“It’s the people, stupid”

Advertising agencies don’t make widgets and they don’t have factories or manufacturing lines that create tangible goods; they are in the idea business. So it constantly amazes me how many of them don’t understand that their most valuable asset is – their people. Every agency’s success relies purely on the talent it has within its ranks and yet so few companies actually do meaningful things to retain and nurture talent.

David Ogilvy famously said, “If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.”  Sadly, so many companies today, and it’s not limited to ad agencies, seem content hiring and retaining small people. I understand that when times are tough there will be cost-cutting, and things like training programs and other employee perks will disappear but this is just the tip of the iceberg, and frankly, not the only things that companies should think about when trying to retain talent. These things can help in the short-term but do scant little to address the true nature of retention in the long-run. Don’t get me wrong, money is important but most companies believe that it is the only tool they have to motivate and recognize employee performance.

To me it starts with understanding a very simple formula:

“Happy Employees = Happy Clients.”

When your employees are happy, they are motivated. When they are motivated, they go above and beyond and it shows in both the quality of their ideas and their output. When the work shines it tends to resonate with customers, creates brand recognition and preference, which in turn leads to greater sales. When sales increase we have very happy clients…It truly is that simple! This is really the only way to achieve great results, and client satisfaction. Quite simple when you spell it out but extremely hard when it comes to actually getting management in most company to recognize it or have the courage to execute it.

The trouble begins with two important areas; both of which are misunderstood by many corporations. First, most companies today, believe that making clients happy involves giving their clients exactly what they ask for -  rather than helping clients understand what they really need. I am not talking about getting a clear brief from a client but about literally letting your clients dictate the idea, and much worse the execution. Following this path will ALWAYS lead to failure; without exception. It is simply a matter of time before you will lose the business. Think about it, if clients knew what they needed, leave alone how to articulate it to their customers, then agencies would not exist. It is like going to a brilliant lawyer and asking them to take your case, then insisting on writing the arguments, the opening and closing statements and doing everything short of standing up yourself in court. It defeats the purpose of hiring and paying someone for their particular experience and expertise.

The second problem is in the way companies approach talent retention. Granted these days it feels like most companies care little about their star performers, leave alone the average employee, but let’s for a moment imagine a company that does care and makes a genuine effort to create “happy employees.” The problems still lies in a flawed approach to providing this happiness. Most companies still believe that hard work should be rewarded by simply paying an employee more money. This is all well and good but retaining talent requires much more than dollars. It requires making sure employees are constantly challenged, that they are learning and growing everyday (and I don’t mean purely through workshops or training seminars). Additionally, it goes a log way to know that your company has your back, by standing behind their work and defending and fighting for it with clients. Also, it would really help if companies spent more time making sure that their people are not constantly doing busy work or re-works on every project – nothing kills morale faster.

If companies really want to retain and nurture great talent, then they need to think about creating a culture that promotes these behaviors in management; at every level of their organisation. They also need to hold management accountable and ensure that they are following through on these practices. It is these things that help contribute most to that most powerful and yet hardest to deliver tool a company has in its retention arsenal – employee motivation. Money cannot provide the same satisfaction that feeling appreciated for your efforts does or seeing the fruits of your labour perform in the marketplace.

Everybody’s Doing The Social Commotion…

The hype with social has become so big that a whole new industry of “social-experts” has appeared out of thin air. Just a few years ago these people did not exist or perhaps wore some other moniker when peddling their wares.

I am not saying there is no need to have a social strategy but merely that it is also important for to think about the relevance of these platforms for your product and business; think about the best way to engage your customers, based on who they are. This means that every company DOES NOT needs to have a social presence with a Facebook page, a Twitter account, a Pinterest board, or a blog. Maintaining a presence in social media is a full time job and doing it in a way that is meaningful to customers and valuable for your business – is a full team job. Few people realize that just setting them up and then posting or tweeting a few times is probably more damaging than not having it an account all. I routinely ask companies why they feel they need a Facebook page or Twitter account, and most say because everyone else has one. For me, a single person startup or small business should have many other priorities they need to be focused on before starting to worry about tweeting every few hours. And then there are also products and categories that really should not have a Facebook page – toilet papers and clogged drain cleaning brands come to mind as high on that list. Ultimately, it boils down to a little old fashioned common sense being utilized before rushing to sign up to the social bandwagon.

