Wednesday, August 29, 2012

Treatise on Political Economy

Rounding out my tour of classical economics, I've recently read Jean-Baptiste Say's Treatise on Political Economy. I have some regret that I saved this one for last - and have to admit that it's simply a matter of procrastination: a three-volume set whose title led me to expect a lengthy discourse on taxation and government spending in the nineteenth century (which is a good description of the third volume) seemed to be very oblique to economics in the modern era.

The first two volumes, however, were fascinating. Say addresses a number of topics his contemporaries overlooked, and which are particularly germane to the present age: he considers the effect of technology, the value of knowledge-workers, the rationale for customer loyalty, the service economy, the premium paid for brand preference, and many other topics that Adam Smith either ignored or misconstrued - and which the present-day scholar for whom Smith is their only exposure to classical economics continue to ignore and misconstrue.

Say's work is often a footnote in economics textbooks used to train present-day managers, which is perhaps ironic in that it seems far more relevant to the present-day economy that is increasingly based on service and dependent on technology. It should perhaps be the other way around: with Say pushed to the fore and Smith footnoted as his predecessor.

Saturday, August 25, 2012

Social Media Strategy? Again.

In the time since I posted my reflections on social media strategy, I’ve been jumped buy a few aficionados of the toolset who have been very insistent that it’s of critical importance for firms to have a social media strategy. But their arguments have reaffirmed the contrary.

Primarily, the counterargument addresses the (admitted) caveat: that in order for social media to be used, a firm must have developed an audience, and developing an audience requires a sequence of activities that are sustained over time. That is to say, it requires an plan and a program.

But not all plans and programs are strategic for all firms. You also need a plan and program to order office supplies so that the materials will be available when they are needed. But efficient acquisition of office supplies is not a strategic initiative for may firms – it is a necessary task, and an important task, but not strategic.

A second point of argument is that firms whose primary business is related to social media must take a strategic approach. Whether it is a media company that looks to gain an audience to earn revenue from advertisers or a market research firm that needs a large panel of users to provide data, establishing and maintaining a large pool of contacts is of strategic importance.

I will concede that point readily, but it is only in these instances where social media becomes strategic. In the same manner, an office supply company places strategic value on having the right items in its merchandise selection; but anyone who is not in that specific industry does not.

A third point of the counterargument likens social media strategy to IT strategy – that it is just as important. This is based on the hypothesis that IT strategy is important, which seems to have been swallowed as a matter of course, but which is also not necessarily true for the majority of firms.

IT strategy is like the office supplies strategy, and it suffers from the same problems: having a strategy for acquiring and provisioning workstations and servers, and their related software and systems, is a constant pain point for organizations. In firms that are overly devoted to IT strategy, workers can’t get the software they need to accomplish tasks related to the corporate strategy because it conflicts with the IT “strategy.”

So in this case, it may be true that the need for a social media strategy is, indeed, equal to the need for an IT strategy – but not in the way that it’s intended: from the truly strategic perspective, it’s just as unnecessary, and just as counterproductive, to set a strategy for a supporting service that conflicts with the strategy for the organization as a whole. There needs to be an over-arching plan to provide the resources that workers need, but when the plan is designed and executed in a way that denies the resources to those who need them, its utter lack of importance in comparison to truly strategic initiatives becomes obvious.

I don’t expect this is the end of the argument – aficionados of anything have a tendency to be persistent and impervious to logic – the discussion will likely go on. And it’s good and well that it should.

Tuesday, August 21, 2012

Shovelware and Shiny New Things

It's said that the point of studying history is so that we can learn from the mistakes of the past so that we can avoid making them again - and the tragedy is that we never seem to do so. We merely acknowledge, with distressing nonchalance, that we made the same mistake a second time (or a third, or a fourth, etc.) after we've already taken action.

Case in point: I was listening to a colleague vent about how his employer was presently attempting to recreate its entire Web presence on the iPad. To his way of thinking, it was "shiny new thing" syndrome - the executives were distracted by the tablet device and shifted significant budget to pursue it ... by cutting the budget to the smartphone development initiatives, which only a few years prior was funded by cutting budget to their Web site initiatives.

