It’s “Hard” Being Ed McMahon -or- The Dangers of Outsourcing

I absolutely love the Wall Street Journal online edition. The WSJ is one of the most well-written newspapers in the business, and has provided endless fodder for conversations with everyone from executives to politicians to mechanics. This morning however, it provided some conversational fodder of an unintended sort.

I was reading an article about Ed McMahon, the TV personality having his Beverly Hills home enter foreclosure. Finishing the article, I was about to browse a different section of the paper when I noticed an odd entry in the “Sponsored Links” section:

While assuredly the WSJ did not intentionally place the ad for, err, “synthetic hardening products” in this section, it shows the danger of outsourcing critical competencies. I’m not a rabid anti-outsourcing person, and have advised plenty of clients to investigate the option, but would never suggest casually handing over something that is critical to a company’s brand reputation.

Newspapers make the preponderance of their money on advertising, and to some extent, the advertisements reflect the values and audience of the paper to its readers. While the WSJ likely gets a few pennies for each person that clicks the aforementioned “Sponsored Link,” were I a bit more easily offended I might have a strong negative reaction to the Journal that would take far more than a few cents to repair.

Let’s investigate that equation again, and let it sink in for a moment before you drop a core process into someone else’s lap: a few pennies for a “male enhancement” link versus irreparable damage to a 100 year old brand.

 

Has it sunk in? Great. Now a few links from our sponsor:
(Just Kidding)

Return of the Pod People

Well I’ve joined the ranks of the pod people, and made my podcasting debut speaking with Tom Parish of Enterpriseleadership.org about IT strategy, the future of the CIO role, and how IT shops can transition to the “Breakthrough IT” model. I look forward to being enjoyed on subways, during rush hour and in gyms everywhere.

Unfortunately the interviewer sounds crystal clear, and I sound like I am calling from East Berlin, circa 1983.

Enjoy the show!

Un-Targeted Marketing

Technology has revolutionized many aspects of the modern corporation, and as of late, perhaps none as dramatically as marketing. From providing reams of data on customers, response rates and infinitely detailed market segmentation, to engendering an ability to contact millions of people in seconds, IT has forever changed the way companies engage their customers.

While the vast majority of technical innovations in the marketing arena have been positive, the ease at which we can now reach millions of customers has an insidious side: the effortlessness at which a company can become exposed to the tyranny of the minority. As rapid feedback cycles allow companies to react to customer whims in moments, causing speed at reacting to feedback to take a back seat to determining which customers to actually react to. It is all too easy to allow a few loud voices to shift an otherwise successful marketing endeavor, or irrevocably change the course of a company for the worst.

Similarly, market segments that were difficult to reach can now be assaulted on multiple digital fronts. However, the ease of access to a formerly untapped market does not necessarily make that market viable. Shifting your focus away from core customers to attract an additional 1% market share makes no sense if that change in focus causes a dramatic loss from your core contingent. Grandma may now be on the web, but that doesn’t mean you should be wasting your efforts trying to sell her the latest sports car.

Like all things high tech, it is easy to employ a tool for no other reason than that it is available. Whether you are targeting your average citizen or a massive multinational conglomerate, investigate your marketing decisions on their own merits, without consideration for the tool or technology that makes the effort possible. Just because you can wage a massive campaign on a formerly ignored target group does not mean that is where you should be focusing your efforts.

The Keys to the Kingdom

While far from a bona-fide conspiracy theorist, I have always provided corporations with the minimal amount of personal information possible to complete a transaction due to a minor fear of nefarious intentions. Does Crest really need to know my income level, favorite activities and age when asking how I like their toothpaste? Yesterday however, I did something uncharacteristic: I provided a travel company with a list of every city I’ve visited in the last ten or so years (at least that I could remember).

I’ve been experimenting with the Facebook service, and while the jury is still out, one interesting feature is a travel map that shows people in your network where you have been, and notes places that you can provide information on. I’ve been to Las Vegas several times so a friend can discover that information, and ask me for lodging tips, while I can find out the best places to visit near Mumbai from someone in my network. Providing information like this brings up two questions central to the burgeoning “social networking” scene: What value do you provide that would entice customers to provide this data, and how do you leverage it once you have acquired it?

Travel Map

The map, provided by TripAdvisor.com and pictured above provides for an immediate “cool factor,” delivering the digital equivalent of the physical map riddled with pushpins, without leaving drywall that looks like Swiss cheese when one wants to move the map. There are literally thousands of other companies clamoring for similarly detailed information, yet they don’t think about the value side of the equation. Demanding that I fill out a six page form to request a marketing brochure, or gain access to detailed product information is an intrusive hassle, but a compelling offering like the travel map makes disclosure of personal information far more palatable.

What will be interesting is noting how TripAdvisor uses the data they now have logged in some dark corner of their servers. A traditional “shotgun” marketing approach would likely be ineffective, while tailoring campaigns to every customer’s unique travel history will take far more planning. With the proverbial keys to the kingdom bestowed upon more and more companies it will be interesting to watch as internet marketing handles this abundance of detailed data. I see the future of social network-driven marketing being more about mass customization than target identification. The marketers that can customize offerings that are compelling and appealing based on what they know about their customers will rule the day, and traditional “generic” offerings will look black and white in a world of color.

Chief Who??!?

