither are there any negative consequences of giving up membership. In other words, only truly passionate individuals would aggregate in such a group.

Clearly, leaderless groups are structurally efficient. Are they functionally effective too? In the best-selling book The Wisdom of Crowds, James Suroweicki argues that large, independent groups of people are smarter than an elite few (leaders/ experts). For instance, on Who wants to be a millionaire, audience polls got the correct answer 91 per cent of the time, while the `phone a friend' experts got it right only 65 per cent of the time. He identifies four prerequisites for a `wise' crowd — diversity of opinion, independence, decentralisation and aggregation. There must be a diversity of opinion within the group, which is independent of the views of other members. The group must not have any central chain of command and there must be some way of aggregating various individuals' viewpoints.

The Wikipedia model

Wikipedia (a freely editable online encyclopaedia) is a good example of tapping into the wisdom of crowds. Individuals across the world collectively edit articles to produce content that is by and large of very high quality. There is, of course, the stray incident involving a writer editing an article to depict a deliberately biased point of view. However, Wikipedia does have a core team of editors who scan content for such anomalies. Thus, in effect, the people who contribute to the Wikipedia project are like a leaderless group, which is loosely monitored by a core team of editors.

An interesting thought experiment to conduct would be to evaluate whether such a model can be extended to other kinds of organisations. How could one structure an organisation to tap into the wisdom of crowds? Needless to say, leaderless groups are not suitable for certain kinds of organisations — for instance, a manufacturing organisation would clearly need a highly supervised environment. However, for organisations whose main output is knowledge (software, media) a leaderless approach does seem to be an interesting alternative. Open source software movements clearly show that people don't have any hassles creating intellectual property free of cost — with little or no supervision — if they believe in the larger cause.

Purely from a human psychology perspective, a group with a `leader' necessarily means that one individual becomes bigger than both the cause as well as the other individuals in the group. While this is good in a political cause (like apartheid) where it is important to truly inspire people, it may not be particularly useful in a more everyday cause, like a company that makes a product or service. In the latter, having overarching leaders can lead to harmful political behaviour and other efficiency-dissipating activities that can lead to drop in motivation levels. On the other hand, people are happiest when they work for causes (not people) much larger than their individual selves. In fact, offering work as a service to the Lord, without worrying about one's ego or the end result, finds support in the Bhagvad Gita too. Maybe, it's time organisations experimented more with leaderless set-ups (perhaps within individual divisions if not entirely). History certainly shows that it can work well in a number of contexts.

(The writer, an alumnus of XLRI, works with a multinational financial services company.)

Previously published articles of mine:

• Free riding and social loafing
• Decision making in groups
• The networked marketplace
• The spiritual organization
• Interactive Brands

Google's Adsense Income - Is there a conspiracy?

Google Adsense follows a policy of making payouts only when a user's earnings reach $100. Now, assume that Adsense (like everything else) follows a 80-20 rule i.e 20% of users make 80% of the revenue.

In other words, 80% of Adsense users would be making close to nothing. Assume that the average earnings of these users is about $50. Assume that Adsense has 10 million users.

Adsense users = 10 Million
80% of that = 8 Million
Average earnings of these 8 Million = $50
Total unpaid earnings = $400 Million (!!!)

Lets do some conservative math now
Adsense has 5 million users : $200 Million in unpaid revenues
Adsense has 1 million users: $40 Million unpaid
Adsense has only 500000 users: $20 Million unpaid
These are still large enough numbers to make us want to question what is going on.

Thus, Google could potentially be holding about $400 Million in cash that they probably never will payout because 80% of its users (like me) will never get enough hits to make $100 any time in the near future. Is this a deliberate strategy? Wonder if Google's earnings statements reflect these numbers, but I'm too lazy to check that out!

The least Google should do is to at least payout interest income to these users in addition to what they have already earned.

Technorati Tags: Google, Adsense

Spiderman could be 2007's biggest hit

Rediff reports.



Interesting piece of news this, particularly because the regional language dubs of Spidey 3 (Tamil, Bhojpuri etc) are doing really well.Dubbed movies seem to be a good substitute for poor quality local movies.



