Category Archives: wisdom

Why Marketing & Procurement Are On A Collision Course In The Web 2.0 Universe, And Beyond.

The environment for most brands is changing fast. A stream of new opportunities keeps flowing – social media, word-of-mouth & location – based mobile marketing right now – and the means to take advantage of them comes increasingly from start-ups. In this universe being entrepreneurial is key to Marketing success and a well-intentioned but misguided Procurement department can be as great a threat to brands as the competition.

Differentiation is Both Quantitative and Qualitative.

Companies have to differentiate what they produce in a relevant way. That makes them stand out against competitors and makes their brands valuable. Ad agencies often do this through distinctive creative output. When they resort to scam ads it suggests they haven’t grasped the ‘relevance’ issue. What marketing service providers must do is to price the value they add, or the savings they generate, for clients. If they don’t their service may seem generic, inviting client Procurement departments to squeeze them on price.

Most procurement methods originated to reduce production costs by managing how standardized commodities and homogeneous goods and services are bought. They are fundamentally quantitative, which leaves qualitative, ideas-based or creative services particularly vulnerable to being under-priced. Recent trends toward quantitative RFPs submitted online with no Marketing department participation and no qualitative performance measures, are clearly misguided and a cause for grave concern.

Don’t get me wrong,  Procurement management is critical for all forms of production. However, marketing services contain creative problem-solving elements – not just ad ideas – which are not homogeneous, and which even their producers struggle to value accurately. I went into this earlier in the post on Creative Services and the Vicious Cycle of Procurement.

Wisely applied, Procurement is Good.

The thing is, successful supply chain cost management is vital to business success. If a company can produce consistent, sustainable, marketable quality at a lower price than its competitors it will tend to gain market share and benefit from economies of scale, all increasing ROI. Marketing services companies need to become just as savvy about Procurement as their clients and must apply it in their own businesses too. That TBWA recently appointed a global head of Procurement makes an interesting statement. That their competitors responded with a deafening silence does too.

Where problems arise is with the “consistent” and “sustainable” aspects in that previous paragraph, especially producing the specialty services provided in marketing communications. For example, media agencies slicing income to win business volume for larger buying discounts, a process rampant for a decade, is an unsustainable “Race To The Bottom”. I wrote on this in ’03 working at Carat (Media, 23 March).

What happens is this: after winning a new piece of business with a low bid, a media agency can only afford to staff it with cheap, lower quality staff, overseen by an overstretched senior if they’re lucky. Procurement is happy but Marketing soon complain of weak advice, errors and unresponsiveness. When it comes to a head they put the media account up for pitch again. Procurement lends a hand and the account goes to the lowest bidder. Work into a lather. Rinse. Repeat. Soon nobody in Marketing has much hair left and all the media agencies are producing poor service and making no money.

What Happens When It’s A Race To The Top?

Procurement departments not used to valuing and buying marketing services often have unrealistic expectations. Network media and ad agencies with big holding company parents have helped those develop. As a result many believe that if you lean on a marketing services supplier they’ll find a way to drop their price and keep providing the service. The near sweat-shop conditions in some major agencies probably prove their point.

However, real trouble strikes when Procurement meets Entrepreneurs. The company best positioned to offer cutting edge social media and other innovative services needed for a brand, is increasingly a relatively new start-up. These new firms are staffed with very focused people with little knowledge of procurement methods, nor time to learn them while pulling 18 hour days. Critically, they have limited funds.  To survive and prosper they must build their business up to long term health as fast as possible. In pioneering fields, for start-up founders, and their angel investors, it’s really a Race To The Top.

Start-ups need business, but not on destructive terms. They realise that quickly, or die. However, as any entrepreneurial 21st Century marketer knows, you need these specialists and their new services to differentiate, defend and build your brands in these exciting but complex new arenas. Currently it’s social media, search, and location-based mobile marketing. There’ll be something more within a year.

The Procurement Curse/Benefit Analysis For Marketers.

Whether it all ends in success or tears for any given marketer depends on three main drivers:

1. the marketing company’s culture – exploratory & innovative Vs scared & defensive;

2. that company’s senior leadership & vision  – supportive Vs punitive and;

3. how well their  Procurement department is trained and for what purpose – pure cost saving Vs helping brands be as competitive as possible.

In the bigger picture this applies to dealing with long established ad and media agencies just as much as to social media engagement experts and branded app developers.

If Marketing gets only what Procurement lets them pay for, the question facing marketers has to be: “Does our Procurement department have the skills to help us buy these services successfully?”

If they do not, they will compel you to use and become, second best.

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How Job Insecurity & Professional Cowardice Made Bud Light Stumble For The First Time Ever.

Ads blamed for Bud Lite sales fall.

