The Content Trap

24 min readFeb 11, 2019

Book 5 of 52 in the Mitch’s Notes Project

Why This Book?

Connections, not content, are king. Strategy is knowing where you will play and how you will win. Studying your businesses’ connections will improve your strategy. The Content Trap provides a framework for identifying the user connections; product connections; and functional connections that will help you know where to play and how to win.

Companies that flourish in a digital world have focused on establishing and fostering connections rather than creating the best content. Success comes not from making the “best” content, but from recognizing how content facilitates user connections; it comes not from protecting the value of content at all costs, but from unearthing related opportunities — product connections — close by; and it comes not from mimicking competitors’ best practices, but from seeing functional connections — choices that are part of a connected whole.

You should buy the BOOK.

About the Author:

According to his Harvard Business School Bio: Bharat N. Anand is an expert in digital strategy, media and entertainment strategy, corporate strategy, and organizational change. His work has examined competition in information goods markets, focusing on two central challenges that firms face in these markets: “getting noticed” amidst the increasing clutter of alternatives available to consumers, and “getting paid” for what they produce.

Category: Marketing; Strategy

Mitch’s Summary

This book has a distinct media bent. I believe, however, that many of the lessons are broadly transferable to startups and business in general.

What is in it for you? AKA Questions the Book Inspires.

Do you have the right mindset for the digital age?
What are the user connections, product connections, and functional connections currently available to your business? How can you use these connections to get noticed and get paid?
What is the game you are playing and how are you going to win?
Can you see the forest and the trees? How are the small things in your business tied to the big things?
What positive network effects could you create?
How can you bundle connections to maximize profitability?
How can you engage, mobilize, and monetize crowds?
How can you use connections to more effectively manage fixed costs?
What complements exist that could be used to improve the value of your offering? How should you price complements? Can you own your complements?
Are there spillovers available in your industry or business?
Should you be expanding your offering?
Is there more or less value in product diversification?
What context do you operate in? What are your priorities and when are going to say no? How are you different? What connections have you created to prevent competitors from mimicking and winning?
Should you rethink your advertising?
Are you truly disrupting and substituting , or are you merely a complement?

Where Should You Start?

Start with the right mindset and the books introduction. Bharat Anand believes that success in the digital age will be achieved by people that possess the following:

It’s a mindset that I came to see in people who have managed or led digital change successfully. They are humble in recognizing what they can’t control, yet primed to take advantage of what they can. They don’t claim to know every answer, but are confident about asking the right questions. They are unafraid to go against the grain, to try something different. Throughout, they are able to see the forest and the trees.
And that is, ultimately, the central message of this book. Getting things right requires understanding how small things are tied to big ones. More concretely, it requires three things: seeing how what we do is increasingly linked to what others do; looking beyond where we play to bring related but invisible opportunities into focus; and recognizing how what we do is impacted by where we are.

Introduction

There are two problems for digital companies: 1) getting noticed (in an exponentially noisy world) and 2) getting paid.

These two main problems are compounded by three common management errors.

Obsessing over isolated triggers rather than recognizing the conditions that make them spread.
Wanting to preserve content at all costs-rather than seizing the opportunities around it.
Mistaking strategy for universal solutions — the search for best practices and the belief that there is one “right approach.”

The antidote to these problems and management missteps is to focus on connections.

Connections, I will argue in this book, are at the heart of what shapes any digitally touched business today and will for the foreseeable future. Being able to recognize, leverage, and manage connections separates companies that succeed from those that fail.

There are three types of connections:

User Connections — or, why to focus not on an event’s triggers but on why it spreads. Digital wildfires — the propagation of success or failure in digital businesses — come from close connections between individuals, more than the quality of content or any individual action behind it.
Product Connections — or, how hurt can actually help. Preserve the burning tree at all cost. In digital worlds, it’s focusing on a piece of content that may be destroyed, even if it’s your entire business. But smart strategy requires looking at tomorrow’s benefit rather than today’s hurt.
Functional Connections — or, why differences are not just natural but desirable. The most successful organizations see the entire map of functional links to understand the context within which each decision is made. They don’t look elsewhere for answers, but find their own. This is a fundamental principle of strategy. Strategic success doesn’t just benefit from being different from others. It requires it. If you aren’t different in business, you’ll die.

There is a counter intuitive lesson tied to each type of connection:

User connections: “Cater to every user”: Anand argues that “managing user portfolios is likely to be far more fruitful. This insight follows from understanding user connections.”
Product connections: “Narrow your focus”: Anand argues that “user centricity often requires broadening your horizons, and even diversifying your product portfolio. This insight follows from understanding product connections.”
Functional connections: “Saying yes” to your customer: “Understanding functional connections invariably requires saying no instead.”