While I'm no fan of dubbed movies, Spiderman is certainly the type of movie that wouldn't suffer artistically no matter which language it is dubbed into!



If Bollywood movies were dubbed into English, would they be able to attract a global audience? Of course the plots would still be hackneyed, but for all you know the western audience may lap it up with India being the flavour of the season. I doubt if these dubs would be any worse than those oriental Kung fu action flicks.

Interesting

The Internet is playing a much more important role than anyone ever imagined. Brands are going to be made and destroyed on the Internet, and there’s a whole set of new marketing rules for it. One cardinal rule is trust and respect.

Read more

That's a quote from Keith Pardy, Nokia's senior vice-president of strategic marketing, which appeared in Mint recently.

Reminded me of what I had written for The Hindu Business Line many months back.

All kinds of organisations need to embrace the power of the Internet as the new global market place where brands will be created and destroyed ... Brands would need to be `humble' and not mighty; brands will have to understand, rather than be understood; brands will have to listen and not talk.

Notice the similarity!

Structured Procrastination

This is a very interesting article on procrastination that I found in my inbox. It's apparently written by a Harvard Professor. Presenting it in full below.

Structured Procrastination
by John Perry
Version of April 25, 1995
I have been intending to write this essay for months. Why am I finally doing it? Because I finally found some uncommitted time? Wrong. I have papers to grade, textbook orders to fill out, an NSF proposal to referee, dissertation drafts to read. I am working on this essay as a way of not doing all of those things. This is the essence of what I call structured procrastination, an amazing strategy I have discovered that converts procrastinators into effective human beings, respected and admired for all that they can accomplish and the good use they make of time. All procrastinators put off things they have to do. Structured procrastination is the art of making this bad trait work for you. The key idea is that procrastinating does not mean doing absolutely nothing. Procrastinators seldom do absolutely nothing; they do marginally useful things, like gardening or sharpening pencils or making a diagram of how they will reorganize their files when they get around to it. Why does the procrastinator do these things? Because they are a way of
not doing something more important. If all the procrastinator had left to do was to sharpen some pencils, no force on earth could get him do it. However, the procrastinator can be motivated to do difficult, timely and important tasks, as long as these tasks are a way of not doing something more important.

Structured procrastination means shaping the structure of the tasks one has to do in a way that exploits this fact. The list of tasks one has in mind will be ordered by importance. Tasks that seem most urgent and important are on top. But there are also worthwhile tasks to perform lower down on the list. Doing these tasks becomes a way of not doing the things higher up on the list. With this sort of appropriate task structure, the procrastinator becomes a useful citizen. Indeed, the procrastinator can even acquire, as I have, a reputation for getting a lot done.

The most perfect situation for structured procrastination that I ever had was when my wife and I served as Resident Fellows in Soto House, a Stanford dormitory. In the evening, faced with papers to grade, lectures to prepare, committee work to be done, I would leave our cottage next to the dorm and go over to the lounge and play ping-pong with the residents, or talk over things with them in their rooms, or just sit there and read the paper. I got a reputation for being a terrific Resident Fellow, and one of the rare profs on campus who spent time with undergraduates and got to know them. What a set up: play ping pong as a way of not doing more important things, and get a reputation as Mr. Chips.

Procrastinators often follow exactly the wrong tack. They try to minimize their commitments, assuming that if they have only a few things to do, they will quit procrastinating and get them done. But this goes contrary to the basic nature of the procrastinator and destroys his most important source of motivation. The few tasks on his list will be by definition the most important, and the only way to avoid doing them will be to do nothing. This is a way to become a couch potato, not an effective human being.

At this point you may be asking, "How about the important tasks at the top of the list, that one never does?" Admittedly, there is a potential problem here.

