socialistic anarchists - new business models and the death of traditional advertising

Media owners must find ways to attract and retain talent and create stand-alone digital divisions in order to compete in the era of internet blogs, open access and online communities, Sir Martin Sorrell, the chief executive of WPP, has warned. The head of the UK advertising group also acknowledged the difficulty of competing against websites that destroyed business models. "How do you deal with socialistic anarchists?”

Writes Emiko Terazono of the FT

"The internet is the most socialistic force you've ever seen," he added, noting that the response from some media groups had been to offer their content for free in traditional and digital form."They have decided - 'if I don't eat my children, somebody else will'," he told executives from UK regional newspapers attending an industry conference, adding that he disapproved of giving away content for free. "You should charge for it if the consumer values the content,"

Hmmm – Yes perhaps it’s a bummer that business models have been twisted out of shape, and Sir Martin does have an important to point to make. But lets think a bit about this…

Steve Jobs said, I would rather be a pirate than be in the navy, metaphorically these socialistic anarchists as Sorrell calls them are the pirates of the 21st Century. But that does not mean that they live without any rules or boundaries, its just that are different. They are not top down, and they are not about command and control. Have a read of Adam Morgan’s book The Pirate Inside to better understand the point.

Today we live in a world of information empowerment. I would think that businesses have to start by rethinking how they create value, who creates it and how that value is delivered. It is not a straightforward transaction anymore. Business models need to be readdressed. I think advertising becomes the content and content becomes the advertising. Traditional notions of what advertising is and what advertising does, again has to be rethought. And it is not more banner ads that is for sure.

Curiously though, I would have though Sir Martin would have been having a word with his own advertising network that struggles to come to terms with this new super-distributed socio-economy before giving the poor regional newspapers the benefit of his wisdom. Where existing infrastructures and existing creative departments seem still, myopically concentrated on the 60-second spot. And where in the UK at least, creative departments seem only interested in doing ads that their mates are going to applaud down the Dog and Duck.

Today advertising in the UK seems stuck somewhere circa 1986. And that is not me being polemic. That view comes from inside the industry itself.

Question: Are these organisations then any better equipped than the poor old regional newspapers to solve the business and marketing challenges of today?

As a consequence we have to ask, how do organisations structure themselves today and, in the future? And, what talent is required in those organisations?

I would suggest it’s not more of the same. Today, as CEO of SMLXL I find myself for example working with mobile specialists, programmers, 3–Dimensional designers, psychologists, digital specialists, writers, moving image designers, economic modellers, sociologists, film makers. ALL collectively working towards a specific goal. What unites us?
1). No ego
2). A shared belief that nobody is as clever as everybody
3). All our energies, and intellects concentrated on achieving the specific task
4). An interest in solving the business problem not feeding our format machines

SMLXL believes that what client’s need in the first place is good advice not set piece format solutions, being shoe-horned into an asymmetric world.

Therefore, marketing needs to start by thinking – what is the best user experience? And then work back from there. New customer propositions and versatile teams built to solve those problems is the order of the day.

Therefore
Advertising becomes the content, content becomes the advertising.
Advertising becomes the conversation, and the conversation becomes the advertising.

As Jeff Jarvis of buzzmachine wrote, “conversation is the kingdom”, and, companies will have better control if they improve the dialogue.

This is what I would describe as the difference between interruptive marketing communications and engagement marketing communications.

For example news is the start of the discussion not the end.

But lets get back to the newspapers. Life can be local - but that is why local newspapers need to think about their role in local communities and then implement completely new and innovative ways to attract readers and advertisers.

Digital strategies have got to be at the very heart of a newspapers business, not an appendage. Those strategies have got to be cross-platform and they have to deliver both added-value for the reader and for the advertiser.

There is an opportunity here to really add value, not dilute it. And the danger is very real.

The Guardian article says

here is a savagery and uniformity about the recent slide which, combined with the perceived threat of the internet, is ringing alarm bells. This time, weekly titles, which have seen sales increase for a number of years, also recorded a fall of about 4.5% across the board - a development that is both troubling and perplexing executives.

