Confronting Complexity
Why the future of brands depends on learning to think differently
“While most people understand first-order effects, few deal well with second- and third-order effects. Unfortunately, virtually everything interesting lies in fourth-order effects and beyond.” — Jay Forrester[1]
Abstract
In a survey of 1,700 CMOs, the consensus was that their world is getting more complex and fewer than half felt prepared to handle it[2].
I believe that the world has always been complex, but we have managed to convince ourselves that it was merely complicated. This has had a profound impact on the way we think about brands: from our bias for analysis rather than action and our preference for simplicity and simplification.
This paper proposes a way for brands to confront the complexity through probing, sense-making and system building.
“For every complex problem there is an answer
that is clear, simple, and wrong.” — H. L. Mencken[3]
The structure of this essay
Down the rabbit hole
We discover the mechanisms that structure the markets in which brands operate and how small the difference between success and failure really is.
How deep does the hole go
We take a closer look at human behaviour and find complexity everywhere
Implications for how we think about brands
We learn why we need to analyse less and probe more
Launching a brand in a complex world
We apply this new way of thinking to getting a brand started
Growing a brand in a complex world
We continue applying this new way of thinking to taking an established brand further
Conclusion
We bring things to a close
Down the rabbit hole
“When asked, most IPA agencies would say that they are in the business of helping their clients create brands”[4]
“Brands help businesses build and maintain market share”[5]
“in most categories, a given brand’s market share is stationary, showing remarkable stability over long time horizons (10 years)”[6]
Despite £16 billion spent each year on advertising in the UK[7], the status-quo of most categories remains unchanged[8,9]. This is not a stalemate between equals, but the entrenching of a deeply unequal hierarchy with a few winners and a long tail of losers. [10,11]
In most categories, the distribution of market shares amongst brands follows a power law[10]. Brands are on average, two-thirds the size of their next largest competitor[11] and no matter how hard they try to break this pattern, there appears to be a hidden force pulling them back in-line: “the relative position of the players is only temporarily disturbed by their respective marketing activities”, these markets“are in a long-run equilibrium” [12]
These patterns are so common and so enduring that there must be something going on behind the scenes to create them. How can there be so much similarity across such a wide variety of categories, brands and tactics? These patterns have not been imposed top-down, so what is it that causes them to emerge bottom-up so frequently?
“There is some evidence that the probability of choosing a brand is increased if, first, the same brand has been chosen before (habit) and if, second, it is seen to be chosen by other people (conformity).”[13]
It turns out, these macro-structures emerge out of two simple and related micro-motives[14]:
- We are more likely to buy what we have already bought.
- We are more likely to buy what others are buying.
These heuristics save us from expending an enormous effort balancing the pros and cons of every purchase decision. But the consequence of these shortcuts is that people behave in ways that reinforce any inequalities between brands in a category. They create a cumulative advantage where the rich-get-richer and the poor get left behind.
“When people tend to like something that other people like, differences in popularity are subject to what is called cumulative advantage, meaning that once, say, a song or a book becomes more popular than another it will tend to become more popular still”[15]
The existence of cumulative advantage is well documented. In Eating the Big Fish, Adam Morgan has catalogued some of the many ways in which large brands gain an advantage over smaller brands: large brands have to spend proportionately less to maintain equilibrium, they have both more customers and more frequent customers and their higher total spontaneous awareness results in exponentially more top-of-mind awareness and preference.[16]
But while the existence of cumulative advantage may be familiar, if we really think through its implications, we end up in a very strange world indeed.
In the absence of cumulative advantage: “If we were to imagine history being somehow ‘rerun’ many times… explanations in which intrinsic attributes were the only things that mattered would predict that the same outcome would pertain every time.”[15]
By contrast, when cumulative advantage is present “even tiny random fluctuations tend to get bigger over time, generating potentially enormous differences in the long run”, the upshot being that “even identical universes, starting out with the same set of people and objects and tastes, would nevertheless generate different cultural or marketplace winners”[15]
How can this be? How can a brand’s intrinsic attributes not be the ultimate source of performance? As an industry, our language betrays a belief in the value of the things a brand has, “we talk of brand essences (unchanging), brand values (abiding), brand architecture (surely built to last)” [17]. Brands are supposed to succeed because of the properties they have baked-in.