The trick is to pick the right sorts of projects for the top of the list. The ideal sorts of things have two characteristics, First, they seem to have clear deadlines (but really don't). Second, they seem awfully important (but really aren't). Luckily, life abounds with such tasks. In universities the vast majority of tasks fall into this category, and I'm sure the same is true for most other large institutions. Take for example the item right at the top of my list right now. This is finishing an essay for a volume in the philosophy of language. It was supposed to be done eleven months ago. I have accomplished an enormous number of important things as a way of not working on it. A couple of months ago, bothered by guilt, I wrote a letter to the editor saying how sorry I was to be so late and expressing my good intentions to get to work. Writing the letter was, of course, a way of not working on the article. It turned out that I really wasn't much further behind schedule than anyone else. And how important is this article anyway? Not so important that at some point something that seems more important won't come along. Then I'll get to work on it.

Another example is book order forms. I write this in June. In October, I will teach a class on Epistemology. The book order forms are already overdue at the book store. It is easy to take this as an important task with a pressing deadline (for you non-procrastinators, I will observe that deadlines really start to press a week or two after they pass.) I get almost daily reminders from the department secretary, students sometimes ask me what we will be reading, and the unfilled order form sits right in the middle of my desk, right under the wrapping from the sandwich I ate last Wednesday. This task is near the top of my list; it bothers me, and motivates me to do other useful but superficially less important things. But in fact, the book store is plenty busy with forms already filed by non-procrastinators. I can get mine in mid-Summer and things will be fine. I just need to order popular well-known books from efficient publishers. I will accept some other, apparently more important, task sometime between now and, say, August 1st. Then my psyche will feel comfortable about filling out the order forms as a way of not doing this new task.

The observant reader may feel at this point that structured procrastination requires a certain amount of self-deception, since one is in effect constantly perpetrating a pyramid scheme on oneself. Exactly. One needs to be able to recognize and commit oneself to tasks with inflated importance and unreal deadlines, while making oneself feel that they are important and urgent. This is not a problem, because virtually all procrastinators have excellent self-deceptive skills also. And what could be more noble than using one character flaw to offset the bad effects of another?

Update: This is the source

New look

To make up for the fact that my posting has been erratic, I have changed the template of this blog. Same old content. New look!

On a serious note, I've got to get back to regular posting.

Also, if you wish to bring management related posts to my attention, do mail me and I will feature your post on this blog.

The PS3 Song - a Web 2.0 rant

Interesting Web 2.0 approach to telling a brand that it sucks. Check it out!

Pearls before breakfast

Read this.

Go ahead, everything else can wait.

The Bakshali Inheritance - IIMC convocation

Convocation Speech by Ajit Balakrishnan: IIM Calcutta, 1^stApril 2007

An excellent read

Emergence

I read about this interesting concept today.

Emergence is one of the founding principles of agility, and is the closest one to pure magic. Emergent properties aren't designed or built in, they simply happen as a dynamic result of the rest of the system. "Emergence" comes from middle 17th century Latin in the sense of an "unforeseen occurrence." You can't plan for it or schedule it, but you can cultivate an environment where you can let it happen and benefit from it.

A classic example of emergence lies in the flocking behavior of birds. A computer simulation can use as few as three simple rules (along the lines of "don't run into each other") and suddenly you get very complex behavior as the flock wends and wafts its way gracefully through the sky, reforming around obstacles, and so on. None of this advanced behavior (such as reforming the same shape around an obstacle) is specified by the rules; it emerges from the dynamics of the system.

Link via 37signals. Source: Andrew Hunt - The pragmatic programmers.

Sometimes the best ways to create complex outcomes is to create simple mantras to be followed religiously by all stakeholders.

The concept can be extended to organizations as a whole. If an organization has 3-5 pithy mantras that it will abide by in all its decisions, it can lead to complex positive outcomes. On the other hand if one were to start from the complex outcome and work backwards, failure is guaranteed. I believe that great vision statements perform this function in aligning the actions of organizational stakeholders.

Sony Bravia ad

The award winning Sony Bravia ad manages to evoke an emotional response every time! And this link seems to suggest that those multi-coloured balls you see in the ad are real ones.

The music is by Jose Gonzalez, and the song is called 'Heartbeats'.