I’m going to let you in on a little-know real estate investment tip. Forget California, New York or the sunny shores of the Caribbean, the real money to be made is in C-suite real estate. For years C-suites were stable, with roomy offices and square footage to spare. There were the big three: the CEO, CFO and COO. As IT went from an esoteric handful of engineers to an equally esoteric swarm of techies, along came the CIO to oversee them.

Things were going fine, and then marketing wanted their corner office and added the CMO (Chief Marketing Officer) to the mix. Worried about its recently won turf and not to be outdone, IT added the CTO (Chief Technical Officer). As the C-suite captains fought over closet space, the world suddenly became a more dangerous place, and the CRO (Chief Risk Officer), CSO (Chief Security Officer) and CCO (Chief Compliance Officer) muscled their way into the C-suite. With things growing disorderly, the CPO (Chief Process Officer) arrived on the scene, developing processes to ensure the CFO’s adding machines were not getting in the way of the CRO’s 18-volume risk management plan.

With no end to the insanity in sight, the latest and perhaps strangest addition to the C-suite is the CBO (Chief Blogging Officer). Just when I thought blogging had finally made its way through the hype cycle, the CBO arrives on the scene. Make no mistake, there are loads of people blogging and it is an effective communication medium that companies can use to speak with their employees and customers. Despite this, elevating blogging to the C-suite is similar to having a Chief Telephone Officer, or Chief Paper Officer when your problem is ineffective corporate communication.

The key to blogging, like any other media, is the message rather than the media itself. Corporate blogs that deliver a legal-sanitized message once every six weeks are as ineffective as press releases whose meaning is shrouded in corporate-speak and legalese. The solution to better communication internally and externally is making effective messaging a company priority, embedded at all levels of the corporation, rather than yet another CdjO (Chief du jour Officer)!

Monetizing Social Networking

There is frequent talk recently of “monetizing” social networking and so-called Web 2.0 technologies like Facebook, Twitter et al. Essentially, the term monetizing means extracting a profit from something. While companies like Facebook have a market capitalization larger than that of Ford Motor Company, they are unable to turn a profit. Talking about making a profit is apparently oh-so Web -1.0, and using a euphuism like “monetizing” makes it sound like these companies are not actually bleeding cash like a drunken pirate.

One can’t help but look at social networking and the massive investments that have been made, and wonder where the money is going to come from. Many of the social networking sites have had phenomenal success in terms of gathering a huge user base, but aside from limited advertising revenue, few have seen the cash windfalls that have long been predicted. Many of these predictions rely on the law of big numbers. Basically this law assumes that given a massive number of people using your service, if just a tiny percentage spends a few bucks with you, you’ve hit pay dirt. Recall many of the business plans of the late 1990s that started with an incomprehensively large number of internet users, followed by a statement like “If only 0.00001% of all internet users…” The fatal flaw of this law is that people are not random bumper cars, which float around the internet dropping a few bucks on whatever they happen to bump into. A product or service with no perceived value is not going to make money no matter how many people bump into it.

The best analogy I can draw is to the massive investment in internet infrastructure that occurred in the 90’s. The logic was that all this traffic (a really big number) had to go over someone’s wires, so if you invested in the folks that owned the wires, you would need an armored car to haul your investment returns around. The fatal flaw in this logic was that the value of the internet was not in the wires and boxes connecting everything together, rather it was in the content and services that were delivered over those wires. Consumers found value in the Googles and Yahoos, not in the MCIs or Verios that own the copper and fiber.

Similarly, the value in Facebook or Myspace does not lie in the portal itself, rather it’s the people using the service and the content they generate. While these companies may contend that they are now unstoppable due to their sheer number of users, one only has to look at eBay, whose frequent price increases have alienated its core users and driven them to replacement services. While there is money to be made in social networking, it’s likely not going to be in the “pipes,” rather it will be found by capitalizing on the content generated by the service’s users.

The End of Blogging

What better way to begin a new blog than by predicting the end of blogging. Blogging is a good metaphor for much of what I am going to be covering here, perhaps what one would call “supernova technology.” It explodes on the scene with much sound and fury, only to collapse unto itself until a new, less remarkable entity appears.

The first universally experienced supernova technology was the web itself. Recall for a moment the heady days of the 1990s, where the web was a theurgic entity and everything in it was “cool,” even that grey site with the Times New Roman font your cousin the computer geek put together. Venture capitalists tripped over each other to fund E-everything, from sock puppet mascots to websites that would “revolutionize” the mundane: from grocery shopping to corporate purchasing.

These days the web is quite a bit more rational. Business ideas that don’t make sense in the real world are no longer entertained due solely to a web presence, and designers and graphic artists, the people that were successful in print media, rule the web rather than the HTML-savvy geek.

Blogging has followed a similar path. The banal that was once magical because it was on a blog is now ignored as more prosaic drivel. CEO blogs and other corporate blogs that promised better employee relations due to the “intimacy of blogging” have quietly closed down after legal censored and cleansed the blog to the point that it was just another piece of noncommittal garbage laced with meaningless corporate jargon.

Blogs are a medium like any other. Content and quality rule the day, versus pictures of one’s cat and some so-called Web 2.0 jargon. I hope to help you separate the helpful from the hype, and capitalize on the former while avoiding costly forays chasing the later.

Welcome to IT BS Watch!