To be fair, in experiments designed to test the effects of cumulative advantage, intrinsics were not entirely irrelevant. The very best items never did terribly and the very worst never actually won, but in the vast majority of cases almost any outcome was possible each time the experiment was run.[15]
We can see this in action, by the fact that market share is better explained by the order each brand entered the market than by any measure of brand utility. (Pioneers have an average share of 29% vs. late entrants with a share of 13%)[18]. Once a brand is established as the market leader, their position becomes difficult to dislodge. It is inherently self-reinforcing.
“Many business strategies fail because they rely wholly upon the intrinsic qualities of the product to build market share and neglect the importance of creating the conditions, particularly the perception of the product’s popularity, that favour contagion and addiction taking hold.”[18]
How deep does the hole go?
“For the first time we can precisely map the behaviour of large numbers of people as they go about their normal lives”[19]
“digital breadcrumbs…, when pulled together, offer increasingly comprehensive pictures of both individuals and groups,
with the potential of transforming our understanding of our lives, organisations, and societies in a fashion that was barely conceivable
just a few years ago.”[20]“the Web becomes a gigantic informational ecosystem that can be used to quantitatively measure and test theories of human behaviour and social interaction.”[21]
In 1969, sociologist Morris Zelditch asked “Can You Really Study an Army in a Laboratory?”[22]. At the time, the conclusion was that you couldn’t. Half-a-century later, researchers have realised they don’t need to. Through the “digital breadcrumbs” we all leave behind, researchers can observe the dynamics of mass human behaviour directly in the wild .
For example, our mobile phones track both our location and also, through the calls and messages we send and receive, our social networks. This information, it turns out, is better at predicting people’s spending behaviour than information on the individual’s personality[23].
The more we look at how people really behave in society, rather than how they say they behave or how they behave in isolation, the more we realise that it is the interactions between people that really matter. And this makes the world complex, not complicated.
“What makes the social world complex isn’t individual complexity but the way people go together, in often surprising ways, to create patterns”[24]
Something is complicated when it lacks simplicity, something is complex when it lacks independence, when the sum is greater than its parts. A jumbo jet is complicated; mayonnaise is complex[25].
Complex systems are characterised by[27]:
- Interconnectedness
- Feedback (both reinforcing and balancing)
- A memory of the past that impacts on the present
- Self organisation and spontaneous order
- Emergence of behaviour cannot be explained by the sum of its parts
- Non-linearity such that small changes can produce disproportionately larger results
- Tipping points and thresholds
- An ambiguity surrounding cause and effect: A causes B and B causes A
- They are predictable looking back, unpredictable looking forward
The more people study mass human behaviour, the more they come across the characteristics of complexity.
“If you want to study a river you don’t take out a bucketful of water and stare at it on the shore. A river is not its water, and by taking the water out of the river, you lose the essential quality of river, which is its motion, its activity, its flow.”[26]
Our attention is bursty
Analysis of the the phone calls we make, emails we send, webpages we visit, files we print, even the library visits we make has shown that human activity isn’t distributed evenly through time, it is “bursty”. We work, live and play with short flourishes of activity followed by long gaps of nothing. [28]
We interact in flocks
Much like flocks of birds or schools of fish and swarms of insects, the simple rules that govern people’s interactions with each other cause the spontaneous creation of flocks, groups of people whose behaviour is closely interlinked. Out of these rules — separation, alignment, and cohesion — emerges a wide variety of complex and unpredictable behaviours.[29]
We naturally organise around hubs
The same cumulative advantage mechanic we saw earlier has also been observed at work in networks of all kinds: the links between webpages to the connections between people. With networks it is called preferential attachment because, as the network grows, each new node has a preference for attaching with larger nodes in direct proportion to the size of the node. The result is the formation of a few very well connected hubs coexisting with many poorly-connected nodes.[30]
And separate into cliques and communities
The presence of homophily, “the conscious or unconscious tendency to associate with people who resemble us”[31] in a network, will also cause it to separate into clusters of like-minded people.