It takes time and work to build a solid social presence. Each new platform that you add means more work because it’s not as simple as sharing the same information across all your social pages. If you really want to build value for your business then you need to create value for your customers. This means first understanding the role of Twitter versus Facebook versus a blog and seeing how your customers are using and interacting with these platforms. Only then can you start to formulate a strategy to effectively make use of them for your needs. For example, Facebook can be an effective platform for building a community around your brand; by sharing information, starting discussions, soliciting ideas and requesting feedback on your products and/or services. It can be a great way to build loyalty through engagement and dialogue. Help to create long-term relationships with your customers and maybe turn them into evangelists; if done well. Twitter on the other hand is a great tool for more instant sharing. You can use it to announce new product launches, special flash sales and even to resolve customer complaints in real-time; as Dell and Southwest have done so effectively.

No matter which social platform(s) you decide to use there are a few things you have to be prepared to do; if you want to succeed. First and most importantly, get over yourself, your products and your services. I don’t care how great you think they are – it does not matter if you think so – it only matters if your customers do. Never use social media to blow your own horn; nothing is more off putting to an existing or prospective customer than a company telling them how brilliant they are. Second, never try to sell, sell, sell – you have sales people and channels for that. Social media is not a hit them on the head type selling tool. You can place ads for that. Find smarter and more subtle ways to offer value to your customers that will in turn lead to sales or generate word-of-mouth for your brand. Third, make sure that what you share will be of interest to your customers, beyond just your company stuff. This means not restricting yourself to tweets or posts that are always about your products and/or company. Take some leaps and broaden your horizons. Don’t be scared to follow interesting people, to be creative, human and inspirational. Share things that make you laugh and things that make people laugh about you. Share stories about your customers and even your competitors. All this helps make your brand and company come across as more secure and confident; and those are typically the kinds of brand that customers are attracted to and like to be associated with.

Finally, remember that you will need to grow a very thick skin. By putting yourself out there, and you will be if you do this well, be prepared for harsh criticism from customers and screw ups by employees (have an action plan to deal with them when they happen but don’t retreat). This is the price you have to pay to truly come across as real, in a world where very little can be controlled and preplanned. This will ultimately determine the difference between your social success and failure – how “real” or contrived your company comes across.

The Trouble with Monetizing Facebook

Aside from the fact that the CEO is a very young man who wears a hoody, I believe there are few other fundamental impediments to Facebook’s future success based on the very reasons that have made it so popular.

Think about what Facebook is at its most basic – a self-aggrandizement platform that is entirely built around feeding our obsession with me, me and me. From status updates about myself, to wall posts about things I like, to the latest gossip I want to share – it is nothing more than a one-way megaphone to the world; a modern day digital soap box for the one billion people who now use it.

I believe this has in large part been the reason for Facebook’s astounding success; it feeds into our most basic human desire to have our voice heard, in a completely unadulterated manner. Often while never having to listen or pay attention to other opinions. It is the modern day equivalent of “I post therefore I am,” as Descartes might have put it. It is as if the act of posting today guarantees the existence of self, for this socially driven over-sharing generation that has never known the world without the internet and Facebook.

Arguably, we are all better at talking than listening. We humans have always yearned to be heard, preferably without anyone offering an opposing argument or opinion. Well, there is no better place or platform to fulfill this need, than Facebook. However, this does not exactly make Facebook a great platform to get my attention as a marketer, or to try to sell me stuff when you think about it in this way. So it is not surprising to me that among the hundreds of people I know, who use Facebook regularly, not one person who has ever clicked on (other than accidentally) or bought something after seeing an advertisement on Facebook.