Each time, the abrupt change in focus left work half-completed in the previous channel, and work in the new channel-of-obsession was done in a hectic and sloppy manner. The repetition had him discouraged, and unable to commit himself wholeheartedly to his new projects because it seemed inevitable that, a year or two in the future, there would be a new platform (the iWatch or somesuch) for which his present work would be abandoned.

This took me back to 1994, a time when the Internet was relatively new to business, and their immediate reaction was to stop doing print and re-create all of their existing print documents online. As a result, many Web sites were a jumble of disorganized information, shoveled from archives of print documents that were written at different times, for different purposes, and for different audiences - and clients completely ignored the nature and potential of the new medium.

Perhaps I shouldn't complain too much, as it was the start of a fairly decent career when one savvy executive recognized the problem and reached outside the IT industry to get someone with a communications background to help make sense of it all - but one of the most frustrating aspects of my work from that day to this has been fighting against the shovelware mentality and the gormless enthusiasm for shiny new things.

No-one seems to have recognized that the mistake that is made when there's a heated rush to adopt a new channel and shovel over the content and functionality of older ones without regard to the nature, capabilities, and usage patterns of the channel. Or worse, they do recognize it, but issue the order to "just get something out there" and fix it later. But later, some other distraction comes along and the work that was done in a sloppy, heated rush is left that way indefinitely. Or worse still, the sloppy work that was done in other channels sets a precedent - it becomes a standard way of doing things that should be imitated in new channels for the sake of providing a consistent customer experience. Consistently awful, but consistent nonetheless.

I'm feeling far too pessimistic at the moment to propose a solution to the problem. Perhaps anyone with a long enough memory can use the example of the past to suggest we avoid, rather than repeat, the shovelware mistake in future. Or given the shorter span of time between platforms these days, perhaps it doesn't take so long of a memory to provide an example.

The point being that when the Internet came along in 1993 (or more accurately, that's when it went commercial and opened itself to the general public), there was not much in the way of a precedent. I think it was around the fifth century when books came to replace scrolls and tablets, and the originals probably were little more than collections of parchment and papyrus scrolls, cut apart and bound together without regard to whether the collection made much sense.

It took centuries to get books right, and decades to get the Web sorted out (if, indeed, it could be deemed "sorted" even today), and new media are bubbling up at such a frantic pace that it remains likely that decision-makers will latch on to them compulsively for a short amount of time, adopting them with reckless lust and abandoning them prematurely.

Historically speaking, it's a great time to be working in this industry if you enjoy fiddling around with shiny new things ... not so much if you care about doing things well.

Friday, August 17, 2012

Social Media Strategy?

I got dragged into a discussion with an acutely obnoxious individual over the topic of social media strategies. His take on it was that every firm ought to have a detailed social media strategy and commit significant budget and resources to its pursuit, but he seemed to take the necessity of social media as axiomatic.

His point was social media is something that should be a strategic initiative "just because" and was unable to present a reason that it should be pursued. Though looking into his profile after the debate, it became apparent to me that the "because" was "because my firm makes a great deal of cash selling products related to social media."

So I remain unconvinced ... but rather than reacting to an argument based on a feeble premise, I mean to explore the reasons I maintain that social media is not a strategic initiative.

Fundamentally, it has to do with the nature of strategy itself: a strategy is undertaken to gain a benefit (or respond to a problem). While there are a number of case studies that demonstrate the tactical (read "not strategic") outcomes of leveraging social media, even its strongest aficionados are hard pressed to suggest that having a million Facebook friends results directly to the accomplishment of any goal (unless the goal is merely to have a lot of Facebook friends for the sake of having them, which again becomes a tautology).

An analogy: if your goal is to build a house, you need a plan to build the house. And while a hammer is a useful tool that will be used extensively in achieving that goal, there is not a need to have a "hammer strategy" - and doing so can in fact become counterproductive if your desire to use the tool causes you to focus exclusively upon it, to the exclusion of more productive tools that might be more efficient and effective to a given need.

That is, a hammer is great when you need to drive a nail - but it doesn't drive screws, cut plywood, lay tile, and do any of the other tasks needed to accomplish the goal. And granted, an hardcore hammer-fan might be able to find a way to use it to do these things, but it would merely be a circus trick, and the outcome would likely be worse than using the right tool for the task.