And when like-minded people get together, they often end up thinking a more extreme version of what they each thought before they started to talk to one another.“Social networks… operate as polarisation machines because they help confirm and thus amplify people’s antecedent views”[32] .
Networks act are amplifiers
This illustrates a wider emergent property of networks: “Social networks tend to magnify whatever they are seeded with”[31]. “Social influence determines to a large extent what we adopt and when we adopt it.”[34] Our likelihood of picking up on something circulating through the network increases as more of our connections pick up on it. However, this “doesn’t generate any new information, it only amplifies the consequences that a little bit of information can have, whether it is real information or not”[24]
Allowing rumours to find a life of their own
During the 2011 London riots, the Twitter rumour-mill sprang into action. Rioters had released animals from London Zoo. People had broken into McDonald’s and were cooking their own Big Macs. The London Eye was set on fire. A children’s hospital had been attacked. And the army had been deployed at Bank. None of these rumours were true, but that didn’t stop many users passing them on as fact. [35]
Rumours start “when a group of early movers… say or do something and other people follow their signal”.[36]. As a rumour is passed on, it may get modified. Some form of “evidence” may be added or it may be reformulated and re-expressed. Others may challenge its credibility through argument or new information. At which point, an evolutionary process may take over and the rumour may converge on a consensus form.
“Ideas don’t spread because they are good.
Social media acts as a petri-dish for ideas, the
variants best suited to selection pressures win”[37]
“Ideas get transformed, repurposed, or distorted as they pass from hand to hand, a process which has been accelerated as we move into network culture. Arguably, those ideas which survive are those which can be most easily appropriated and reworked by a range of different communities.”[38]
It is entirely possible for different forms of the rumour to thrive amongst different groups of people, each finding their own cultural niche.[36]
Where the rumour is false, “it may nevertheless re-surface as latecomers pick up the original tweet and join in.”[39]
Bringing it back to brands
“Brands will need to find a place in this swirling, memetic media system where all sorts of information freely flows: word of mouth, fashion, trends, imitation, flattery, truths, half-truths, rumour, panic, entertainment, news, deals, alerts, brands, friendships, passions, tastes, memories, moods — pretty much everything that makes up our personal and professional lives”[13]
It is clear that, this is a system where “the whole becomes not merely more, but very different from the sum of its parts”[40].“Nonlinear complex dynamics are around us: unpredictable variability, tipping points, sudden changes in behaviour, hysteresis — all are frequent symptoms of a non-linear world”[41].
This isn’t how we usually thinking about the world brands occupy.
Implications for how we approach brands
I believe that people (and therefore brands) operate in a complex world, one which we, as an industry, have mistaken to be complicated one.
The Cynefin (pronounced kuh-nev-in) framework[42], developed by David Snowdon whilst at IBM, provides a useful illustration of the difference between complicated and complex systems and also the difference between how we should respond to each.
Our history with Sense — Analyse — Respond
Account planning originated to be the analysers of the agency world. A planner “was charged with ensuring that all data relevant to key advertising decisions should be properly analysed, complemented with new research and brought to bear on judgments of the creative strategy”[43]
The classic planning cycle[44] follows the sense (“where are we?”), analyse (“why are we there?” and “where could we be?”) and response (“how could we get there?”) approach because it assumes that a direct link between our planned actions and desired effects can be found.
Research is commissioned. Agency expertise is applied. The right analysis will uncover a way forward. It will allow us to take the complicated and make it simple. And if for some reason we don’t succeed, our failure must be as a consequence of improper analysis: “I suspect that our weakness… is more often failure to analyse fully the data we’ve got”[44] and therefore calls for yet more research and better experts to turn things around.
If, instead, we are actually operating in a complex environment then forecasting “where we could be” is futile. More analysis won’t help anybody because the relationship between cause and effect can only be knowable in hindsight. No amount of prior analysis can provide certainty that doing A will indeed lead to the occurrence of B.