The other fundamental issue with Facebook and the notion of social commerce that it is trying to tap into is that people don’t buy simply based on what they see their friends or family buying. Also, not everyone wants to broadcast their every purchase, publicly. We may go see a movie that has been recommended by a good friend or perhaps have our interest piqued about one being discussed on Facebook but I know that I will never buy an i-Pad or a new car just because one (or many) of my friends bought one and advertised it on Facebook. Not to mention the fact that it would become incredibly tedious (and sometimes embarrassing) to see a continuous list of purchases made by my friend list – find me one person who enjoys seeing each and EVERY song being played by their friends…

The fact that Facebook has always been free for users also poses a challenge when it comes to monetizing any of their features or services. The New York Times is struggling to gain paid subscribers after being free for so many years. Once you set such a basic expectation with people it will be viewed as a betrayal to try and charge for something they have come to consider a right. Facebook just started to offer the ability to pay to “promote” posts, this after a failed experiment in New Zealand, where they tried charging people a nominal fee to ensure that their friends could see what they wrote on their wall posts. Not surprisingly the pay per post experiment was a complete disaster because of the transient and self-obsessed nature of the information posted on Facebook; in my estimation. Not only is it societally worthless but certainly not valuable enough to people posting it, to pay to have it seen.  Think about how many of your status updates and posts on Facebook you think are worth paying to share with your friends?

The final part of Facebook’s problem boils down to behavior and human programming. Think about how we function in our daily lives; from brushing our teeth to the brand of toothpaste we are loyal to. The rituals and routines we develop happen over time and are formed due to comfort, familiarity and a level of trust that, over time, leads to an automatic-ease and unconscious behavior.  I go to Google to search, to Amazon to buy stuff, to a news site for the latest news – why do you go to Facebook?

Why Ron Johnson’s JC Penney Experiment Failed

Ron Johnson is credited with delivering two of the most successful retail models of this century as the man behind Target and Apple Stores. So what went wrong with JC Penney?

It seems that Johnson decided to ignore his own tenants and instead chose the path that many other corporate leaders seem to follow today – he simply changed the most superficial aspects of the JC Penney brand – the logo, colours, slogan and physical retail environment and delivered it via a shiny new ad campaign. He completely forgot to change the things that matter more and are responsible for delivering a successful brand experience; the company culture, internal and front-line employee’s buying into the vision and having the training and commitment to deliver on it. And I believe another thing he missed or underestimated, before rolling out his re-invention, was the core JCP customer appetite for the pace and extent of change.

Many corporations still believe that advertising and marketing can compensate for lack of a quality product or a great customer experience. It is a shortcut that will ALWAYS fail. This is an age old battle we in the advertising industry have fought with clients who do not want to spend the time or invest the money to build a truly great brand. They want quick, easy and cheap ways to a successful brand. There is not one. Advertising campaigns can only sell what already exists; they cannot create what does not. In fact, I would argue that you end up damaging your company and brand more by making promises that your product and customer experience do not deliver. In the end, customers are less likely to forgive or try you again. The man who at both Apple and Target was the antithesis to this fast and easy way seemed to succumb to external pressures with JC Penney and try to deliver a massive turn-around in a few quarters rather than over a period of years.

With every brand re-invention you have to start by answering two fundamental questions; what still works for the brand and should be carried forward, and second how far can you move forward without losing your most loyal customers; while ensuring you gain new ones. This is not about finding the best possible compromise but it is about ensuring that you don’t throw the baby out with the bath water and lose your most valuable customers by creating something that is so alien to them, so unfamiliar that they no longer have an emotional connection with the brand. Also, you have to be cognizant of the fact that old brands have a long history and bring with them baggage, so you have to move them forward and update them in ways that do not allow you a totally clean slate, like Mr. Johnson had with Apple Stores. Perhaps, Mr. Johnson decided to try and re-invent this old brand like he had a clean slate, without understanding what worked and what his most loyal customers would not be willing to live without, at least in the short-term. As a result he alienated his most loyal customers before he had the time to attract a new customer.

Mr. Johnson should have spent his first year simply unveiling his vision with internal management and employees with an aim to start building support, passion and committed to delivering this vision to customers; while taking time to study JC Penney’s brand history and better understand their most valuable customers. All this much before any shiny new ads and re-designs hit TV channels and store shelves. One thing I will say in his defense is that Wall Street is responsible in large part for creating an environment of quarterly results mentality; where CEO’s are under tremendous pressure to deliver growth every few months. This is simply not the way you can ever build a successful company and brand. It takes time and years of investment and management commitment to create the likes of an Apple, Amazon, IBM or American Express. That said, there will always be external pressures and corporate leaders also need to push back (on Wall Street and investors) so they can take the time to bring all the stakeholders on board with their vision, before leading the way in executing it on far more realistic timelines.

