August 25, 2010
Horizontal connectivity between many human beings, courtesy of the World Wide Web, is the great cultural and technological disruptor of the 21st Century, and it will ultimately change the world. Human connectivity has heretofore been one-to-one, hierarchical — such as the institutional connectivity associated with school, employment, church or government — or limited to mass gatherings, be they familial, social or those built around a stage of one form or another. We could be connected to a movement, for example, but even that association was in the abstract until some sort of meeting or rally.
Connectivity's prize is control, for the ability to put people together — such as in a crowd — brings with it influence and value. Marketing to the mass became the art-cum-science of modern era commerce, manipulation of the one-to-many, hierarchical connection.
Horizontal connectivity disrupts everything, but especially the mass. So complete is the disruption that even back channel conversations during a mass event compete with the event itself for the attention of participants. Attention is the quest of the marketeur, but his target — the pejorative "consumers" — are now the masters of their own attention. Content that was used to create a mass was at one time scarce. Now attention itself is the scarcity.
Horizontal connectivity also disrupts all business paradigms by interfering with equilibrium, that state of balance in any system in which one force cancels out another. In modernist logic, equilibrium is what makes everything "work," because stability is what creates opportunity for those with enough power or intelligence or money or knowledge or resources. The whole concept of modernism itself demands equilibrium, for the opposite is viewed as chaos to the logical mind. Science was birthed to tame chaos, and this is especially true with the science of business.
Change is the constant threat of business, but in times of change, there is always the view that equilibrium will eventually follow, that the ship will be righted. This is the great error of contemporary business thinking in the face of disruptive elements of today's digital technologies. We think that once we harness these things, everything will settle back into equilibrium.
Isn't this what Apple is attempting to do with its iPhone and iPad closed systems? Isn't this what Google and Verizon hope to accomplish with defining the mobile Web as cable? Equilibrium is the goal, some sort of balance that allows those with the smarts or the resources to take advantage of it for profit.
The issue is what Deloitte & Touche's John Hagel III and John Seely Brown are exploring in their work as co-chairmen of the Deloitte LLP Center for the Edge in California. Their views are radical and compelling, for they believe that equilibrium may be a thing of the past.
The combination of these forces - a rapidly evolving digital infrastructure and public policy shifts favoring freer movement - defines a world of constant change. If this premise is right--that the pattern of disruption followed by stabilization has itself been disrupted--then it may be we're facing the mother of all disruptions, a big shift into a world without equilibrium, one that will continue to shift rapidly even once the current recession has passed. A world in which companies lose their leadership positions at an increasing rate. A world in which extreme events, such as the ongoing financial turmoil across global markets, become increasingly likely. A world of shifting product economics, and increasing volatility in brand equity, share values, and commodity prices.
Equilibrium to media companies is certainly in a state of flux, for everything about media — from content to the way it is supported — is in change, and yet there remains a fervent belief at the top of media companies that eventually everything will settle back into equilibrium. But what if that's not true? What if the only constant we face ahead is the seeming chaos of change? How will we forecast business, much less meet budget expectations of the current quarter? These are the types of difficult questions we ought to be asking at the highest levels, for waiting around for normal to return is the little boy whistling in the dark in hopes that the monsters will go away.
The Web disrupts equilibrium for media by introducing the variable of horizontal connectivity. This creates problems in the sustainable business model of media at least five ways:
If consumption of media is one-to-one instead of one-to-many, it becomes a measurable commodity, which means that audience sizes determined by diaries, meters, panels or any other scientific method are less meaningful than direct measurement. This impacts what media can charge, and any real data "correction" is likely to be less than what any audience survey produces. Moreover, the audience for the advertising message itself can be measured, and this will not be favorable for content-driven, audience-based media.
The advertisers themselves are connected to consumers in the same way media companies are, so the "need" that advertisers had for media companies is dramatically lessened. Advertisers are themselves media companies, and this will increasingly impact our bottom lines.
Our authority as "the press" is weakened by this horizontal connectivity, because, as Jay Rosen has so beautifully pointed out, connected people can talk to each other and back to us about the news we present to them. Gone are the days of media-as-lecturer, media-as-omniscient, media-as-gatekeeper.
Hyperconnected people can make their own media, and many of them are. Grass roots journalism is springing up all over, aided by aggregators like AOL who can help them monetize their little businesses.
Horizontal connectivity empowers the bottom of what used to be the top-down universe of modernism. The ability to talk back to power and to each other in real time is something the world has never known before, and it is highly resistant to manipulation. Horizontal connectivity destroys Walter Lippmann's "manufacture of consent," because the messages that create consent can be so easily challenged.