“When you make the complicated simple, you make it better. But when you make the complex simple, you make it wrong”[45]
The pitfalls of Sense — Analyse — Respond
“Failures [are] caused by… flawed executive mindsets that throw off a company’s perception of reality [and] delusional attitudes that keep this inaccurate reality in place”[46]
In a complicated world we should sense, analyse and respond. In a complex world we should probe, sense and respond. If we treat a complex system like a complicated one our analysis is likely to lead us astray.
Michael Raynor calls this the Strategy Paradox: “organisations that embody what would seem to the best practices in strategy planning… can also be the most vulnerable to planing errors.”[47]
He provides a new take on the failure of Sony’s Betamax to illustrate his point. Sony expected people to use VCRs to record their favourite TV shows. Every one of Sony’s decisions was geared around better serving that need (e.g. higher quality, shorter play length tapes). When consumer demand shifted towards watching renting movies, it happened far more rapidly than anyone in the industry anticipated. Sony moved quickly to eliminate the initial advantage held by Matsushita (and their lower quality, longer play length tapes), but to no avail.
Raynor argues that the main cause of strategic failure is not a bad strategy but a plausible strategy that turns out to be wrong.
It’s tempting to think that more or better analysis could have saved Betamax. Looking back, it is obvious that people would want to rent movies at home. But at the time, no-one could be that certain. Both Sony’s and Matsushita’s strategic choices were plausible, and we can’t be sure that in a do-over Sony wouldn’t come out on top. In fact, many of the choices Sony made with Betamax, Apple also made with the iPod, and that time round things did play out very differently.
The reality is that, in a complex world, planning only provides the illusion of certainty and control when, in fact, neither exists. This can be especially dangerous when it blinds us to any other possibilities.
Probe — Sense — Respond
“The world can only be grasped by action, not by contemplation”[48]
If we are to dismantle the traditional planning process, what should we replace it with? If we can’t make predictions about the future, how do we increase our odds of success?
I believe their are three key shifts we need to make:
- From planning to searching
- From reacting to proacting
- From simplicity & consistency to diversity
Searching beats planning
We need to openly acknowledge that there are limits to what can be planned and predicted. At the same time, we mustn’t start thinking that anything goes. If we are to consistently improve our odds of success we need to find a way to act systematically and strategically in this new world.
“A planner thinks he already knows the answer… a searcher admits he doesn’t know the answer in advance.” [49]
Searching acknowledges we don’t know what we don’t know. It keeps us open to alternatives and primed for the unexpected. Searching is optimistic that there is a way forward, but pessimistic about the map we are holding.
Proaction beats reaction
Typically, research provides the fuel for the planning process. But in a complex world Market Research cannot be predictive it can only be descriptive. But, as searchers, we will be less interested in describing how the world is and more interested in finding ways to change it.
In his book, Cultermatic, Grant McCracken cautions: “more responsiveness is always a great idea. But it’s a passive resonse. It waits for the world to act, and only then does it react, trapping the coporation in a feverish game of catch-up.”[50] He urges us to be“more aggressive and proactive.” .
We are not reacting to the world, but “poking the world with a stick”[51] to see what happens. We can’t do this by taking measurements first, we must proactively engage the world and track everything that happens as a result.
Diversity beats simplicity
When Instagram was acquired for $1 billion, it became a poster child for the virtues of both simplicity of execution and also simplicity of strategy. Co-founder, Kevin Systrom, attributed the apps success to “focusing on one thing and doing it really, really well”.
This makes intuitive sense in hindsight because we know that Instagram focused on the right one thing. In reality though, Instagram actually started life as the far from focused Burbn, a check-in app geared around making future plans with friends and earning points for hanging out with them. Pictures was something it did on the side.[52] If Instagram had done only one thing from the start, it probably would never have stumbled onto the potential of social photo sharing.
The purpose of probing the world is to learn something about it. We learn the most by exploring widely rather than deeply. “The only way to get a good idea is to get lots of them, even to let them proliferate independently and compete for primacy.”[50]Track everything and move on from anything that doesn’t seem valuable.
Simplicity is fragile: it succeeds if it happens to be focusing on the right thing at the right time, but it also leaves the brand open to Betamax-esque failures. In contrast, diversity is robust, it can withstand rapid changes in tastes and behaviours. All bets are hedged.