A  US Budweiser campaign, “Drinkability”, is being blamed for the first full year sales decline in Bud Lite history. This in a recession when beer sales are often one of few things that go up. A firm of consultants  was  involved. Apparently their recommendations became ad briefs which DDB and Euro anwered by coming up with the “Drinkability” campaign.

Lots of voices are now being heard from all quarters about why this happened and who is at fault.

A Wide Range Of Differing Opinions.

A number of points have been made including:

“Were the spots entertaining? No. Were they loaded with brief-filling, focus group-tested, chest-puffing talking points? Yes.” – Adman blog posting

“Consulting doesn’t boast creative expertise nor does it have any interest in “starting a turf war” with creative agencies.” – A consultancy spokesperson

“…some clients will pay consultants millions to rehash research and refine positioning, but then they pressure agencies to lower costs on the thinking/ideas that positions and builds awareness of a brand and ultimately sell products.” – online comment posting

“Unfortunately, too many people are willing to blindly accept whatever “dictate” trickles down and don’t bother to question the validity of the premise or invest themselves in its integrity. This is a cause for shame in our industry. It opens the door for spectators to broadly crucify agencies and consultants, wastes money, damages brands, and demoralizes everyone involved.” – online comment posting

“Agency creative directors tend to do more damage to brands if left unchecked. They too often develop high concept ads that win awards but do very little to motivate consumers in any way. The examples are endless.” – online comment posting

Others attribute the Bud Lite decline to Anheuser-Busch being bought by InBev.

Then of course there’s the question of whether one can or can’t directly correlate advertising and sales. Well, one can’t have it both ways.

All these points have merit to a greater or lesser degree. However, I think there’s a simpler, deeper issue behind all this.

When you’re scared you tend to make bad decisions.

Let’s face it, those ads are weak. The consultant-driven briefs that Budweiser Marketing pushed on DDB and Euro should have been declined immediately for what they clearly were: weak, lacking compelling beer consumer insights and likely to generate poor advertising harmful to Bud Lite in the competitive context.

Next, the agencies should have proposed better briefs, drawing on what was useful from the consultant reports, avoiding what wasn’t or was clearly going to harm the brand. At that point the Bud clients needed to listen carefully, debate it skillfully and collaborate on agreeing powerful briefs.

The Great Recession is partly to blame, as is unchecked Procurement thinking.

Budget cutbacks and the retrenchment of expensive but experienced ad talent have taken a toll. We seem to be left with scared ad agency people lacking the experience and the faith in their craft, and thus also the confidence in it, to do their jobs bravely and professionally. To say a professional “No” instead of an easy, but ultimately ruinous “Yes”.

Advertising is an industry with a high proportion of people eager to please and who are in fundamentally weak positions relative to their clients. As a result they are thus very vulnerable to being bullied by equally scared, inexperienced or under-qualified marketing staff.

The result of all of this seems to be increasing levels of professional cowardice. Among advertising people, and among Marketers too.

That old Young & Rubicam house ad nails it. The one that shows a spinal column from the neck to the coccyx with the headline, as I recall it:

“This is a backbone. You can’t run a good ad agency without one.”

Actually, you can’t run any good business without one.

(PS, if anyone has a copy or a link to that Y&R ad please link it in the comments below or email me. Tx.)

5 Lessons Nelson Mandela Teaches Us About Leadership & Innovation

credit: South Africa. The Good News. www.sagoodnews.co.za

credit: South Africa The Good News. http://www.sagoodnews.co.za

Leadership & Innovation are really inseparable; parts of each other.

Leader/Innovators change their organizations, their countries and often the world. South Africa’s first democratically elected President faced a crisis of vast hostility and intense fear between the newly empowered black majority and the previously dominant whites. The Truth & Reconciliation Commission was an innovation which changed the course of history.

Here are five quotes from Nelson Mandela which have much to offer leaders & innovators everywhere.

1. “It always seems impossible until it’s done.”

Innovation is about making what does not exist today, exist tomorrow. No matter how hard it seems, no matter how impossible everyone says it is.

2. “I learned that courage was not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear.”

This is a reality every leader faces, especially in a recession or a crisis. It is what the entrepreneur deals with in launching a business using all the money he can scrape together. It’s what the innovator embraces in leading an organization into a new area for success, away from the safety of the known.

3. “There is no passion to be found in playing small – in settling for a life that is less than the one you are capable of living.”

A real leader helps us and the company we all work in, to grow as significant and as talented as we can be. How much more rewarding it is for leaders to help build people and their confidence in themselves, to live a life as large as they are capable of. The Innovator does not “settle” for what is, but strives for what can be and takes us there.

4. “It is better to lead from behind and to put others in front, especially when you celebrate victory when nice things occur. You take the front line when there is danger. Then people will appreciate your leadership.”