Web 2.0 marketing

Former India cricketer Krishnamachari Srikkanth seems to believe in the networked marketplace. He is promoting his cricket website Krish Cricket on an Orkut community. He has an Orkut profile too, and is glad to add friends! His website targets cricket fans through mobile games, and other interactive content. What better place to find young people than Orkut?

What's more Srikkanth is also promoting Google's cricket blogging contest, and has his own blog too.

Interactive Brands - featured in The Hindu Business Line

Today, The Hindu Business Line's Brand Line supplement carried this article written by me. Link to website: Interactive Brands

Full text follows:

Today's young adult spends significant amounts of her time using the Internet. The Internet has become the dominant medium of keeping in touch, networking, sharing views with people all over the world, researching and getting work done (if you are a knowledge worker). The membership figures of prominent social networking sites such as Orkut and Facebook is indicative of this undeniable trend.

The young adult of today's world is hyper-networked, interlinked to many more people than before, and part of many more conversations than ever before. Marketers who are today selling their brands to a spectrum of target groups of which such hyper-networked individuals constitute a small but significant chunk will realise (as these individuals age) over the next 10 years that the entire marketplace has turned hyper-networked.

Are brick-and-mortar companies prepared for this change? I doubt it. The difficulty of `selling' to such hyper-networked individuals is that they are highly sceptical of advertising, branding gimmicks and PR spiel. This group tends to form and create opinions through n-way conversations that take place on the Internet through blogs, social networking sites and e-mail. Such communication is not just text-based - it could even take place through videos (YouTube), images (Flickr) and voice (podcasts).

The important feature of these conversations is that the information they contain is viewed with much more trust, primarily because such conversations do not have a hidden profit motive. The equivalent to this global conversation is the `word of mouth' benefits that brands earlier enjoyed in the brick-and-mortar era.

Join the conversation

The solution that one foresees in such a scenario is for brands to turn interactive, and actually join the conversation. Interactive brands would be those that effectively conduct two-way conversations with their defined marketplace. The earlier era was one of uni-directional communication, which involved running advertisements and other branding initiatives on one-way communication media such as the television, radio and billboards. Potential customers were expected to passively absorb messages from such media, and consume the advertised product or service. Occasionally positive word-of-mouth contributed to brand choice in addition to the creative message. However, with the emergence of the Internet, word of mouth assumes a much more significant and globe-spanning role in brand choice.

Corporate blogs

How then do brands engage in two-way interactions with their defined marketplace? One effective way to do this is a corporate blog, which incidentally finds itself in Bain Company's list of top 25 management tools of 2007. A key benefit of a corporate blog is that it enables an organisation to communicate in an honest, human voice to the world at large.

This honest voice would involve such former taboos as publicly acknowledging mistakes as and when they occur, honest promises on customer service levels, transparent communication on future product launches and internal thought processes. In addition to this, customers can use this forum to openly talk to the company, and about their experiences with the company's offering. A static corporate Web site can never create the kind of interactivity and richness that a corporate blog can offer.

Community of users

Another way for brands to get involved in the conversation is to create communities of users. Two examples come to mind - The Royal Enfield owners club of the UK, and closer to home, Sunsilk's `Gang of Girls' Web site. Such communities allow customers to interact with other users of a product or service, and have conversations that have the incidental benefit of providing inputs to product development initiatives. Additionally, they would also help companies observe the evolution of their customers, and respond much faster than ever before.

It appears that brands will have no choice but to be part of the conversation between users, or risk being left out completely. This is not to say that traditional brand building approaches are no longer valid. They still have a role to play, but that role is more likely to help in reinforcing the brand's message, rather than creating it from scratch. Additionally, smart brands will no longer view people as `target groups' but start viewing them as people whom they can best understand through conversations.

Iconic brands tend to tap into a customer's self-actualisation needs on Maslow's hierarchy of needs. People get emotionally involved with brands when they can relate to the brand in a manner that goes beyond mere price or quality. It is equally important for brands to get emotionally involved with their users by joining the conversation, or risk commoditisation. The choice is clear!

(The writer, an alumnus of XLRI, is with a multinational financial services firm.)