Launching a brand into a complex world
“Most marketing funds are spent on tit-for-tat rivalry rather than pioneering marketmaking”[18]. This is understandable given the high risks involved (35% to 45% of fully commercialised product launches fail [53]). However, the rewards of successfully pioneering a new market are not incrementally higher, they are exponentially higher: “a study of Unilever would suggest that around 70 percent of its profits come from brands that created the category in which they are generally brand leader.”[54]
Pioneers enjoy both sales dominance and sales resilience in the face of competitive challenges. Other brands may enter later with better products and lower prices, but they will be destined to play catchup.
How do we approach the challenge of pioneering a new category if analysis cannot be relied upon? How should we now probe our way forward?
“Most brilliant entrepreneurs don’t begin with
brilliant ideas — they discover them”[55]
Google leave their investors with no doubt about their approach to funding speculative new ventures: “We will not shy away from high-risk, high-reward projects because of short-term earnings pressure. For example, we would fund projects that have a 10 percent chance, [placing] smaller bets in areas that seem very speculative or even strange. As the ratio of reward to risk increase, we will accept projects further outside our normal areas, especially when the initial investment is small… most risky projects fizzle, often teaching us something. Others succeed and become attractive businesses”[56]
The key here is small bets. Big bets and big ideas need to be fail-safe. So much is invested in them at the outset that they cannot be allowed to fail. The focus is on matching the size of investment to the assumed size of the expected gain.
In contrast small bets can be safe-fail[42]. They limit the initial investment so that both success and failure can be entertained. The focus is on how much the organisation can afford to lose in pursuit of ideas of indeterminable value. If the ideas show promise then initial success can be amplified, if they don’t then any damage can be minimised.
The small bets approach is necessarily resource-light, but is ideas-intensive. It demands a quantity and diversity of ideas that most organisations are not geared up to deliver.
Generating Options
In the early 1990s, a psychologist, Kevin Dunbar setup cameras in four scientific labs to find out where breakthrough ideas came from. He found that “the ground zero of innovation was not the microscope. It was the conference table”[57]. Steven Johnson looked into this research plus much more for his book Where Good Ideas Come Fromand found that “the trick to having good ideas is not to sit around in glorious isolation and try to think big thoughts. The trick is to get more parts on the table.” “we are often better served by connecting ideas”[57]
This works best if we can find a way to make long-distance connections between distant and divergent ideas. To do so, we will need to consciously replace our natural homophilia with a hetrophilia, cultivating diversity in both our personal and professional networks.
At the 2008 APG Battle of Big Thinking, inspired by the birth of the Guggenheim out of a meeting between “two seemingly opposite minds”, Graham Fink proposed pairing each one of the 250 audience members with “someone from outside their industry/profession, e.g. a speedboat designer with an advertising creative; an air-traffic controller with a marketing strategist.” to see what see what valuable new ideas might be created.[58]
In 2014, we don’t need Graham Fink to help us. We have all the tools we need to create our own social networks of opposites.
Prototype
On their own ideas are ethereal, if they are to engage with the world they need to be given form, they need to be made concrete. In the spirit of safe-fail, we are looking for the shortest, most efficient and economical method for making ideas concrete. A prototype is just that: an idea made tangible enough to provoke a response.
If you were to develop a head or body mounted camera for use during action sports, you probably wouldn’t develop something that looked quite like a GoPro does. It’s form factor is obtrusive, clunky and not a little goofy looking. Now that the GoPro is a success, these attributes form part of the brand’s visual distinctiveness, but, they are really vestiges of the many prototypes Nick Woodman created to test his ideas on the world. Starting with a strap that tethered an existing 35mm camera to the wrist of surfers[59]:
Test in Culture
Prototypes don’t have to be product prototypes. Brands and communications can be prototyped as well, so long as they are given a form that allow for testing in culture rather than testing in a research facility. Brands and communications are cultural products, for which we are trying to “find a place in this swirling, memetic media system”[13]. We cannot take a bucketful out of the river or put an army into the lab, to get a read we have to put something out into the world.