The City, which is still trying to work out what the aborted auction of Northcliffe Newspapers means for the future of the regional business, is jittery about the downward trend. "Two or three years ago, you would say it was just about long-term decline because of demographic changes," says Richard Hitchcock, a media analyst at Numis Securities. "But now people are paying closer attention to it because of the internet.

As Peter Williams Finance Director for the Daily Mail and General Trust says...

It's very, very clear what we run are not local newspapers but local media businesses. Our business is to generate vehicles for readers to get information and advertisers to get their message across.

Lets return to Peter Williams’ reference to the internet. The internet is not a channel, it is in fact a whole new ecology. Lets take iPTV for example, which will start to attract communities of interest, and those communities of interest will form new socio-economic models. Value is created in new ways, it will be co-created around conversations and content. It will become a marketplace for trade and community as our once thriving market towns were.

But that requires another post to think about that one

It is fair to say that Darwinism has rudely arrived in our media and business ecologies for all concerned

Comments

[Stuart Wood]

Business Values?

I completely agree with your comments Alan but isn't it incumbent upon businesses to develop their individual and respective value systems too which in turn will add value?

The historically and widely accepted primary purpose of business is to increase its wealth thus achieving a profit and increasing shareholder value. But how does this narrow view best serve humanity and the more socialistic medium of the internet?

What this unitary ‘profits are everything’ approach does not however conceive is the wider implications of the firm operating within society, of which it is inextricably linked, and the affect that it may, directly and indirectly, have on the people and various other constituents, that make up that society.

Milton Friedman, the Noble Prize winning economist, vigorously protested against the notion of corporations taking on any wider social responsibilities. Moral responsibility, according to Friedman, is exclusive to human beings and therefore not the concern or duty of the firm. Furthermore, management should act solely in the interests of the firm’s shareholders and certainly not become involved in social issues, which he contended were the sole responsibility of government. However, if moral responsibility is exclusive to human beings, and not to the firm, then is Friedman suggesting that employees of such firms need to leave some of their humanity, and certainly their morality, at home?

How then, can the consumers engage and trust these inanimate, morally vacant firms, and would the consumer want to engage with this type or organisation if it knew about it’s ‘character’ or lack of character - surely not. Furthermore, would other constituents, in contact with the firm such as suppliers and employees, and local communities enter into a relationship with such an organisation if they too were aware of this lack of humanity within the firm? Maybe customers, potential and existing, would think differently if they knew the morally indefensible lengths that some companies will go to in order to achieve a profit.

Lee Iacocca is a prime example of a manager that went too far. He is a widely known as a morally vacant, single-minded, profits driven manager who went to extremes to achieve profits. Iacocca was the manager in charge of the infamous Ford Pinto over twenty years ago when it was going head-to-head in competition against the VW Beetle. There was a problem with the Pinto’s fuel tank that had a propensity to explode under impact. The executives at Ford, led by Iacocca, were fully aware that the Pinto was dangerous under certain conditions and they carried out a review of what was required to make the car safe. The findings would have certainly saved the lives of Ford’s customers.

However, the cost of improving the quality of the Ford Pinto fuel tank was $5 per vehicle and it was deemed too expensive for the cars to be recalled. The company actually carried out a cost-benefit-analysis of recalling the Pinto against the predicted number of deaths per annum that may be attributed to the weakness in the Pinto’s fuel tank and thus the amount of damages the company would have to pay out to the families of the deceased Ford customers. It was cheaper to payout to the families of the deceased than to improve the safety of the fuel tank and thus the improvements were shelved.

Hundreds of people lost their lives because of this singleminded pursuit of profit at any cost...so much for customer service!

Surely this case should have served as warning to all unitary focused, profits are everything, whatever it takes, morally vacant businesses and also motivate government to legislate. However, this has not proved to be the case with many different ethically vacant incidences over the past twenty years involving companies such as McDonalds, Enron, WorldCom, Shell, Nike and others.

There are however a few shining lights out there that have developed their businesses by steadily increasing sales and market share, without selling their souls, or behaving in an illegal or morally indefensible manner. Cafédirect, Ecover, The Body Shop, Ben and Jerry’s Ice Cream, Charles Schwab, The People Tree are testament to this fact. Recently, even big business has caught on to the idea that these “high value” ethical brands may have the potential to develop a more meaningful and human relationship with the customer. So much so that The Body Shop (L’Oreal) and Ben and Jerry’s (Unilever) have been bought out by multinationals.