That is to say that the goal of a company is serve the needs of its customers, and to be successful in that goal it needs to serve its customers well, attending to the core value they seek to obtain by doing business with it. Customer experience is a component of that strategy, which may itself be seen as strategic because the core product or service can be considered as an element in strategic activities (customers may accept a more expensive or less serviceable product if their entire experience of interacting with a firm is positive).

Social media, meanwhile, is a tool that is leveraged in order to improve customer experience. Where it supports the strategy, it is to be applied; where it does not support the strategy, it is not. But most importantly, it is a tool that is used to support the strategy, and not a strategic initiative unto itself.


I can think of one counterpoint to the position I've taken: social media is not a tool that is ready on demand. That is, a company that has shunned the social channels cannot successfully turn up whenever it needs to use them and expect to have success - which seems to be what many actually do, and have a correspondingly dour perspective on its value - but it must instead put ongoing effort into developing and fostering its social connections in the digital channels.

Another comparison: when it comes to meatspace social networking, you must place effort into meeting and establishing a relationship with people long in advance of asking them for assistance. The fair-weather friend who turns up only when he needs something from you is generally unwelcome, and is unlikely to get it.

And in that sense, online social channels require an ongoing process of support and development - so while having a million "friends" is of no strategic value, to have that resource ready for use in pursuit of a stratagem when the time of need arises requires a great deal of ongoing effort in times when it is not.

I don't think that makes it strategic, per se, but that does not mean it's unimportant to undertake the necessary actions to develop and maintain the tool because there are instances in which it will be needed. It requires a great deal of time and effort on an ongoing basis in order for it to be useful when it has the potential to contribute to something that is strategic, and expending that effort will pay considerable dividends when and if the need for it should arise.

So in that sense, a firm may have a series of actions it must undertake to acquire and maintain a social media presence that can then be leveraged when there's a strategic need for it. And the breadth and scope of those activities is something like a strategy ... but I'm still left with the sense that it doesn't really live in the same realm.

It could merely be that the English language lacks a proper word to indicate that something is desirable because of its potential uses in accomplishing strategic goals, and that "strategy" is an important-sounding term that bridges this gap, but it's ill-fitting and somewhat misleading.

Monday, August 13, 2012

Engagement and Purchasing: Mere Correlation

I read something that seems dangerously unintelligent: the longer a prospect engages with your brand, the more likely it is that they will purchase your product or service - therefore, if you wish to improve your conversion rate, you have to find ways to get people to engage with your brand for a longer period of time.

I have no doubt that this is true, up to the "therefore." It should come as no surprise that a person who ends up buying a product spends more time considering it than a person who does not - as the non-buyer can tell at a glance, or after considering a few basic questions (Is this something that would benefit me? Is it worth the price? Is it better than alternatives?) that the product is not desirable and they do not wish to purchase it, and immediately disengage, whereas the first-time buyer must engage long enough to answer those questions and others that arise before committing to buying the item.

(As a side note, the amount of time likely decreases again for the loyal customer, for whom purchasing the item is an automatic decision and needs little deliberation. In fact, the loyal buyer will seem to be the least engaged of all. This likely skews the overall numbers, but for now I'll stick to the intended situation of a new prospect's decision to buy for the first time, except to beg the question of how you identify whether a person who does not purchase is really in that situation.)

The assumption seems to be that if you can somehow compel a person to spend more time with the brand, they will eventually convince themselves that it is desirable. My sense is this is exactly the opposite to the way that buyers think and behave. The initial reaction is an emotional one - a sense of inexplicable attraction based on an immediate reaction leads to the primitive impulse of "I want." Or in some instances, it's "what is that?" followed by curiosity and discovery. But ultimately, the logical side steps in to attempt to restrain or counteract the emotional reaction: you don't need it, you can't afford it, there are better things to spend your money on. It's only when logic agrees with emotion that a prospect has the intent to purchase.