Kickstarter is one such environment where both products and cultural products compete, from fashion to product design, consumer technology to art, music and photography. Each Kickstarter page showcases an idea brought to life just enough to gauge the world’s response to it. And if the response is good, the ideas get developed further.
“This is the advantage of the Culturematic. It’s not stuck in a lab. It’s out there in the world… it doesn’t insist on its glamour or its usefulness. It’s prepared to sink or swim. It is unassuming and hardworking”[50]
Feed a hit, starve a flop
“With conventional planning, it is considered appropriate to fund the entire project as the expectation is that one can predict a positive outcome.”[63] In a complex world, we need to maintain a flexibility in funding projects. We need to be be able to withhold funding from initiatives that don’t show promise so that we may double down on those that do. Ultimately, we are trying to create a feedback loop of our own that amplifies successes and dampens failures.
This will work best if the we can minimise the lag between probing and sensing. “Much information arrives too late to be of use in strategy making”[64]. It takes time to record the information, to aggregate it into reports, to have the reports presented and therefore “hard information is fundamentally historical”.
We are not trying to forecast into the future, but we are looking to get a clearer picture of how we’re doing now. Search and social data can provide this picture without the lag. Smart use of search data can be used to predict the present [65] and social data to even predict the near-future.[66]
“We are not claiming that Google Trends data help predict the future. Rather we are claiming that Google Trends may help in predicting the present. For example, the volume of queries on a particular brand of automobile during the second week in June may be helpful in predicting the June sales report for that brand, when it is released in July.” [65]
Rinse and repeat
Once we know what is taking hold in the world, we have learned something about the world as it stands. At this point, we want to be able to learn from early successes and increase our odds of doing more that works. We need to turn prototypes into templates for future hits.
Rather than rigid templates that trade diversity for consistency, we need generative templates that produce a diversity of new ideas from a prototypical example. Think of how TV formats are originated and evolve, for example, how the original success of MTV’s The Real World spawned Project Runway, Wipeout, Ice Road Truckers, Jersey Shore, American Idol, Big Brother and the rest of the reality TV genre.[50] Or how HBO mined the margins of society to create Oz, The Sopranos, Deadwood, Big Love and Six Feet Under [50].
We can even evolve new ideas by cross-breeding established templates with each other to produce sub-genres and hybrid-genres, just as reality TV meets Desperate Housewives and the CSI franchise to produce The Real Housewives and The Real CSI.
Portfolio management
The role of brand strategy becomes less about plotting a path into the future and more about creating a portfolio of options that will serve the brand well whatever the future may hold.
Therefore, the success of a brand team and their agencies should not be the success or failure of any one idea — if were to imagine rerunning history, there are no guarantees that winners wouldn’t become losers and vice-versa. Instead the ultimate measure of success should be the fertility and resilience of the whole portfolio offset against the investments made into the portfolio.
Application to RadioShack
RadioShack, the US consumer electronics retailer, are not strictly speaking a new brand, but they are a brand in a tail-spin being forced to close 1,100 stores after seeing a 20% year-on-year decline in revenue. They are currently banking on a new brand positioning and an award-winning Super Bowl spot to turn things around.[60] What if they did something more fundamental? What if instead of fighting to regain lost ground, Radio Shack started searching for a new category to pioneer?
Could they take a lead from Odeo, the podcasting network, whose founders feared the worst when iTunes began dominating the podcast marketplace. They gave employees two weeks to come up with a new business idea[61], and within a month they had created a prototype for the status-updating micro-blogging platform that would become Twitter.[62]
RadioShack has all the raw materials it needs to search for the next great consumer electronic product. They have the components on shelf, they have technical expertise on staff and, crucially, the customers they do have come from a wide variety of backgrounds, with a wide variety of projects ideas already on their minds. Putting this all together: how many potential product prototypes could they have working if each one of the 1,100 stores spent two weeks looking for the next Radio Shack business idea?
Rather than commissioning their agency to produce a celebrity-packed Superbowl commercial, what if they were to invite the agency to ride-along and document the many ideas coming into fruition and stories behind those ideas? What if all of these product and cultural prototypes were placed into competition with each other and the rest of the world on social media and Kickstarter?