Art and Science of the Business Plan

If you are starting a business, you need to begin by writing a business plan; this much is obvious. However, asking people advice on how to write one can often be more complicated than writing it! Today, most people will tell you that investors (for whom most business plans are penned) are extremely time starved and have very short attention spans. Both these facts are true. So the logical conclusion one would reach is keep your business plan short but make it interesting, which also means not writing pages and pages that cannot be read on an iPhone screen.

That said I still strongly recommend to every entrepreneur I advise to always start with the old fashioned long form version BUT never to share that with investors. So why you ask should they bother? The reason it is really important to start with the long-form is because it helps accomplish two very important things; first, it forces you to really research and do your homework to explain and defend why the world needs your business, to study your competitors in-depth, to understand who would buy you and why – and explain how you think you can make money. Second, it is a great exercise (albeit painful one) that literally forces your brain to go through the rigorous process of thinking through your business fundamentals in the context of studying your category, customers and competitors in a way that helps you gain a depth and perspective that few entrepreneurs have when they start out. Trust me when I say that having a command of, and familiarity with this knowledge at your fingertips, will impress every potential investor. Once you complete the long-form version file it away and start work on the investor version. This should be no more than a 10-12 slide distillation of your long-form business plan.

It truly is a valuable process that one cannot appreciate unless they go through it. Not only will you feel more confident about your pitch but also have the laser focused essence of your big idea. Now there are good and bad ways to create slides. I suggest you start by thinking about it as a story; one that is personal and one that you have told millions of times. Your presentation should come across with this level of passion and familiarity. You should be able to bring the slides to life with rich details and anecdotes that help make it more real for your audience. Before you start to write the slides, imagine that your business is a short story and build an interesting plot around how you tell it. Think about an opening sequence, adding some tension and build-up before you do your great product unveil. Find ways to help your audience relate e.g. have interesting and real people to bring to life your target consumer(s), etc. Finally, remember that your slides are not there to do the talking – YOU are! This means that you should NEVER be reading off your slides (your audience can do that for themselves). Your job is to bring them to life by talking about all the things the audience cannot see or read on the slide. The slides are merely there to provide a point-of-focus for the audience and to move your story’s plot forward. You are responsible for making the story more interesting and exciting until your audience is so engrossed that they are clamoring to know how it ends. Most of all remember to have fun and don’t forget to be you. If you come across like a rehearsed robot, no matter how great, your idea will suffer too.

One final point to remember is that all smart investors make investments in people (and teams) and not an idea per se. The success of every idea is entirely dependent on how well it is executed; which is determined by the team’s passion, experience and combined talent. Investors already know that 90% of start-up ideas they invest in will fail but if they believe in the people, they also believe that one day these people will find success, even if it is not with their original idea.

Marissa Mayer and The New Yahoo Employee Policy

Marrisa Mayer is absolutely right that real and meaningful relationships cannot be built purely from behind computer screens, via email, or over the phone. I don’t care what anyone says about the proliferation of technology and the ease-of-access it has provided for an increasingly mobile workforce, and it has, but it is still not close to being a substitute for face-to-face contact and the casual in-person encounters in lunch rooms or other parts of an office that form the intangibles of building human relationships.

I admit that people can be extremely efficient working remotely. It is easy to interact with various departments, have meetings over Skype and pretty much complete every task you need to, in order fulfill your job responsibilities. I also know many companies today are entirely virtual, and are thriving, but I bet even their CEO’s will admit that with more money (or much lower travel costs) they too would want their employees to meet more often, in-person. Ultimately, every company leader realizes that you cannot create that highly intangible yet extremely valuable thing we call “culture.” Corporations that have it feel more familiar, warmer and more like a home away from home for employees. They provide a common purpose, and those that do it better, create a sense of belonging to a tribe.  Just think about the amount of time we all spend working …

Here the rub; you simply cannot build meaningful relationships with people you have never sat across the table from, shared a latte with or broken bread with. A very wise CEO once told me that “everything that happens after 6pm is far more important than what transpires during the workday; this is where the magic happens.” He was absolutely right. It is during these moments; when you share the experience of having faced an abusively irate client, discuss the dressing down your boss got in front of you, or have a colleague offer to do something for you, so you can leave early, because they overheard it was you anniversary– these are the things that form the bonds that make up the intangible glue of real relationships. And these moments only transpire when you let your hair down, share a laugh, throw out a random idea based on something you just overheard, or because someone confessed a problem they were facing over lunch. Try taking your finance guy out for a coffee and ask him what he thinks of your latest project, and you will start to understand what I mean.