As such, the notion that a customer must be compelled to want a product is when the product is inherently undesirable. In that instance, your choice is to improve the product to make it desirable or utilize tactics that are meant to overcome resistance. Even at that, there are better tactics to use than badgering a customer: a brand that inflicts itself on a person who has already decided not to purchase isn't appealing ... it's annoying. Hence the reason most salespeople are considered to be about as pleasant as a dose of scabies.

The notion of pressure-sales also reminds me of a sound-bite from a salesman who said, in so many words, that the reason for his success was not so much in being able to identify likely prospects as it was identifying unlikely ones so that he could avoid wasting time trying to sell them - which is exactly opposite to the notion of compelling longer engagement to convert a person who is uninterested in buying ... and which makes much better sense.

Thursday, August 9, 2012

Social Media Marketing for Business

I've slogged through another offering on the topic of social media, Brown's Social Media Marketing for Business - and I've come to the conclusion that one of the main reasons that commercial organizations don't understand social media is that the people who offer them advice on how to leverage it don't understand it either. But rather than cataloging the various issues, it's likely more useful to focus on what's likely the most valuable bit of information the book offers: people socialized before social media existed.

That's one of the greatest fallacies offered by social media, or anything slapped with a "new" label, is that it causes people to behave in ways that they previously did not, or effected a significant change in existing behavior. The advances that catch on satisfy needs that already exist, or facilitate actions that are already taking place. The advances that require people to change their behaviors seldom gather much steam.

You can argue that technology encourages people to take action by making things easier to do. Because we have airplanes, more people visit foreign countries. They had the ability to do so before, but it was too expensive or inconvenient to bother. Perhaps that was not entirely a bad thing, as crossing an ocean on a steamship gave passengers a bit of time to learn the language and culture of the place they would be visiting, and the expense kept the more embarrassing members of society from giving the rest a bad reputation overseas.

But I digress - and to make hay of the digression, etiquette is often lost as a consequence of technological gain. Those who see social media as a "new" set of behaviors do not recognize that the old rules apply: discretion and consideration are cast aside because they are "old" and have no place in the new way of things. Or so it is assumed by those who venture into the "new" world of social media and, apparently, by those who offer them advice as to how to behave.

Most people recognize that handing out business cards at a social event, bringing a bullhorn to a public park to hawk your wares, interrupting a conversation among people you barely know to tell them about the things you will do for them if they give you some money, and other such behaviors are entirely inappropriate. But these same things are advocated in social media because it is presumed to be different and new and the old rules don't apply.

And it's a bit ironic that in every book about social media, there's at least one chapter and sometimes several about what to do if people don't like you, don't want to be your friend, and warn other people about the things that you've done to offend them, intrude upon them, and take advantage of them. Meanwhile, every other chapter in the book offers advice that will almost certainly lead you to offend, intrude upon, and take advantage of people.

If I didn't know better, I'd be led to believe that the point of these books is to convince firms to do things that will give them a bad reputation so that they will hire the author as a consultant to help them fix the problems that following his advice has created. Sounds like a pretty good racket.

Sunday, August 5, 2012

Time: The Real Price of Things

This meditation is likely to be abstract, philosophic, and a bit weird - but I think I may be onto something that would render a more dependable and accurate assessment of the motivation of buyers and sellers in the marketplace: the substitution of time for money in our consideration of various factors.

In commercial considerations, money is the standard of measurement: every thing and every activity is reduced to a monetary value, entered into the accounting ledgers, and presumed to explain everything perfectly. Except it doesn't. Money is an abstract concept, and "a dollar" represents different things to different people on both the supply and demand side, across different locations, and across different times. It really is quite sloppy and leads to many misconceptions, contradictions, and paradoxes.

Instead, translate money into time. A thing costs a certain amount of money because a certain amount of labor goes into its fabrication and provisioning. Even when a producer buys a physical component to add to his product (flour), the supplier's cost of that component deals with his own labor costs (the labor to raise and harvest wheat, grind it to powder, package and deliver it), and any materials that supplier uses are representations of the labor costs of his own suppliers.

Perhaps it's easier to understand from the consumer's side: the money that a consumer uses to purchase items he wants and needs is gained by the time he has spent at his own work as a laborer. If a person earns $10 an hour, a $5 purchase represents 30 minutes of his time; if a person earns $30 an hour, it represents 5 minutes of his time. The money-price is the same, but the amount of time the money represents is different to each of those customers.