At the very least, they would have hundreds of expressions of their “It Can Be Done, When We Do It Together” ethos. And instead of rolling the dice on a single fail-safe spot, they would have hundreds of safe-fail prototypes, out of which, a few might emerge and prove themselves worthy of a Superbowl media buy.
Growing a brand in a complex world
Given that the market share of most brands remains stable over long time-periods. It is fairly safe to assume that “if you find a position that works today, something quite substantial must change for it to stop working tomorrow”[67].
The flip-side, is that something substantial must also change for the brand to suddenly start performing more positively. Cumulative advantages build slowly and decay slowly. Whatever the brand does from one moment to the next has the long-arm of history to contend with.
This explains why “the relative position of the players is only temporarily disturbed by their respective marketing activities”[12]. Focusing on increasing sales in the short-term does little to change the underlying mechanics of the marketplace in the long-term.
Les Binet and Peter Field have demonstrated that “a succession of short-term response campaigns will not achieve the same level of business success over the long-term as a campaign designed with year-on-year improvement in mind.”[74]. I believe brands can achieve that year-on-year improvement if they make their short-term focus the accumulation of cumulative advantage through which both current and future sales will flow. That way the short-term gains can be compounded over the long-term.
I propose a system for building this cumulative advantage based on:
- Anchoring the brand to existing habit loops
- Making usage of the brand easier to copy
- Developing internal capabilities
“If you do something every day; it’s a system. If you’re waiting to achieve it someday in the future, it’s a goal.”[68]
Anchor the brand to existing habit loops
Habit loops are made up of a cue that triggers a routine that ends in a reward. The reward then reinforces the link between the cue and the routine in memory[69]. This is a reinforcing feedback loop: A causes B cause C which in turn increase the propensity for A to cause B.
Brands that are triggered by more cues or more frequent cues have an inherent advantage. The more often the cue occurs, the more often the brand is used and the more often the loop is reinforced, further embedding the brand’s advantage.
When P&G first created Febreze, they launched it as “a revolutionary way to destroy odours”[69]. They tried “to create a whole new habit with Febreze” hoping that bad smells would trigger daily usage. Unfortunately, this limited the potential of the brand, because “people couldn’t detect most of the bad smells in their lives… even the strongest odours fade with constant exposure.” To turn the brand around, they changed the anchor, from anchoring the brand to bad smells to anchoring it to the end of the cleaning ritual. They “piggyback[ed] on habit loops that were already in place” by reframing Febreze as an “air freshener used once things are already clean”.
Make using the brand easier to copy
We are more likely to buy what others are buying, but not because existing users actively recruit new users to the brand. The action is not users influencing non-users, but non-users imitating users. And for a imitation of a behaviour to occur, that behaviour must be visible enough to copy. “Social learning is visual theft”[70].
Making brand usage easier to copy is another point of leverage for a brand looking to accumulate cumulative advantage. For example, out of all the photos and videos shot each day, most are taken and shared without much visibility of the brand used.
Canon’s decision to paint the outside of some of their pro-lenses white (to protect the lens from overheating when shooting under strong sunlight), created a very visible behaviour that is easily noticed and imitated, driving the brands ubiquity at sporting events.
As mentioned earlier, GoPro has a visual distinctiveness that boosts copying. The brand team have also gone further to raise the visibility of the brand. They encourage, distribute, and even polish users’ footage. They search the web for footage shot on a GoPro and provide a platform for the videos. A single video of a firefighter rescuing a cat from a burning building was watched 18 million times on YouTube. It has also created new software that makes it easier to edit, share and tag the footage leading to a GoPro-tagged video being uploaded to YouTube every 20 seconds [71].
Develop capabilities, especially learning capabilities
There is a third source of cumulative advantage that is easy to overlook. It doesn’t exist outside the brand in habit cues or imitation cues. It exists inside the brand teas (and their agencies) in the experience and capabilities that those teams have accrued. Specifically, it exists in the things the teams have learned to do especially well, especially quickly and/or especially cheaply.[67]
Red Bull have an “accumulated body of production and distribution expertise” built up over 20 years filming action sports[72], including over a decade working with Felix Baumgartner. Other brands could have conceived of Stratos as an idea, but not other brand had thecapability to pull it off. Not without going on the same long-journey as Red Bull, and even then, they would be destined to play catch-up.