Note that the primary goal of each of these "high values" companies was not to enrich shareholders; it was in fact to enrich and benefit the actual suppliers, customers, employees, shareholders and the wider society thus developing real long-term relationships that benefit all.

Businesses and their managers should be responsible to their shareholders but they should never lose sight of their responsibilities to their employees, suppliers, customers, the communities and environments in which they operate and society in general. Enlightened shareholder value, which is striking a balance between the competing interests of the different stakeholders in order to benefit the shareholders in the long run is the policy advocated here. It makes perfect business sense. The Iacocca, purely profit driven focus on shareholder value, above the lives of his own customers, is utterly reprehensible.

Good business; embracing values, ethics and fairness, as Cafédirect, Ecover, People Tree and others have illustrated, can make perfect “high value” business sense. This is an entirely more fair, intelligent and human way of doing business for all involved and enables this deeper engagement between brands and their customers online.

[alan moore]

Dear Stuart,

Thank you for such a considered response. And my apologies for not responding sooner. A family death I am afraid. So I was not ignoring you!

I think to add to your thoughts, that a clothing company called Howies is worth looking at. Howies, use organic cotton, reuse the leftovers of cotton factories, pay an earth tax, talk to all their stakeholders and are driven by a core belief system.

People by into the beliefs of the brand and share with those beliefs

Also think about Toyota

Toyota employees embody a passionate culture: they submit over 60,000 ideas a year.
Toyota employees are employed for life.
They get ideas-based bonuses of anywhere from 500 to 160,000 Yen.
Their union models and ensures their retirement needs on their behalf.

Living in an industrialised world meant that scale was about, profits and products created by the masses for the masses benefitting the few financially.

Niche markets and value driven brands, do scale in the same way but the follow the trends of a post-industrial society whose values have changed to something more humanistic.

Thoughts

[Stuart Wood]

Hi Alan,

Sorry to hear about your recent loss.

I do completely agree with you and whilst I highlighted slightly more obvious "ethical businesses" as they are known, within their so called niche, I do believe that many many other corporations have in fact embraced ethics and value systems within their cultures.

I tend to believe that small businesses have deeply embedded value systems within their cultures as they tend to be run by the vision holder and therefore the energy, passion, and more importantly the sense of ownership of values are inherent in these sorts of companies.

They have a character and a human feel about them which I fear gets lost on floatation. Once a company gets floated on the stock market I think this is where it starts to lose its identity and values and direction for that matter as the founder and vision holder may no longer be the driving influential force - the shareholders are. I tend to be concerned about any organisation that has a unitary purpose i.e. increasing shareholder value. Or for that matter a fairtrade company that purely seeks to increase sales to their developing countries.

What I mean by this is to have a unitary purpose on any nature is dangerous to the business and to the constituents that make up that business. For example if a fairtrade company were to pursue pure sales targets, maybe they would lose their "fairness" to their employees or stakeholders in the process...

Toyota is an excellent example however of a large corporation that operates in the fiercest of industries but excels and I believe that their culture and the human relationships that they foster both internally and externally have a massive impact on their success. However, I also understand that whilst they used to have jobs for life, this is not the case anymore? Not sure if this has changed in recent times or not.

I will also look into Howies.

[alan moore]

All good points.

The question is for the legacy business built over the last 150 years or so is how do they survive?

They must adapt to do so, they have to reinvent themselves for the new millenia, which has different needs and as a consequence different values

Cheers

Alan

[groet]

dear sir/madame,

I have one question about the body shop and their take over by l'oreal. you said that this will benefit all stakeholders. however, their has been a lot of criticism about this take over such as l'oreal uses animal testet ingridients. this thus seem like betrayal for customers. my question therefore is, how can the body shop deal with this criticsm while still keeping a good reputation.

thanks in avance
groet

[karen millen sale]

"He was my North, my South, my East and West, My working week and my Sunday rest, My noon, my midnight, my talk, my song; I thought that love would last forever: I was wrong" - W.H. Auden