And within the media hegemony, no one needs equilibrium more than Madison Avenue. It's here, where big money changes hands in a system that rewards manipulation of a certain "balance," that media finds its greatest enemy in responding to change. Madison Avenue wants no part of anything new, and so it resists and continues to feed the beast it knows so well and from which it draws its sustenance. Big advertisers still turn big money over to agencies — both internal and external — who spend it based on traditional measurements and theories, and media companies are the biggest beneficiaries. That benefit, however, comes with a risk.
It is this deliberate blindness that leads big agencies to press ahead with television upfront buys in the face of evidence that people skip ads or change channels during commercial breaks. A new study in the UK, for example, found that 86 percent of people viewing time-shifted programs — those recorded on a DVR — skip through the advertisements. 86 percent! Respondents said shorter ad breaks, more memorable campaigns and shorter ads would encourage people to watch more advertising, but the advertising world is disincentivized to make any such changes.
Television advertising still "works" and is still the most remembered kind of advertising, but many of these big money advertisers are experimenting elsewhere, and the longevity of their love affair with television isn't a sure thing. The issue isn't whether Madison Avenue will continue to support media; the question is at what level, and this is the risk that media companies take in continuing to stand still with the expectation that equilibrium will return.
At the local level, when Nissan's agency calls and wants to "place" a $20,000 online buy, the media company needs to have in place a system that allows for this, and so resistance to change is again rewarded. The advertiser is hoping to tilt equilibrium's balance in its favor by outspending — although it's often disguised as outthinking — its competitors. Strategically, the business of the media company, therefore, is to create the size and kind of audience Nissan is seeking, and managers are rewarded through bonuses for doing just that.
It's all pretty straightforward, until the elements that work together to create the equilibrium are disrupted. The biggest disruptor is, of course, the economy, for money is what makes the whole thing work. Recessions historically have hurt every level of the system, but the system knows that all it needs to do is hang in there, because equilibrium will soon return.
Hagel and Seely Brown are suggesting that things are so different today that equilibrium is perhaps not coming back, and if that's true, then media companies are the least prepared for the future. We must maintain our abilities to capitalize on monies available through traditional means while creating new value and shaping new business models for tomorrow. This is not an option. The media industries have typically not spent a lot of resources on development, but these are not typical times. If we truly desire a seat at tomorrow's media table, then we need to consider at least some of the following:
Get into the ammunition business. The deer now have guns, and if we want future relevancy, we need to support this. We need to help people know what we know and do what we do. There are agencies springing up everywhere to help local businesses with, for example, Facebook and YouTube. That business should be ours. Anything that involves teaching businesses how to function as media companies ought to be in our sweet spot, and we should pursue it with everything we have.
When our core competency is being disrupted, we need to look to our edge competencies. The most obvious edge competency for media companies is its employees: the individual people who gather and report the news and the people who have deep roots in the sales community. Develop their brands, so that they can be much more flexible and participatory in the community. Sales people need to learn to become business consultants — and not simply to drive business back to the brand — because those who need their help can spot that a mile away.
We need to stop demanding a knowable return on investment as we build for tomorrow. This has been the biggest deal-breaker for media in the area of innovation, because projecting revenue can only draw that which is known into the business development equation. Managers need spreadsheets; leaders don't, and the media industries desperately need leaders. Meanwhile, proximity-based applications, couponing applications, Google and social media applications and a host of others have sprung up around us. We have to stop waiting for others to figure things out and take some chances on our own.
We need to admit that our real competitors are not the other media companies in town and stop reacting only to what they do. We're being nickel and dimed to death online by Internet pureplay companies that don't have a stake in the communities we serve. All they do is suck money out, and this is not good for local economies. Yet, we're helpless to stop it absent direct action. Build local ad networks. Become local business consultants. Use our legacy media outlets to promote our new things, because it's our competitive advantage. We may even — God forbid — want to work with our offline competitors to find an advantage online.
We need to create new value in the form of databases. All of these pureplay companies know something that we don't: data is the future. Building a database — any database — immediately creates value, because it's something nobody else has. Set yourselves, for example, to create a database of every email address in the market. That's a doable strategy with a very real payoff. "But that's not our business," you say. That instinct is why we're letting outsiders come in and steal from us.
We need fat Facebook fan pages — many of them — and lively YouTube channels. Why? Because that's where people are today, and we cannot assume that they will ever come "visit" us on our terms. There are individuals making good six-figure incomes on YouTube. Why are we not involved in that? Monetizing Facebook is a reality, but we shouldn't base our efforts on Facebook on how much money we can make (see #3). Another value-creating strategy is to attempt to recruit the entire market to be our fans, in one form or another.
Horizontal connectivity doesn't have to work against us, but in order for us to exploit its strengths, we have to be prepared to think in ways that are counterintuitive to mass media. That's a big task for most and the real challenge for tenured managers. Can old media horses learn new media tricks? Of course they can. I've seen it many times.
New world knowledge begins by doing. Who and what are your horizontal connections?