Old rules no longer apply

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Kraft Heinz became the deal where Warrent Buffet’s old rules for investment came unstuck.

The FT reported on Monday this week:

Kraft Heinz shares dived nearly 30 per cent on Friday after it took a $15bn writedown, cut its dividend payout and disclosed it was the subject of a probe by the Securities and Exchange Commission into its accounting policies.

Buffet is the Western world’s most admired investor. He is admired because of the largely unbroken success of his company Berkshire Hathaway; success founded on the disciplined application of his rules, the most important being to only bet on incumbent brands that have a “moat”, meaning that they were able to defend and grow their market position and to hold shares for a long time. He steered clear of innovators and tech firms – eventually buying Apple once it has clearly shed its disruptor status and established itself as an apparently immovable giant in the music and smartphone markets.

The success of his approach undermined the claims of gospel of The Innovator’s Dilemma. Some things did never change, the predictable Buffet wins said, you can’t go wrong with big brands that people love. And that was true, as they say, until it wasn’t.

Where CPG incumbents go, advertising holding groups follow

In the CB Insights newsletter the collapse of the Kraft Heinz share price was cited as an example of digital disruption’s effect of “gradually, then suddenly” downfalls of incumbents.

The FT’s John Gapper commented, “advertising  flavoured with history is no longer enough”, an analysis that can be applied to the big advertising holding groups as well.

The old rules no longer apply. Our mission is to write the new ones.

Excellent podcast on innovation

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Disruption is a word worn thin by overuse. “Verbal inflation”, Michael Raynor (a long-time collaborator of Clayton Christensen) calls the effect in this Andreessen Horowitz podcast where he talks about his work on disruption theory and how to apply it to planning and prediction (also covered in his book The Innovator’s Manifesto).

Podcast: a16z: Holy Non Sequiturs, Batman: What Disruption Theory Is … and Isn’t

  

Digital transformation is universal

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Following on from the quote about digital transformation from Russell Davies, here’s the Economist’s economics editor in his newspaper’s The World in 2015 supplement:

Virtually every firm in every industry is being shaken up by the digital revolution. No chief executive can ignore the onslaught of mobile computing, big data, artificial intelligence and the like. These new technologies offer the promise of huge efficiency gains, but also the threat of being walloped by some upstart from Silicon Valley.

Just in case there was any doubt…

He goes on to say that the financial crisis may have slowed the impact of digital, but that as the world economy picks up, so will the rate of disruption. It’s only just begun, people.

 

Music business in flux (still)

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When the web touches an industry it disrupts and then absorbs it, to paraphrase Kevin Kelly. One of the first it touched, disrupted and absorbed was the music industry, so it is interesting to return to it from time to time to find out how it has adapted.

A recent In Business podcast did just this.

  • Musicians are diversifying their activities, according to Moby. They need to know how to write, promote, score movies and build live followings to stand the best chance of success.
  • Brighton-and-Buenos Aires act Yossarian say that building an audience is no easier than before, but you can now look to global markets for your audience (and band mates).
  • Billy Bragg talked about how the direct relationship with fans means not relying on the music press as an intermediary, but even when you own the means of production it is still a struggle to make a living.
  • Thom Yorke was cited on his antipathy toward Spotify – painting it as a battle for the future of the music industry, the “last fart of a dying corpse”, I think he said.

All in all, not a lot I hadn’t heard before. But twenty years into the Great Disruption in that industry, the most useful insight for other industries – other than don’t sue your own customers – is that things have not settled down.

There’s optimism that there is a future for the music industry. Well, more that there are futures for the music industry – there is no consensus about what shape it will take. And the waves of disruption, like powerful aftershocks following the main seismic event of the web’s arrival, continue to be felt.

: : Bonus link: There’s more from the podcast in this BBC article

Back to PR and the future

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A week or so back, I was at the PRCA conference The Future of PR, as part of a panel discussing how agencies are changing.

Danny Whatmough had invited me to take part in a panel discussion following the presentation of a survey of PR agencies and clients.

Technically, I left the PR industry in 2006 when I joined Spannerworks and founded what would become a social media and content practice at iCrossing (after the latter bought the former). Now I’m working with the Brilliant Noise with team creating an integrated digital marketing model of which PR is an important element and I’m also a non-executive at Liberate Media, an online communications agency that is built around PR as a discipline. It feels like a completing circle – PR’s back on my mind.

The story I was telling myself about PR in 2006 when I left and she remains the same in 2013. Because of its management consultancy aspects, the fact that it sees itself as a management discipline as well as a marketing discipline and its expertise in earning attention through content and distribution networks PR can be a leader in the marketing mix.

One delegate said to me after the panel that the conversation felt similar to the one the industry had been having since 2008. It was characterised by questions about how PR could grow and self-doubt and criticism of its failure to claim bigger budgets and a more central role in the marketing mix. How can PR grow and evolve? How does it need to adapt to a world where social media can be as important as traditional media?