Some of my previously published articles.

• The spiritual organization
• The networked marketplace
• Decision making in groups
• Free riding and social loafing

Cricket ads

With the World Cup around the corner, it's time for some very interesting cricket centric ads. Marketers will try every trick in the book to associate their brands with India's inexplicable obsession with cricket, and hope for a reciprocal Pavlovian passion for the product to develop. This one is the new Nike ad. Excellent stuff. Notice how Sreesanth and Zaheer Khan have the most insignificant role in the whole story. I have a feeling the ad is trying to tell us that the Indian cricket fan is much bigger than the Indian cricket star. I love the way the ad has this "order in the midst of chaos" feel to it, that only Mumbai can create.



And here's an old Adidas ad featuring Sachin, that still gives me goosebumps. Notice how the phone rings throughout the ad, as the world comes to a standstill waiting for Sachin to face the delivery. This is probably the best Sachin ad of all time, because it just lets him do what he is good at (playing cricket) without having to mouth any inane lines like 'Visa power, go get it'.

Self promotion

Many of us are uncomfortable about self promotion, even if it is with regard to something that other people would really want to know about.David Maister talks about this phenomenon in this very interesting post and podcast.

Technorati Tags: David Maister, self promotion

Corporate blogging - my thoughts

Over at Abhilasha's blog I found some interesting questions raised by her on corporate blogging. In this post I attempt to answer a few of them:

1. Why should my organization blog?
For starters, if you are a consumer facing company (B2C), it helps to have an open conversation with your customer. Customers love to know what their favourite companies are upto. This is more so in the case of products that early adopters love (tech products, gadgets etc). A corporate blog can also become a very human touch point for customers, when compared to a boring website or even worse, a call center!

2. What realistic expectations can my organization have about the benefits of blogging, and what
obvious pitfalls or shortcomings should we be wary of?
A great, engaging blog does a lot more PR than a press release ever will. A great corporate blog can also help develop a loyal community of users around a product. Human beings love to be connnected to causes - sometimes, merely promoting a great product (like the I-pod) can be a cause. A blog can help create such a cause.

3. Who in the organization should blog?
I would say, the most important decision makers should. That way promises made on the blog will carry much more credibility.

4. What role does PR/ Corporate Communications have in this?
None! Blogs are the new age response to that tiring, sugar coated thing called the press relase.

5. What guidelines/policy should govern corporates bloggers?
Preferably none. However office bitching could be avoided!! A broad guideline coule be - say anything you want, as long as it is something that the customer is interested in knowing.

6. How can my organization measure the impact effectiveness of corporate blogging?
There is no need to really measure effectiveness. Think of it this way - what is the impact of a CEO talking one to one with millions of customers everyday? Its difficult to put a number to that. That's because the revenue you earn from a corporate blog is goodwill.

Technorati Tags: corporate blogs, blogging, cluetrain

XLRI Alumni in 2006-07

Prof. Madhukar Shukla compiles what XL alumni have been upto over the last year.



Technorati Tags: XLRI, Alumni

Kawasaki on market adoption

The top ten stupid ways to hinder market adoption

Guy includes one of my pet peeves - enforced immediate registration - as one of the barriers. Couldn't agree with him more. I don't understand what the additional value 'registration' brings in in an Internet scenario, where identities can easily be faked. I'd rather have a million anonymous users than 100 users about whom I know everything, and whom I can later target for promotional offers.

Corporate blogs

What kind of companies should start blogs to communicate with their customers? My thoughts:

1. Smallish startups that don't have marketing budgets
2. Companies that have very few product lines, or even better just one product. That way the conversation can be 1 to N. N to N conversations are just noise!
3. Companies whose brands directly touch individual customers. I wouldn't recommend a steel maker to start a blog for instance. I would certainly like to see, say, a winemaker with a blog (like this one). People would like to talk to or listen to brands that they directly relate to.
4. Large organizations that have people who are mini-celebrities in their own right - Steve Jobs, Robert Scoble etc.

At the end of the day, a blog is just a medium. The message is always more important than the medium. So, unless you have something compelling to say to your customer don't start a blog!

