South African Business Culture and The New Consumer

As a growing awareness spreads through the boardrooms of South African companies that the internet is not only coming, it's already been here a while and it's changed fundamentally the way customers (and employees) think and behave, a ripple of alarm goes out: are we able to survive, even thrive? Or are we corporate Titanics, hurtling full-speed into the pack-ice while the officers waltz blissfully in the ballroom?

And when the realisation finally sinks in that not only their structures and processes but also their corporate cultures are handicapping attempts to adapt to the new digital age, there's inevitably a demand for more and more training.

I have done a lot of what passes for culture change work in my life, and it still irks me when someone asks me to help them develop a training programme that will change the organisational culture of one group or another. It's not that senior managers don't understand that there is much more to engendering such a change than simply training people, it's that they don't want to be bothered with anything more complicated. And they certainly don't want to be in the awkward position of having to acknowledge that they themselves may be a large part of whatever problem it is they have defined.

You can’t change an organisational culture simply by “training” one person at a time (unless of course you start at the shareholders and the CEO and work downwards, but that’s another story). Bottom-up culture-shifts cannot be induced by senior management -- they usually only happen as uncontrolled revolutions initiated by employees themselves. That happens more often these days of course, with the disruptive hierarchy-oblivious culture of digital natives bubbling up into the lower levels of organisations and challenging legacy processes that were installed way before the web-born collaborative age. But the culture of openness and sharing which the web has fostered is, unfortunately, rarely the kind of culture-shift that upper management would like to induce.

Training is not futile -- far from it -- but in order to get the intended culture-shift momentum going training has to be concentrated in time and enterprise-wide in scope. And it needs to have a shifting-culture context already in place if the training is going to take root and grow. Anyone in the corporate learning field knows that training is typically only one component of any performance improvement initiative, just as culture change is but one component.

Organisations waste vast amounts of time and money looking to one-dimensional strategies to solve multi-dimensional problems. There are natural reasons for this: the silo mentality makes it hard for any one decision-maker to influence more than one area; we habitualy measure and reward low-level tactical activities rather than high-level strategic impacts.

The e-business culture shift problem has more dimensions to it than most senior managers are comfortable getting their heads around. Up-skilling is but one of those dimensions: you have to get all of your employees, from top to bottom, to understand the essential technology and process issues, as well as what it means to be an e-business.

But there are so many other dimensions, macro and micro: customers are more discerning, better informed, less tolerant, and a lot less loyal; the media for communicating marketing and PR messages are mutating; competitors are now global, often appearing overnight so you never see them coming; the pace of transaction processes has to accelerate up to real-time, having knock-on effects on systems and the employees and suppliers who use them; corporate strategy-setting processes may be inadequate to deal with the flexibility the rapid disruptive market changes demand; and the impact of all of this is felt through production, logistics, legal, HR, and finance departments.

The primary reason why businesses fail to become e-businesses is management resistance to change; which is also the primary reason why businesses fail, period. So getting a change of culture in place, fostering a culture that embraces change, is vital. But it is typically upper management where that culture change is most needed.

Despite the quaint notion of dynamic leaders at the helm boldly charting new courses, in my experience senior managers don't change unless they become aware of a compelling need to do so. Perhaps this is the point at which a little training might go a long way. When senior people come face to face with just how far adrift of current realities their own norms have become, it's interesting to see who bolts for the lifeboats, who goes back to the ballroom, and who heads for the bridge.

What’s the problem with traditional ad agencies?

Just Do It! Nike just did, ditching its running shoe advertising agency of twenty five years not because it was unhappy with creative or because of costs, but because Wieden & Kennedy just didn't have the digital media passion or expertise needed to adequately engage the new consumer.

While Nike moving its running shoe business after so long and successful a partnership is news in itself, what is really making waves in the agency world is the reason for the move. Agencies worldwide are generally still doing a half-hearted job of leveraging the internet and related technologies for brand building, and most of them know it. When a manufacturer as intimately in touch with its consumer as Nike is sees the need to do more and do it better, and is willing to just do it, the agency world looks over its shoulder to see who is next to go.

Wieden & Kennedy are not a minor agency – they have long been a creative powerhouse doing work for companies like Procter & Gamble and Coca-Cola. They must have seen this coming, and probably had plenty of warning from Nike, but were simply unable to change fast enough to keep the account.

In February, Mark Parker, Nike's CEO, told investors

The Nike brand will always be our strongest asset, but consumers are looking for new relevance and connections. We're fundamentally changing the way we're organized as a company. It's really all about going deeper to get deeper connections and deeper insights, to get more innovation and more relevance, and to make us ultimately more competitive in each of the discrete pieces of our business. This allows us to be more informed and more surgical in creating products and optimizing our go-to-market strategies within each category.

Nike gets it. The consumer – particularly in Nike’s demographic – is now calling the shots, and companies who insist on pursuing a 1980’s-style mass-market broadcast approach to communicating risk being marginalized or, worse, becoming irrelevant.

As the New York Times put it,

The message is clear: No matter how talented an agency's creative team or how well the client's management likes the firm's executives, the agency is of limited value unless it embraces digital media.

That means, just as the web has permeated the lives of consumers, agencies must permeate digital culture throughout their organisations, instead of regarding “internet stuff” as an afterthought, add-on, or external business. For many markets, digital thinking needs to be a foundation of advertising strategy. And while it makes sense to start digital operations as a separate entity (thus bypassing all of the legacy resistance), there has to be a plan to reintegrate online operations as soon as the “interactive agency” is up and running.

