Size....

As a business you are more likely to survive – the smaller you are as an organisation. On the face of it – ridiculous – but true.

For what passes as a career (that word - so prescriptive and dull – a career – it even shares half of cancers’ letters….) I've worked in businesses’ who are getting hurt by the online world.

My learning’s.....big businesses faced with this “threat” can't change. No…I’d go further - they “won't” change. In fact in the case of EMI I think they’d rather die than change.

I’m picking on EMI because I have first hand experience of the business (I have an email relationship with Guy Hands - I sent him a book – it’s a long story) but we could just as easily substitute NewsCorp, Palm, AA, Travis Perkins, NASA, civil service, NHS……

In a recent conference call with his senior management team I discovered their strategy was….

1.    To make their packaging better so people bought more CDs
2.    To make older people buy more music
3.    To make sure different formats were introduced

13 years since Napster. 13 years since a college student with zero resources fundamentally altered their business model - and nothing - and I mean - nothing has changed.

Why is a business, now all but bankrupt, which for so long has been watching the paint, on the writing on the wall, slowly dry, still adamantly refusing to accept reality and change?

If Guy Hands presented his shareholders with a plan to use his UPS (discovering and marketing music) - to fire everyone except the A&R teams, close the flash offices, make music free and generate revenue off the merch and tour income (which we know has been the solution for 12 and a half years – see Live Nation’s shareprice v. EMI’s for more info.) – he would probably be given the green light.

But he can't - and he won't.

Why?

Because at a fundamental level human nature - anger, fear and ignorance - breed a strong resistance to change. But that's not the whole story. This intransigence is reinforced, like steel in concrete - at a practical level - by the size of his organisation.

Even if Guy Hands bought the plan – he knows the people on my conference call - and those embedded within the business - can’t change as a group.

“If it was down to me…..”

Human nature doesn't truly explain this suicide, because of course there are plenty of people within EMI (usually at a junior level, and usually under 25) who “get it”. How is it that these few are not listened to?

Size.

Sean Fanning (Napster) injected a lethal, long acting poison into the music industry's business model because he was small. Fanning had no overhead. He needed no committee to approve his work. He had no legacy CRM system which prevented him from telling all his mates about it. There were no politics between him and a hundred other people to kill the idea (for my first meetings with Terra Firma we couldn’t meet at EMI’s offices in West London because the TF people weren’t sure we’d be welcome….). His idea lived, because there weren’t 100 other people around willing to kill it, for all the weird and wonderful reasons we humans tell ourselves are legitimate at the time.

Size is why Zappos created value so quickly. Size is the biggest single threat to google and it knows it. It is why it gives its employees time to work on their own. To try and mimick the conditions in which the original business was created.

Online then David really is stronger than Goliath - and yet the notion goes against all evolutionary logic. It is completely counter intuitive.

It is in no way an original thought. Gladwell popularised the notion of a finite number of people within an organisational hub and I’m sure there is psychological work stretching back many decades on which he built his thesis. Plenty have made the point.

What is so extraordinary to me as I work with businesses now, 13 years later, is that it is still happening. Surely someone properly bright, someone with a couple of MBAs who speaks 4 languages and owns an expensive suit has, at some point, taken the CEO aside and had a chat?

What is even more scary is that this is happening in so many “traditional” businesses, businesses on which so many of us depend for our livelyhoods and pensions. Want a possible cause of the next financial crisis? Step up the old world meeting the new….

Massive household names, corporations which you just couldn’t even consider going broke, run by intelligent resourceful people, cant move. Its like they’re in one of those dreams where you wanna…..run……but……you…...just….can’t…..get…..any…..where

The fact bears repeating because of how amazing it is!

As a business you are making your survival exponentially less likely with every new employee you take on.

Its crazy. But its true.

This from Seth Godin here

soap in the bubble bath...

To remain healthy - media based communities need to remain in the same type of "people soil" in which they grew.

Bottom up tribes cannot be assimilated by top down organisations. One kills the other. Like soap in the bubble bath. The psychology is wrong.

Xfm, Delicious, EMI, Last.fm's, Myspace's, OD2 - the list is without end....

So what does this mean for Zappos? Will it grow, or decay?