Mohammad Yunus at FICCI Mumbai

Recently, I attended a FICCI organized talk by Mohammad Yunus, the nobel prize winning proponent of microcredit. Thought I'd blog about it, but found an excellent existing post that covers it pretty well.

A talk by Mohammad Yunus

Networked marketplace

An instance of how brands will suffer if they ignore the emerging networked marketplace.
Looks like Air Deccan will need to do some serious brand rebuilding.

Missed flight, delayed flights and Air Deccan

I think an interesting thing for Air Deccan to try would be to setup a corporate blog, and start an honest conversation with its customers, acknowledge where they are going wrong, and tell us what they are doing to fix things.

Retail, and the invisible hand of the economy

Reliance, Bharti may storm microfinance.

A perfect example of how the invisible hand of the economy works. Each agent works in his own self interest, leading to a greater good for mankind. The retail revolution in India may unknowingly help in fighting poverty in rural India.

Self-aggrandization post

Gautam, India's number one business blogger considers this blog to be amongst his list of top Indian business blogs. Yay!

Anecdote

I have always believed in the importance of narrative, and stories in organizations. Sometimes, these narratives assume even more importance than logical/efficient decision making. A typical example is the commonly heard "this is how we do things here". I found an interesting blog that is dedicated to such stuff - Anecdote. Anecdote is a consulting firm that works in this niche area.

Here's an interesting post from Anecdote - the difference between a sound argument and a good story

Bruner called the two modes of thought ‘logico-scientific’ (or paradigmatic) and ‘narrative’, arguing that:

the types of causality implied in the two modes are palpably different. The term then functions differently in the logical proposition ‘if x, then y’ and in the narrative recit ‘The king died, and then the queen died.’ One leads to a search for universal truth conditions, the other for likely particular connections between two events – mortal grief, suicide, foul play. (pp. 11–12)

To compare the two modes, Bruner claimed, is to understand the difference between a sound argument and a good story.

What should I do with my life?

I will be posting links to interesting articles that try to answer this question that has troubled mankind for long. Will update this post over the next few days.

Steve Jobs - You've got to find what you love

Po Bronson's book - What should I do with my life?

Most attempt to answer it with one eye open, one eye closed. We let our fears govern our decisions; rather than challenging the validity of those fears, we accept the boundaries set by those fears, and end up confining our search to a narrow range of possibilities, like the guy looking for his car keys under the streetlight because he’s afraid of the dark. Some broad examples: we confine ourselves to a range that is acceptable to our parents or our spouse; we confine ourselves to places inhabited only by people "like us," meaning of our class and education level; we place too much emphasis on being respected by an imaginary audience; we shy away from avocations that take a long time to mature and pay off

Synchronicity!

On Jan 21st, I wrote this on an alumni group of XLRI

"I doubt if the i-Phone will succeed - the main reason being that for once Apple is entering into a field that already has a lot of path breaking innovation happening (in a few years phones went from being just phones to cameras to music players to e-mail clients etc).

The I-pod, on the other hand, was launched in an environment where there was hardly any innovation happening on the portable music player front. The Macintosh, and its GUI was also launched in a similar technological environment. Both these products turned into icons because of the disruptive innovation they brought in. Iconic products tend to tap into the customer's need to identify with something that is path breakingly unique unique, and not possessed by many (atleast to start off with).

My guess is that the i-Phone does not have enough disruptive innovation built into it."

On Jan 24th, Peter Fader, in an interview featured at Knowledge@Wharton said:

Fader: Apple is facing a very different market. It's a market that's far more mature than the MP3 Player market was at the time. It's a far more sophisticated customer base. Apple had the opportunity to go into the MP3 market and basically reshape that market and create the standard for customers' tastes and preferences.

Those things have already been done by the myriad players in the cell phone market. Apple can do a very limited amount of reshaping. I think that when this phone actually hits the market, some of the grand visions that Steve Jobs has as well as some of the Apple zealots are going to be rather disappointed.

Interesting to note the high degree of similarity. Talk about synchronicity!