Some brands go further still and develop a meta-capability: they learn how to learn more effectively.
“Pixar is as close to a constant learning organisation as there is”[55]. They have evolved from the manufacturer of computer hardware via the creation of animated shorts and TV commercials into the feature film producer we know today, driven by a “prolonged and determined efforts to counter the natural human reactions to success by aspiring to proactively (and honestly) seek-out and solve new problems constantly.”[55] They not only put prototypes out into the world (their feature films often start life as a digital short), they treat the entire organisation as a prototype. Nothing is set-in stone, everything is a hypothesis under study.
This is the mindset brands need to cultivate if they are to compete in a complex world. “Brands need to be about becoming, not being” [50]
“we cannot afford to think of strategy as something fixed, a problem that is solved and settled. Strategy… has to be embraced as something open, not something closed. It is a system that evolves, moves and changes.”[73]
Application to RadioShack
While RadioShack are searching for the next new category to pioneer, they could also be looking at ways to improve the cumulative advantage of their existing business. Closing 1,100 stores reduces overheads but also reduces both physical availability and mental availability (fewer store fronts reminding and refreshing the memory structures of passers by). This could create a negative spiral of feedback eroding any advantage the brand may have once held.
This is all the more critical now that all consumer electronics retailers are forced to compete with the likes of Wal-Mart and Amazon. Two brands that have built up massive cumulative advantages of their own.
Wal-Mart’s habit loop goes from the need to stock up (cue), wandering the aisles of a superstore (routine) and then getting everything in one place at low prices (reward). Showrooming behaviour allows Amazon to piggyback on traditional retailers loops: a need arises (cue) they browse at a traditional retailer (routine) and then get it cheaper online (reward).
In both cases the reward is stronger RadioShacks loop: a need arises (cue), browsing RadioShack (routine?), getting the item (reward?). RadioShack can’t sell items cheaper than either Amazon or Wall-mart, instead it needs another way to improve the reward at the end of their habit loop. Again, what if RadioShack used the electronics specific expertise it has (which neither Amazon nor Wal-mart have developed to the same degree) to give each customer more than they bargained for? What if they experimented with providing a different electronics life-hack with each purchase?
Need a new webcam (cue), head to RadioShack (routine), get the item and advice on how to light yourself properly (reward).
In each case we are providing a stronger reward to better reinforce the habit loop and the idea that “It Can Be Done, When We Do It Together”.
These RadioHacks would become even more powerful if they made shopping at RadioShack more visible to others. What if they providedRadioHacks that left a visible trace, that become the brands equivalent to the Canon white lens, things that are noticed by virtue of breaking conventions.
For example, somebody needing a new adapter for a USB phone charger (cue) might head to RadioShack (routine) and learn how to turn some of their wall outlets into USB chargers (reward). This provides a home improvement project to document in social media (you wouldn’t share the purchase of a USB charger, but you would share this), and more importantly there would be a permanent visual cue of the rewards of shopping at RadioShack.
All in all, between the search to pioneer a new category and experiments to boost the reward and visibility of shopping at RadioShack, the brand could be sending a broad portfolio of probes out into the world, they could be focusing on initiatives that have a chance of compounding over time and they could be creating an organisational mindset that is proactive in tinkering and improving the brand rather than rigidly sticking to and efficiently executing a losing formula. Most importantly, this approach should help RadioShack probe-sense-respond rather than sense-analyse-respond. After all, theyare probably not where they are today because they did their analysis wrong, they are here because they did their analysis right but the world changed around them in ways they couldn’t predict (but are now obvious in hindsight).
Conclusion
I used to believe that world was complicated and our job was to make it simple. In reality, the world brands and people operate in is complex not complicated. It is highly interconnected with feedback loops everywhere.
These loops simultaneously prevent brands from gaining on larger competitors whilst making the environment they operate in highly unpredictable. But brands can succeed if they confront this complexity head-on and build their own capabilities and systems to search, probe, experiment, test and respond-to the world.
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