These are tough questions, but they may be the wrong questions for PR professionals and agencies to ask themselves.

There are two paths open to in-house and agency professionals alike. They can lead from a strategic point in the mix, or they can become an expert discipline in media relations and integrate tightly with the other aspects of the marketing mix i.e. SEO content UX social media etc. The key to success will not be competing with other elements of the earned media mix, but collaborating with them.

It becomes increasingly unhelpful to ask which of marketing-communications disciplines has primacy as they each depend on one another fro success in earning the attention of customers and being part of an integrated approach.

In the survey which Danny Whatmough of Ketchum presented there was a fascinating question about whether the term “PR agency will still exist in 5-10 years time. Almost 40% of respondents felt that there would not be.

There was also a telling quote from one client: “The [agency] offer needs to be across communications and engagement and all its disciplines – not just narrow PR.”

I felt it was important to point out to the audience that there was also no certainty that there would be any such thing as an SEO agency, a digital agency, or what state of media agencies would be in, as their business becomes automated, assimilated into Google (and other “stacks”) and large clients increasingly look building media buying capabilities in house.

When there are pitches these days PR agencies find themselves up against creative, digital, media and any number of other disciplines. As Alison Jeremy, director of communications at the NSPCC said – “I’m just interested in who has the best idea.”

The upshot is that all of the communications and marketing mix are up for grabs – as is all of business. The disruption of the web is not localised to something that we call PR – it is disrupting every aspect of business commerce and culture.

The stakes that we are playing for are as large as we want them to be. If we talk about innovation in an incremental way – slightly better PR, slightly better advertising, slightly better promotions – then will we’re all missing the real opportunity. The opportunity is to reinvent how organisations talk to the customers.

That may not involve any think all PR or marketing or SEO or advertising in ten years time. Of course it may well do, but the power balances the way that organisations think about this process of engaging with the customers will be radically different.

Is the future bright for PR? The future for the people and the organisations that service the public relations needs of clients today are as bright as they want them to be. Danger and opportunity – you get to choose how you see the current great disruption.

Networks Thinking: Adapting for Complexity

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Networks Thinking: Adapting for Complexity – Antony Mayfield

View more presentations from Antony Mayfield.

These are the notes, slides and suggested further reading for the lecture I’m giving today at Warwick Business School as part of its Complexity, Management & Network Thinking business module entitled Networks Thinking: Adapting for Complexity.

Introduction

Networks became a focus for me about seven years ago, as I began to look at the effect that social networks and the web were having on the industries I was working in, marketing communications and media. The more I learned about networks, the more it seemed to me that they were incredibly important in re-thinking how our business worked – the business of attracting attention, essentially – and that they were important both as the cause and context of disruption we were experiencing (and would continue to experience for some years to come).

When it came to media and marketing, channels were being replaced (displaced, disrupted) by networks as the dominant model. The implications were profound for industries that had been built on building big channels, for big audiences with big advertisements and big budgets attached.

At iCrossing, the digital agency which gave me a home and let me develop a social media and content practice, we started re-designing the whole process of brand communications, from research through to measurement, with three principles

  1. Understand your networks
  2. Be useful to your networks
  3. Be present in your networks

It became clear very quickly, that once you started to adapt your customer communications to the new reality of networks, you started to look at the rest of the business very differently and that the impact of networks, the need to adapt to the age of networks, was going to be felt throughout the organisation. Networks were disrupting the existing media and communications models so much that soon politics, commerce, culture and society as a whole would begin to feel its effects.

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Networks are a model for managing complexity

Some of the topics and themes addressed in the talk include…

  • Embracing complexity
  • Scales from individual, to team, to division to team…
  • Understand networks (& then your networks)
  • Develop organisational and personal networks literacy
  • Networks thinking: design for networks
  • Beginning to lay down principles
  • As well as understanding… your networks… principles…
  • Presence first, process second: more important to be in play and prepared…

Sources cited

Recommended reading (some already cited as sources):

Recommended blogs

 

 

 

Communities of purpose

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I like David Cushman’s take on the way that the web disrupts everything it touches.

My main focus has been in thinking about the shift from channels to networks in media. Reading David reminds me that it is everything that looks like a chain, especially value chains, that are things that networks will rip apart.

Then, as he should, he makes it personal:

If you can find part – a kernel – a piece that is truly yours and which you truly believe in, congratulations, that is something of great valuable, which others will find value in and join you in building on. (image courtesy cayusa)

That is your contribution to the new creation webs which will emerge as communities of purpose become the business units of the 21st century.

Communities of purpose. Yes – that’s something to remember. And those purposes might last a few hours or a few decades. That purpose might be the marketer’s fantasy of grouping around the purpose of buying a product, celebrating a scrap of content, or a politician’s nightmare of an organised poplace come to dictate terms on a piece of legislation.