Sanjeev Bikhchandani on Naukri's IPO

An excellent interview by Gautam.

Companies look beyond IIMs for fresh talent

Very interesting trend

Beyond a point, the rising salaries of entry level management talent from premier b-schools may actually become unsustainable, making them unaffordable for a lot of companies! Already, FMCG companies are facing the heat at premier campuses, with the financial services sector/ consulting firms offering much better pay packets. Wont be surprised if this trend becomes a full blown reality in the next few years, particularly with the small number of "premier b-school MBAs" churned out every year.

The spiritual organization

A recent article of mine which appeared inThe Hindu Business Line.

Link to the article: The spiritual organization

Full text follows:

People who work in a `nine-to-five' kind of workplace must often wonder why `work' is structured the way it is. The modern nature of work has its underpinnings in the Industrial Revolution and its many factories. These factories presented an interesting challenge in how a large number of workers were to be efficiently managed to produce a desired level of output. Frederick Taylor successfully studied and analysed work in factories, with his simple motto being reduction in variability — in other words, viewing people as mere parts of a machine that had to work together to produce a desired product. Needless to say, this view of work and human resources could not last for long.

People do not necessarily work to satisfy an economic function. People work for various other reasons including fulfilment of their potential, following their passions and so on. Such motivations are much truer of the modern knowledge worker who works more in the realm of ideas and analysis as opposed to actions and objects. Yet, I find that most organisations still largely view job roles along the lines of the `parts of a machine' model described earlier. With most modern professionals spending a significant chunk of their waking hours at work, work ends up being an important sphere to achieve a lot of life goals apart from economic goals. Work may even become a path to spiritual development (suddenly shifting the focus from the here and now to the next world if there is one!). The Industrial Revolution (and the Protestant Reformation) on the other hand, made society focus more on this world, with work being an important component in it. The Industrial Revolution and the modern knowledge economy are at opposite ends of the spectrum in the nature of work they create. And yet, very little has changed in the approach that modern organisations have towards people.

Most organisations that claim to be modern in all respects — be it technology, strategy, CRM, operations and so on — manage to be extremely archaic in their people practices. I find a huge hangover from the industrial era still permeating the hallowed corporate hallways. It appears that the `modern' knowledge worker lives in a world populated by access cards, nine to five regimes, appraisals that tend to measure performance in the way a car's performance would be measured and so on. It is thus no surprise that the very term human resources seems to convey a view of people as input-output machines (pay salary, will work).

In my view, the organisation of the future must be a spiritual one. Its goals must be closely aligned with the life goals of its stakeholders. In such an organisation, I would give people the freedom to choose what they want to do, within broad constraints. The underlying theme would be that people inherently love to work when the kind of work they do is closely linked to who they truly are. This concept finds support in the Bhagawad Gita too, where Lord Krishna commands Arjuna not to be a coward, and to be true to his dharma (the true nature of one's personality). The current approach to hiring, on the other hand, seems to be one of `filling open positions'.

Second, the spiritual organisation would pay closer attention to the non-work goals of employees. This may mean allowing employees to spend significant chunks of time pursuing these goals even during the `working day'. Career growth paths would be super-customised and not standardised. Thus, on a broad level, a spiritual organisation would place self-actualisation before profits, and this paradigm would present itself in the organisation structure, hierarchies, roles, career paths, approach towards customers, products and so on.

It is not as if organisations have been entirely oblivious to the way people view work today. A lot of new age companies — technology companies like Google, start-ups and others — do experiment with people practices to foster a culture of flexibility and openness. Hierarchies too are becoming a lot more informal. However, if one looks at the entire spectrum of organisations and not just a few nimble new-age companies, there is still a long way to go. People have progressed from being mere `resources' to `human capital', which is the most important non-substitutable resource in this knowledge economy. It's about time this change is acknowledged and capitalism turns into human capitalism!

(The writer, an alumnus of XLRI, is working with a multinational financial services company )

Some of my previously published articles:

• The networked marketplace
• Decision making in groups
• Free riding and social loafing