Marketing Expert's Corner

This article written in 2006

 

Since the dawn of the information age, TV and films have portrayed computers as being capable of evil, mayhem, murder, and even world domination.  War Games, 2001, Demon Seed, The Matrix, I Robot, Star Trek, and dozens of other science fiction books and movies painted really scary portraits of what our digital creations would do to us if given the chance.  Terminator's story line had it that the Final Conflict began just 15 minutes after Skynet's link-up allowed it to gain consciousness.

The realities of the information age have been a lot less dramatic, and probably will be for a long time to come.  In this issue, we'll explore the real-world impact of the technologies that we've been building and marketing.  Why?  Because the best marketing is based on truth, not fabulous stories.  The magic of marketing happens with believable hype.

Future Schlock

Computers and high technology have had a huge impact on our lives.  But the impact is rarely as envisioned -- or as marketed -- by the technology's purveyors.  For example, Alexander Graham Bell did not expect that the telephone would be used for point-to-point conversations.  He thought that people would come to auditoriums to listen to the news, lectures, and music brought by telephone wires.  This is what radio eventually did, only decades later and in the home.  One hundred years later, developers of the Short Message Service in cell phones expected their system to be used for occasional paging among professionals.  What happened instead:  millions of teenagers tapping out SMS messages as a replacement for passing notes around the classroom.

Looking at the core of the IT industry:

  • There are more microprocessors in the world than there are people.  Most computers are used in remote controls, door locks, and other low-level automation.  There is no danger of their conspiring against us.

  • A $1000 laptop may have as many as 16 billion transistors in it and a clock speed 30 times faster than a Cray-1.  But most of the processing power is used to run GUI widgets and eye-candy.  On a laptop fully loaded with software toys, going from power-on to usable desktop applications consumes enough time for a trillion computational operations.  Long before a Windows system could take over the world, it would BSOD.

  • The largest computing resources are grids that tackle really tough problems like modeling weather systems, simulating nuclear explosions, and exploring genomes.  Google uses a grid of 500,000+ Linux boxes.  But the biggest grids on the planet -- harnessing millions of nodes -- are used to compute fractals for Electric Sheep screen savers or sift through random noise for the SETI project.  Doesn't make for a good movie script.

  • There are hundreds of useful software applications for sale.  But most users typically run less than 7 applications on their computers, most of which are used as a very smart replacement for paper.  

  • Artificial Intelligence -- once an overhyped defense-department technology and still an overhyped plot device for science fiction -- is used most commonly to correct spelling, detect (and generate!) spam messages, and animate videogame characters.  HAL ain't here.

  • The real impact of IT on users has been surprising.  Everyone forecasted that office automation software would reduce the amount of paper, but ink and toner are the only consistently profitable parts of the whole industry.  Vendors paid big money to prove that computer literacy would lead to higher incomes, but a recent study (funded, ironically, by HP) showed that the info-glut in modern PCs actually decreased office-worker IQ by more than 10 points.  Yes, we're turning out more documents, but that doesn't actually mean productivity or better outcomes.

Looking further afield, at electronic media and entertainment:

  • For 3 years now, every computer made can be a TV, radio, DVD player, recording studio, and videoconferencing system.  This goes double for a Mac.  Yet even today, nobody but the uber-geek puts a PC in their living room.

  • Despite the potential for the democratization of entertainment content -- something that many artists viewed as nirvana -- the quality content is not coming from "anywhere in cyberspace."  Sure, there's an overabundance of stuff on YouTube, MySpace, and GarageBand.com, but the stuff you actually want to watch and listen to is produced and controlled by increasingly concentrated media conglomerates.

How has this changed the economy?

Clearly, IT has had a dramatic impact on business and consumer purchasing patterns.  Slide rules, drafting tables, typewriters, and pocket protectors disappeared within 10 years or their digital replacements. 

But the dramatic changes from the PC are complete, and future innovation at the base level will have only incremental effects.  (In fact, we're probably near the end of the PC era as we know it.  The only things preventing the PDA/phone from supplanting most PCs:  the size of the keyboard, and the limited battery life.  Find a way to eliminate a laptop's screen through an audio or eye-movement interface, and the PC is toast.)

After all the hype about the Next Big Thing, what really changed the economy was not routine automation or individual productivity software, but digitized content and the internet.  Ironically, the really important impacts -- the effect on documents, research, and media -- were not hyped that much.  The gravitational pull of the Network Effect was, truth be told, missed even by Bill Gates and Scott McNealy for quite a while. 

Universal email (and its cousins, IM, newsgroups, and blogs) has all but wiped out postal mail, faxes, and office memos.  VOIP and audio chats will wipe out conventional telephony. 