Business strategy is about two questions: where should you play, and how will you win.

Part I: Classifieds — User Connections

Chapter 1: A Tale of Two Geographies

Norwegian newspaper company Schibsted and China’s technology giant Tencent are two companies that have aced the digital transformation because they paid attention to user connections.

The link isn’t the superior quality of products or the ability to innovate and bring new offerings to market first. The link is the ability to recognize and manage connections across users. This principle — user connections — is a critical concept for media, technology, and Internet organizations. But few get it right.

Chapter 2: The Real Problem with Newspapers

This simple difference has profound implications. While the economics of news depends on attracting readers one by one, the economics of classifieds is about connections between buyers and sellers. These come from “positive feedback loops,” or as they’re often referred to, a “network effect”: The more listings you have, the more buyers you attract, who in turn attract more listings. So while the decision to read print versus online news is made one reader at a time, the decision to go to a print versus an online classifieds site is determined by the choices of many.
The Internet didn’t kill news; it destroyed the classifieds subsidy. Where news organizations went wrong was not in failing to deliver faster, cheaper, better news online — to believe that is to fall into the Content Trap — but in failing to protect the classifieds subsidy or to profitably manage its migration online. Papers were beaten to the punch in capturing user connections in the digital arena.

Chapter 3: Networks

Network effects are all about user connections. They are perhaps the biggest reason why technology firms seem to behave so differently from more traditional companies — why they are obsessed with “free” models, fast growth, and rapid prototyping.
The more users of a networked product , the greater its value to you.

Direct network effects arise from connections between similar users. To identify them, simply ask: Does the product’s value to a buyer increase as more people buy and use it? Indirect network effects result from connections between different types of users or suppliers — in this case, customers and app developers. To identify them, ask: Does the value to one type of user increase as the number of suppliers or other types of users rises.

Network effects (or “network externalities,” as they’re sometimes called) are about connections between users. They are rampant in digital markets, as communication, sharing, and social have come to define success. As businesses continue to learn more about them, they would do well to keep four things in mind.

Product quality need not win — Content has been a curse. It causes you to think you can make what’s going to delight customers. It causes you to ignore user contributions. It causes you to focus on your own content rather than on how to get the best content in the world — content anyone can make.
Networks protect you from mistakes — Traditionally, the important question in product innovation was whether a company could systematically churn out good products. But for everything we talk about the innovative ability of successful Internet companies, very few companies have been successful serial disruptors; most have just done it once. Most still rely very heavily, and intentionally, on acquisitions. Network effects are what give them higher margins, deter competitors, and dramatically lower the cost of goods. Network effects are what give them a seemingly durable advantage.
Networks can be created — Why would a company work so hard to create a competitive advantage only to give it away? The answer speaks to Amazon’s sophisticated understanding of network effects. Create a fabulous warehousing network and, ultimately, so can others. Your competitive advantage will vanish. Create a retailing platform where anyone can sell to your customers and you’ve carved out an entirely different competitive position. Amazon wanted indirect network effects that would give it control over the entire e-commerce market, not just the
Networks aren’t the same as scale — The problem is not uncommon: confusing the benefits of scale with those of networks. Scale benefits come from fixed costs, network benefits from communication.

Content businesses everywhere tend to define themselves by their content. This is the trap. The power of content is increasingly overwhelmed by the power of user connections, of which network effects are perhaps the most potent form.

Chapter 4: Schibsted

Further, knowing how to create network effects was as important as recognizing the imperative to do so…This seemingly small difference — creating the conditions for user connections to arise naturally and spread virally, versus engineering them top-down — had profound implications:
By understanding the power of user connections, Schibsted had preserved — actually enhanced — the cash cow that had served its news operations for 150 years [classifieds]. Along the way it had reinvented the company’s culture. Network effects are the most celebrated form of user connections and one of the most studied areas during recent decades. Yet theory lags practice.
“Can we help readers help each other?” may seem an odd question for a news organization to ask. News, you might think, is something that’s broadcast; it isn’t “social.” But the question shifted [Schibsted’s news organization’s] mindset about what it did — from “being important” to “being relevant,” as one editor put it.

Chapter 5: The New York Times Paywall

The New York Times identified certain user profiles and successfully mapped the connections for each profile.