It is not that people with a lot of money spend it less discriminately or have different needs - its that the money-price represents a smaller amount of time. In that sense, the $30/hour worker considers a $5 item with the same lack of discretion that a $10/hour worker would regard an item that costs 83 cents. The price, in terms of time, is paltry.

This is likely where the convenience of obtaining an item enters into consideration - regardless of what they earn on the job, both individuals might spend an hour minutes to get to a store, buy an item, and return home. This levels the field a bit, because when convenience and cost are combined, the $10 worker must invest 90 minutes and the $30 worker must invest 65 minutes to obtain it (a difference of 72% is still significant, though less than the 300% difference when money-price is considered alone).

It also levels out differences between markets: an American worker who earns $10 an hour and pays $5 for a meal is spending more money, but the same amount of time as a third-world laborer who earns 50 cents and hour and pays 25 cents for the same meal in his locale. In that light, the histrionic objections to low wages in developing nations is entirely unwarranted.

The difficulty in chronitizing rather than monetizing costs is in the disparity in wages of the buyers. Our sense of equality and fairness is largely satisfied when all customers pay the same money price, regardless of what they earn - but again upset when we recognize that the same money price represents highly disproportionate time prices for different consumers.

It's also highly unlikely, given our cultural fixation on money, that accounting systems can be converted to a chronitized method of measurement. We really don't care that we earned a "profit" of ten minutes on the sale of an item, but want to know how much money we have made.

It does become significant in terms of personal finance: where a person is considering their budget and the price of things in terms of money rather than time. The explanation of why people with a lot of money buy more things and pay higher prices seems more logical when you recognize that they might be spending the same amount of time to buy a "luxury" version of an item that less wealthy individuals purchase an "economy" version.

It is not that having more money makes them regard the money itself as less valuable - it's that it takes them less time to earn more money. And when you consider time given rather than money, it works out that that the $30/hour worker exchanges an equal amount of his time (two hours) for a $60 shirt as the $10/hour worker exchanges for a $20 shirt.

This makes the consideration of price, in the retail sense, much less subject to seemingly unknown factors - but it does make the mathematics a great deal more complicated when price expressed in terms of time fluctuates according to the income and financial resources of each individual customer.

Don't mistake this for a revisionist consideration of pricing: it would be ludicrous for a retailer to ask each customer how much they earn in order to set a money-price for an item to be equal in terms of time for the individual shopper. But it would be (and is) quite natural for a consumer to consider what he spends as a percentage of his total income and select a retailer or an item that offers a price that represents roughly the same proportion of time.

That is, the $10/hour worker who seeks to spend 25% of his income on rent will seek an apartment that lets for $400/month whereas the $30/hour worker, seeking to spend the same 25%, seeks one that lets for $1,200/month. The same for the vehicle they drive, the clothing they wear, the food they eat, and any product or service they consume.

When retailers seek to supply a given market, they seek to satisfy a given price point to accommodate the capacity of a given income level. Each product is tailored to the purchasing capacity of a given income bracket - so that in aggregate, sellers provide range of choices to suit a range of incomes, resulting from a range of wages. That is, when a retailer decides to stock $20 shirts and $60 shirts to accommodate the price sensitivity of different shoppers, what he is really doing is providing each the ability to choose an item that represents an amount of time that is proportional to their income.

To focus only on money prices is to ignore a necessary relationship between money and time that has a significant impact on consumer behavior in terms of price sensitivity. Were the consideration more explicit, it would likely help clarify and add more certainty.

As such, a retailer who is seeking to price his merchandise in a given area has to consider the price sensitivity of customers in an area, and that is difficult to do based on the household income of customers in an area. If you translate cost into time, and determine that customers are willing to give about 20 minutes of their own labor in order to purchase a given item, then determining what price to charge can be done by considering their income in terms of time: if the ZIP code areas that a merchant wishes to serve though a given store average out to $15.87 per hour, then the proper price for an item that represents 20 minutes labor would be $5.29

My thoughts on this matter are beginning to unravel - too much at once to coordinate it all - and I likely need to break off typing and do some thinking to reorganize and reconsider them. But I have the sense I'm onto something here, and that chronitization can be useful in untangling some of the problems where monetization obscures the real cost of things.