The reason we loved Zappos was because it was perceived to be "owned" by the community. It genuinely seemed to gave a shit about its customers. With this key differentiator now lost - it now feels like its part of the ordinary, the mundane, the pedestrian, the mainstream.

Can any asset like this survive outside the community from which it was borne? I'm not sure....

the 6 c's of social media marketing...

This is something I wrote as the first in a series of articles for our company blog / email

The C’s of social media…

Social media is hot. Everyone wants their campaigns to be social – their advertising to be viral - but what do we actually mean by social media?

Social marketing is a phenomena quite unlike any other that the web has seen. Its effects will be felt throughout our society for years to come. We as a species are rediscovering our connectedness and some would argue our humanity. The late, great Douglas Adams put it very well…

“We are natural villagers. For most of mankind's history we have lived in very small communities in which we knew everybody and everybody knew us. But gradually there grew to be far too many of us, and our communities became too large and disparate for us to be able to feel a part of them, and our technologies were unequal to the task of drawing us together. But that is changing.”

For the full text click here

This epoch busting change will affect everyone. The old media (record labels, film studios and newspapers) are already feeling its full force. Many household name brands – EMI, the New York Times, ITV and The Daily Telegraph are fighting for their very survival. Some will not make it into the second decade of this century. These businesses have felt the effect first because of the ease with which their products can be shared. But make no mistake. All businesses in this next phase of the web’s evolution will need to meet similar challenges. It is by no means too late, but it is certainly time to give social marketing some serious time and thought. Take a very simple for instance.....

Right now, it is possible, by using a technology called “facebook connect ” to see in real time, which of your friends (or your friends’ friends) have bought a particular product, and what they thought about it. Yes the technology is in its infancy, no one is using it very well – but its coming - and the effect of this single application alone will be extraordinary - think how powerful the recommendation engine is on Amazon – now image the person writing the recommendation on every ecommerce site you visit is someone you know and trust.

The age of push marketing – where we tell “consumers” what to think about our brands is coming to an end. Have a read of this excellent blog called post advertising to find out more http://www.postadvertising.com/

So it’s a “big” topic – both in terms of scope and impact What I’m going to do over the next couple of month is to introduce you to a few of the pillars of social marketing – the 6 C’s (in a Dodgeball style…). Over the coming weeks we’ll take a look at them, see how they work in practice and what they mean for brands, they are, in order of importance:

- Communities
- Conversations
- Control
- Content
- Continuity
- Context

For anyone wanting to read more widely pick up copies of - Net Gain, Small is the new big or the Cluetrain manifesto - all essential reading for marketers of all ages and creeds.

how not to do it....the music industry

The trials and tribulations of the traditional record labels and their failure to engage in the digital world hardly require re-examination.

You don't need an MBA to figure out suing your customers and then expecting them to form an orderly queue at the record store is unlikely to produce a long term, mutually profitable relationship.

Present a 15 year old with the choice between an expensive, complicated and legal way of acquiring a product and a free, easy and illegal method and again, you don't have to have a masters in psychology to figure out the route most teenagers will go (and most adults for that matter).

The question is what could a business, that has so obviously got it wrong for so long, do now to turn the ship around?

Well, to begin with they need to understand the problem as it stands today. Unlike 5 years ago most people within music now understand that a 360 degree model is the way forward. There is little debate over the solution itself.

The issue for the record labels is that they are now taking a battering, not just from their customers, but other businesses within the sector, offering artists deals they simply can't compete with.

The labels look like the distinctly uncool dad at the skool disco.

Their only chance in my mind is for them to become a brand. The only value left in their businesses, once the publishing arms have been sold and the glitzy offices have emptied, is the significance and meaning associated with their name.

EMI, Chrysalis, Warners - those names still have meaning, not to their customers, but to the talent.

Hands at EMI and Bronfman at Warners will almost certainly fail. By VC standards Hands is already 6 months late in delivering a working business. The chance for reinvention perhaps is after they have gone and those companies are going cheap.

Join those brands with semantic web technologies which enable the better understanding of customer and talent - add city funding, in the form of tax efficient vehicles like VCT / EIS and you have a model for the future.