So while Ms. Mayer was right to bring people back into the office, it seems she may have relied a little too heavily on data to drive he decision and therefore failed miserable on how she executed Yahoo’s new policy (source: Business Insider). As much as I have talked about the virtues of being in the office, I feel equally that there needs to be a balance. People should be able to work from home a few days a week, and this is where technology has provided the ability to do it seamlessly (just not all the time). It should not be one or the other. If I were Ms. Mayer, I would have made it mandatory to be in the office every day for the first six months, for new hires, and then three days a week after that.

The most ironic thing about Ms. Mayer’s approach is that while she may have used data to inform and even make her decision, she clearly needs to learn that she also needs the human touch when executing and implementing policies across the organisation; especially when her objective is try and get people to build better inter-personal relationships.

Facebook: Not $$$ocial Enough?

Earlier this week General Motors decided to stop advertising on Facebook. GM made this announcement “after deciding that paid ads on the site have little impact on consumers’ car purchases” according to the Wall Street Journal (“GM Says Facebook Ads Don’t Pay Off”). Albeit, the total amount, $10 million, is but a tiny fraction of Facebook’s whopping $3.15 billion in reported 2011 ad revenues, the timing was not great. It was less than one week before Facebook’s much vaunted IPO.

So while the revenue loss is paltry, there are two larger concerns for Facebook. One, GM is the third largest advertiser in the US and their announcement might lead other advertisers to re-evaluate their advertising spend on Facebook. The second more worrying thing is that it is a major blow for a young company trying to convince the world that “social advertising” is not only effective but provides Return on Investment (ROI). In the short-term the impact may not be that great simply because Facebook is about to reach 1 billion active users (approximately 14% of the world’s population); and this number alone is hard for most advertisers to ignore. But as a public company, with shareholders, they will soon need to prove that they are worth their high valuation, in revenue terms.

Every company feels compelled to have a social advertising budget, even though there is scant evidence that these dollars generate any sales, or return on investment. The advertising and social marketing industry will have you believe they are effective sales drivers but the reality is that there are few independent studies or evidence to support this hypothesis. If you think about the number of times you have clicked on a Facebook ad or decided to make a purchase based on seeing someone’s status update (or wall post), you will likely reach the same conclusion. Facebook’s ad revenue actually fell in the first quarter of 2012 from the fourth quarter of 2011.

Here is something to ponder about Facebook’s current IPO valuation. According to Anant Sundaram (of Tuck School of Business at Dartmouth) the average price to earnings ratio for the majority of US companies, over the last one hundred years, has been around 15. Apple is at 15 and Google is apparently a little bit higher. However, Facebook’s price-to-earnings ratio is 100.

He goes on to say that “at current levels, it would take Facebook 100 years to generate enough profits to pay for itself. That number is so high because investors are betting Facebook’s profits are going to explode. Sundaram says, judging from this price these investors seem to believe that the company’s profits will double, and then double again, and then double again — all within the next few years. For that to happen, Facebook will need to attract 10 percent of all advertising dollars spent on the planet “across all media – print, billboards, radio, television, Internet.”  To put this in perspective he adds that “Facebook had just over $3 billion in global ad sales. TV ad sales in the U.S. alone last year were $68 billion.” (NPR: “Is Facebook Worth $100 Billion?”).

Facebook recently tried a new revenue generation experiment in New Zealand by charging people two New Zealand dollars (US$1.53) a post to ensure that their own friends see what they write (Wall Street Journal: “Facebook Gets Religion for Revenue”). Are your status updates and posts on Facebook valuable enough to start paying to share it with your friends? I know mine are not and never will be.

Let’s just say I am holding off buying Facebook shares because I don’t believe they have a real revenue model, yet. That is not say that they will not find a Google like search cash cow but let’s just say ad banners on the site are not the Holy Grail that Mark Zuckerberg wants us to believe.