This goes to a key point in my posting yesterday. True leaders will grab the criticism and pass on the praise. Weak managers do the opposite. Innovation involves wrong turns, failures, mis-steps. All must be celebrated and learned from as much as the success. If there are no mistakes are being made it often means that nobody is trying anything new.

5. I have walked that long road to freedom. I have tried not to falter; I have made missteps along the way. But I have discovered the secret that after climbing a great hill, one only finds there are many more hills to climb.

Probably the most vital insight into leadership and innovation is this: one makes mistakes, one recovers; challenges keep coming, one soldiers on. One has to keep going until you achieve the next goal and then the next and so on. Tenacity, stamina, even stubbornness are the order of the day.

This last quote is a bonus. I’ve included it because we’d all do well to remember this; believe this; BE this.

“A good head and a good heart are always a formidable combination.”

Leadership, Management & The Rising Tide

Wave by Lee Fenyves

Wave by Lee Fenyves

A leading businessman told me something remarkable last week. More than 30% of people are looking for a new job.

He wasn’t talking about those “between jobs”. He meant 30% of people in jobs.

On average around 13% of employees are looking for a new job at any point in time, but that number has jumped nearly 150% in the past year

Among the would-be movers there were 3 reasons for the urge:

1. my company is going nowhere and management has no idea what to do about it;

2. our bosses keep beating us up because they keep getting beaten up by their bosses;

3. my company retrenched so many people that I can’t stand working here any more.

The majority of people want a new job because their managers are too useless, too awful, or have damaged the company too badly to work with them any longer.

There has been a consistent theme in this downturn, summed up wryly by Warren Buffet as: “It’s only when the tide goes out that you learn who’s been swimming naked.”

That vivid mental image applies to more than just banking and derivatives. It sums up how we are recognizing all the bluffers, muddlers and office politicians who have risen to their highest level of incompetence and beyond.

Anyone can succeed in management in the good times when nearly everything seems to make money and there’s enough of it sloshing around to cover up one’s mistakes.

That all changes in a recession.

Managers run to find costs to cut. Real leaders, not having surplus costs, have no need to cut and know that one can’t cost-cut one’s way to market leadership.

Managers feel lost in a crisis because their plans were built on “more of the same” from the good times. Real leaders are used to innovating around what their organization is and does so are used to managing change and creating successful options.

Real leaders know where their costs are going and their profits are coming from. They can defend everything they have without their staff even knowing they had to be defended. Their staff often think the recession isn’t nearly as bad as everyone else is saying.

We all have to do some “management”. It’s the administrative part of any leadership role; part of tracking one’s progress in leading an organization. It’s also the protective equipment we use when running a subsidiary or division of a company with its headquarters and focus elsewhere.

As the “green shoots of recovery” grow taller, leaders will increase their pace of innovation and build even greater advantage; managers will breathe a sigh of relief and go back to what they were doing before the downturn.

The rising tide will lift all the boats again. However, talented people will jump ship to better organizations and wise captains will lead superior crews, in better equipped craft, to greater glory when it does.

Does Your Company “Immune System” Kill New Ideas?

Macrophages & T lymphocytes by Dennis Kunkel

Macrophages & T lymphocytes by Dennis Kunkel

Innovation is almost always the difference between success and failure.

That difference is between increasing share and margins on the one hand and producing at parity in an over-traded market for negligible profits on the other.

The ability of any company, big or small, to innovate is tied to three things.

The company Leadership

The company Culture

The focus of the Business

Leaders who are outward looking, who send clear signals that they expect and reward innovation, are usually rewarded themselves in two ways.

– They attract smarter, more talented creative people who are much better to work with and;

– Those people have better ideas that make the business more successful.

Company Culture which encourages exploration and differing views, which accepts the occasional mistakes and costs that go with those, is more likely to produce significant innovations and to keep doing so.

A Business Focus on looking for significant changes to alter the landscape of the industry and how it addresses the needs of its customers, instead of fine-tuning small changes over a long period, is more likely to pull the rug out from under its competitors.

None of this is a surprise. Nothing written here is new. So why aren’t more companies doing it, especially now?

One reason is a lack of leaders empowered to do their jobs this way. This is a shareholders and supervisory board problem. If your company is hogtied this way abandon hope; abandon ship.

However, the biggest innovation killer is often harder to fix, more sinister and rooted in the very success of a company.

As businesses grow, they start to believe their own bullshit about why they are doing so well. That in turn starts to form an ideological immune system which reacts against anything unexpected from outside The Company Way. The watch-phrase in those organizations goes something like this:

“No, that’s not how we do things around here.”

Think about your company. Is an ideological immune system becoming part of your culture? If it is, fix it fast if empowered to, or abandon ship if you’re not.

The only time a company can ever condone that statement is when a type two hiring error proposes canceling innovation, abandoning reason and copying what the competition did last season.