Wednesday, August 1, 2012

Mobile Computing: Unsafe at Any Speed

Sometimes, it takes a lawsuit to get industries to do the right thing - and for mobile computing, I have the sense it's overdue. Given the NTSA statistics on accidents by distracted drivers that result in injury (1,200 per day) or fatality (15 per day), it's only a matter of time before a victim or survivor seeks to collect from the device or software manufacturer ... and wins.

In most instances, news of a case in which an object is blamed for the willful act of a person is at least mildly offensive, as I generally maintain the perspective that it's the person who did something, rather than whatever object he used to do it, that is ultimately responsible. But this conclusion can't be taken as a universal: there are instances in which a product that is used exactly as intended by the manufacturer causes harm, or in which a manufacturer encouraged or did too little to discourage irresponsible use. These instances tend to be rare.

However, all it takes is for the sympathy of the voting public to align with a person who did something irresponsible, and seek instead to blame instead the object used in the irresponsible act and the legal system falls in line. Periodically, there's a high-profile case in which a person hoist by their own petard wins a lawsuit.

For some industries, it's quite common: alcohol companies are sued by the people whose family members were killed by drunk drivers, handgun companies are sued by the survivors of accidental shooting deaths, tobacco companies are sued by the survivors of people who died of cancer. These specific industries are at the far extreme, but the result is a costly nuisance for some firms and a crippling blow to others.

Public opinion still seems to maintain that a person who chooses to use a mobile device while driving is held responsible for that choice, and the hardware and software producers have not become the target. But it's just a matter of time until an incident arises involving a person who has certain qualities that make them immune to blame (a popular entertainer, an attractive young mother, etc.) and the sights will shift to the object rather than the actor.

Manufacturers can use the "we didn't intend" defense for a time, but my sense is that it will wear thin quickly. Mobile computing is, by its very name, intended to be used while a person is in motion, and some applications are clearly intended to be used while a person is operating a vehicle.

Device manufacturers can make it much worse for themselves: they can offer an accessory that affixes their device to the steering wheel or dashboard so it may be used while driving or use video or print advertising that depicts people using their devices while behind the wheel or include statements about their devices being easy-to-use while driving. I wouldn't be surprised if they have not already done so.

Software producers also are culpable when they develop applications specifically for the mobile platform that are designed to require the user's complete attention while driving, or are likewise depicted as being something that should be used while "on the way" to a destination. In considering the ratio of blame to assign for poor design, software developers are far more culpable for their applications than are the manufacturers on whose devices those applications are used.

I'm also assuming that the problem will be limited to using mobile computing while driving an automobile, but mobile computing is unsafe at any speed. It's become a constant nuisance in pedestrian areas to have to cope with people who are walking recklessly - stutter-stepping, changing direction without the typical nonverbal cues, coming to a dead stop in a moving crowd, or standing still in a high-traffic area. And while a pedestrian collision at walking speed typically does little damage (unless you ram into an elderly or handicapped person or bump someone off a train platform), there's still a case to be made, and won, on this basis - though I expect an automobile collision will lead the way.

As with many potential problems, I don't expect many firms will take a proactive stance until someone is injured or killed ... though to return to the statistics at the top of this piece, people are already being injured and killed regularly. So instead, I have to say that it will take a multi-million-dollar lawsuit and widespread public outrage for them to consider doing what they should have been doing all along: to design mobile applications to be used while a person is mobile, requiring only intermittent attention over a short period of time, perhaps offering a notice or warning at the beginning of any task that will require intense focus. Even at that, "intense focus" is entirely subjective, and the argument remains that, especially while driving, even a split-second distraction can result in tragedy.

The only truly effective solution is responsibility on the part of the consumer: to avoid any use of mobile devices while driving or walking. But it is exactly the nature of mobile computing to give people the ability to do things that they should refrain from doing, and encourage them if only by providing an affordance to do so. And it is this encouragement that creates a liability for the firms in our litigious society, and provides an opportunity for people who do not practice or accept personal responsibility to use the legal system to cash in.