Book and record stores die on a weekly basis because of the triple onslaught of Amazon, recordable CD / DVD media, and MP3 compression.  Just last week, Tower Records -- once the world's largest record store chain -- was sold out of bankruptcy.  iTunes and their cousins essentially remove the need for media stores and CD production altogether, and in 2007 iTunes alone represented 10% of the retail US music market.  The fabled internet disintermediation has actually happened here.

Newspapers and news magazines are commercial zombies, ravaged by declining readership thanks to the internet.  They are in a death spiral as they cut their reporting and editorial staff to meet budgetary realities.  Although there is a great example of open source information content in the WikiPedia, blogs and talk radio are not likely to serve as credible substitutes for professional reporters.  As modern societies need a flow of quality news in order to function properly, something big is going to change here:  watch for a tipping point.

Radio has been able to adapt much more readily to the internet than print media, and overall listenership is still healthy.  But podcasting is making a serious dent by changing consumer listening patterns.  In my family, listenership to real-time radio has fallen to zero in just 2 years.  Podcasting might have seemed like just hype, but its user impact is probably even more significant than Tivo.  And users of these new media always skip over any ads.

However, TV is still much more economically potent than radio, because people spend morehours watching TV than listening to radio.  There are more channels to watch every year... and Tivo, satellites, broadband internet, IpTV, YouTube, and Video iPods ensure that this trajectory will continue for a long time to come.  However, because viewership is constrained by the number of free hours in a day, audiences will be increasingly fragmented. 

Advertising has been turned upside down by all these trends.  Print advertising in newsmagazines, professional journals, and newspapers is in deep trouble, although print ads in gaming, fashion, and lifestyle magazines are still OK.  Advertising's impact in broadcast media has been dramatically reduced by Tivo and podcasting, and rates there will decline as audiences splinter. 

On the other hand, there's a ton of positive innovation in online advertising, both in Google and the major media properties.  Watch for a tipping point here as well, as innovators create closed-loop advertising and marketing systems that really engage their audiences as a community of interest.

What does this mean for marketing?

You don't have to have read The Innovator's Dilemma to know that high tech products evolve a whole lot faster than the user's ability to take advantage of them.  Countless product innovations just won't matter, and a lot of hype won't either.

Wonder why you can't get any attention from reporters and editors about your new product?  They're completely jaded, after having been bludgeoned by countless over-zealous product managers.  If you want them to give you some ink, give them an interesting customer story.

Don't get me wrong:  hype is a necessary and even desirable thing.  You won't get headlines without it.  To get funding and press attention, company founders must make grandiose claims about the impact their technology is going to have. 

This awareness-building hype is necessary, but it must not permeate the value propositions or sales materials for products.  Overblown claims cannot be effective because they aren't really relevant or credible to the customer.

Applying the right amount of hype -- and for the right reasons -- is the trick. 

  • If you make components or subsystems:  some new products deserve hype because they change the economics for users.  It is significant that now you can now hold a terabyte of disk storage in your hand for $500.  When there's cheap 64 GB flash RAM, it will make a difference to a lot of products.  If you could increase the power density of batteries by 2x, you'd enable big changes in the way users work.  If you're lucky enough to have a product like this, your hype will be most credible if you had your customers (OEMs) do the talking for you.

  • If you make entire systems (end-user products):  incremental improvements shouldn't be hyped.  What's the level of change that should be hyped?  If the end result of your new system can be a big shift in consumer behavior, and if it passes the in-law litmus test (i.e., at least two of your in-laws says that they would actually do something different thanks to your new product), then hype away.  But it will be more credible if you use an industry expert or pundit to say it.

  • For software (and particularly for platforms):  ubiquity is more important than technological finesse, so don't hype features.  Oracle isn't the 800-LB gorilla because of 7000 APIs or world-beating quality:  it's because Oracle is the de facto standard.  This is where Open Source can be truly important:  when properly targeted, it can achieve ubiquity faster than any previous business model.  So, JBoss and MySQL can hype achieving real market power despite big vendors like BEA and Oracle.

  • For luxury items:  don't use hype at all, use celebrity endorsement.  What is said is nowhere near as important as who said it and how cool the situation surrounding the endorsement was.  The best endorsements are natural and subtle, often involving few words about your brand.

Looking at the impact of the IT and internet revolutions, big changes have happened to the craft of marketing:  advertising, merchandising, selling, and continuous customer interaction. The internet enables companies to rapidly and economically create communities of interest that form the basis for very low cost commercial interaction and loyalty.  Take a look at what Woot has done with almost zero capital.  Clever marketers figure out how to engage their communities throughout the product life-cycle, and create closed-loop systems for measuring and optimizing every phase of doing business.  Unfortunately, most companies have not invested properly in their marketing departments.  They need to evolve their skills to effectively leverage new tools and available information.

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