But advertising agencies the world over are still dragging their heels. Given that the internet attracts more advertising money than radio worldwide, and was second only to TV in the UK last year, it's hard to keep on regarding online as something that is still not important.

Last week at the Online Media Marketing & Advertising (OMMA) conference in Hollywood, a panel of industry insiders agreed that most ad agencies are simply not ready for the digital era. Tim Hanlon, from Publicis, was adamant that the traditional structure of ad agencies is an obstacle, and that de-siloing brand advertising and response advertising is essential to create the flexibility and spontaneity necessary to get to the online consumer.

Bant Breen of Interpublic was of the opinion that acquiring so-called interactive agencies is easy, but integrating them into existing agencies is not, and that’s the thing which is necessary for a more powerful approach to advertising which can do things like build customer relationships and enable transactions.

What’s the problem with traditional ad agencies?

Firstly, the whole structure within agencies (and the communication structures between agencies and clients) makes change a painfully slow process. Not good when rapid and disruptive change is a key characteristic of online consumer environments. How long does it take to brief, pitch, create and roll out a campaign? Given the aversion to risk within agencies and clients, it can take months. Online, you need to be able to do this stuff in days if not hours. The risk of not operating quickly vastly outweighs the risk of moving so slowly you are effectively doing nothing. Agencies need to be given more latitude to act almost spontaneously, but it is unlikely clients would allow that, and even less likely that agencies would want it.

Secondly, agencies and their clients are way too precious about protecting brand identity. Remember when the primary role of a brand manager was to police the “brand bible” and ensure the eternal purity of the proposition? In a web 2.0 world, consumers want to talk about products. And, in the words of the Cluetrain Manifesto, whether the news is good or bad, they tell everybody.

Trying to protect a brand from consumer comment, being afraid that customer opinion may pollute or hijack your carefully crafted identity, is no longer a valid marketing activity. But encouraging discussion and being ready to respond to it, and making sure you are structurally able to maximize net advocacy, are alien concepts to many marketers and their ad agencies.

Thirdly, the traditional approach to broadcasting generic messages to largely mass markets is inappropriate for digital media, which is all about sharply focused messages for niche audiences who are discerning, informed and impatient. When your medium is newspapers or television, you have to communicate across the broad mix of audiences that they reach, and being too focused in your message risks completely missing important components of those audiences. True, satellite TV and niche publications do allow for a more narrowcast approach, but it is nothing compared with the laser-focused nanocasting and individual consumer conversations that the web allows – and requires. But the broadcast mentality of traditional agencies results in nothing more imaginative online than generic corporate banners on mass traffic sites like directories and online newspapers.

Fourthly, the online business model does not work well for agencies. If a major part of your income originates in placement commissions paid by traditional media, it is very hard to look at online opportunities as anything but financially retrograde. So the only real financial incentives to pursue digital strategies are macro incentives: you’ll pull in big accounts if you are seen to be on top of this web thing, or you’ll lose big accounts if you are not. Ad agencies need to reinvent their business models for the 21st century, because their old models are a significant handicap to progress.

Virgin/EMI puts on a virtual concert

Any company targeting the up-to-twenty-somethings that does not already have an online marketing strategy is probably doomed. And if that online marketing strategy does not include harnessing the power of web 2.0 social connectedness (a small part of which is engagement in virtual worlds or videogames), they are probably not really serious about market success.

If you are a fan of Stacy Orrico, you are probably 14 years old. But she’s sold 3.4 million albums already, and her record label, Virgin/EMI, is keen to get closer to her target market. So they are holding a concert tomorrow (Saturday) where the fans can hear songs from her soon-to-be released CD. The difference is that it is an online virtual concert, performed by Stacy’s avatar, in the kid-friendly virtual land of Whyville.com.

While quite a number of corporations have “done the virtual world thing” and set up shop in Second Life, this is a first for Virgin/EMI. And while Second Life is a rather adult world, Whyville is “an edu-tainment virtual world for the tween-age generation” so it is ideal for Stacy’s target audience of 8-15 year olds. Up to 6,000 of Whyville’s two million strong tween-age population are expected to attend the concert.

Of course there is an immediate commercial edge to the concert: audience members can buy songs and virtual souvenirs. And in keeping with the trend for things virtual to carry a greater value than things real, there’s going to be an auction for charity in which you can bid for the virtual clothing worn during the concert by the avatar. Count on many costume changes.

In an interview with ClickZ, Aaron Simon, director of marketing for Virgin Records said, "It's something that is so important when you're a teen artist to really get in front of your buyers. In front of your fans." Apparently interactivity is built in to the program, with audience members being able to raise their virtual hands to ask a question, with a lucky few being invited up on stage to meet the diva in person, so to speak.

With online presence being vital for musicians, performing virtually is going to become almost a mainstream phenomenon.

I’m a tad envious of Whyville, and even more so of Second Life: back in the 1990s we created an online 3D world that was not unlike what Second Life has become. It was specifically designed to be an alternate venue for commerce and entertainment, with undercurrents of political and social intrigue that would have done well in the 21st century. We even had rock groups lined up to perform in virtual stadium concerts. Sadly, our financial backers got cold feet at the last minute, having never really believed in the project, and we put the world on ice.

Still, that was 1996. Better to be way ahead of your time than way behind it.