Digital Buffs and Print Subscribers
Paid Subscribers Versus Workarounds
Foodies, Cultural Avant-gardes, and Opinion Junkies

By bundling the two products and charging the same price to every customer, you can increase revenue by 25 percent — even though the products are unrelated in use and even though the bundled price is a 40 percent discount off the sum of the individual prices!
Their key insight was that the real value of bundling came not from combining products that were similar but from combining customers with different preferences.
The design and philosophy behind the Times’s paywall is a case study in successfully managing customers with different preferences, and recognizing how their decisions were connected. There were connections between print subscribers and digital hard-cores. There were the connections between readers willing to subscribe and ones who never would. There were the connections between opinion junkies and cultural avant-gardes. And there were connections between readers and advertisers. None of these connections had anything to do with network effects. But they were no less important in affecting user behavior, shaping the design of the paywall, and clarifying the reasons for its success. Perhaps most important, recognizing these connections moved the Times away from pricing content — the trap it fell into in 2006 — and toward pricing these connections.

Chapter 6: Television: Connecting Streams

Give viewers the flexibility to purchase only the channels that they really want and they’d be better off since they pay proportionately less, one might think. But this logic misses a crucial point: Because ESPN and the Food Network would attract only their most loyal viewers in an à la carte world, they wouldn’t keep prices the same. They’d be able to increase them without losing their fans — making things worse for viewers.
For ten years I had tried to explain that cable companies are not media companies. They don’t sell content; they are infrastructure providers. Once you think of them in those terms, it’s much easier to imagine that they won’t be killed by the emergence of online media.

Chapter 7: Crowds

The opportunity, and the challenge, of connecting crowds takes different forms. First is the challenge of creating great content and then getting others to read and share it — often the most salient objective of crowd-based models. “It’s about creating a community, messaging between users,” Anil Dash told me recently…Sharing was the secret. Have your content shared, and it amplifies the incentives for people to contribute in the first place — creating positive connections or feedback loops. Otherwise the crowd will soon fade away.

First, the crowd needs to be clear on what content is wanted.
Second, you need to make it easy.
Third, a mechanism to sort the wheat from the chaff.

In other words, crowds require management. They require selection, incentives, and curation, just like contributors in any organization do. Most important, you need to connect them.
The notion of crowds as a model for content creation is just another version of the Content Trap: thinking that if you open up they’ll come, or that you’ll automatically have a robust content-generating model. It’s not enough to allow everyone to create content. You need to make sure you attract the right contributors.

Chapter 8: Cost-Based Connections

For this reason, fixed costs “connect” users. The profit from serving any single customer in a fixed-cost business is inextricably linked to that of serving every other. This means you can’t look at each user gained or lost in isolation — he or she affects profits and losses from all your other users. Lose just three customers out of a hundred in a fixed-cost business and your entire profit might disappear. This is the main problem media firms looking to embrace digital technologies face. It isn’t that customers are fleeing traditional content in droves, or that new digital products are far superior to them. It’s more often that they bear fixed costs.
Walmart’s success comes not (only) from a unique culture, from offering value-for-money products, or from its tough negotiators. It comes in large part from managing fixed costs better than its competitors.
The stories of Walmart and Amazon appear different, but their approaches to managing fixed costs are strikingly similar. Scale fixed costs over larger product volumes. Spread them across more product categories or stores. And find new revenue streams to lower the burden of fixed costs. For any company in a fixed-cost business, success depends on implementing these strategies.
Penguin Random House’s “insourcing” mirrored Amazon’s Marketplace and fulfillment strategy. Invest heavily in fixed costs to gain an advantage, then spread the burden not only across your business but across other businesses as well. Third-party publisher revenues brought the firm millions of dollars in annual revenue — not a bad outcome for a publisher confronting the long-term decline of its print business.
If you can’t reduce costs, increase your revenue. It’s a simple formula, but it’s hard to make it work.

Chapter 9: Chinese Connections: Tencent

The answers to these questions lie not in leveraging network effects or understanding price discrimination or managing fixed costs or creating platforms for user content. It lies in all these things. Perhaps more than any company, Tencent centers its entire strategy on user connections.

Tencent has succeeded because:

Relational identity became as important online as in the real world and Tencent figured that out early.
Cross pollinating networks on other networks. Games ← → IM platform strengthened each other.
Creating nonconvertible currency. Q coins allowed Tencent to won the connections.
Combining all these user connected networks into a mobile first platform based on specific user needs: curiousity about others, feedback from your firends, and comfortably interacting with others.
Tencent’s first stroke of genius was in recognizing this early on. Tencent’s road to victory didn’t come from better games. Its advantage, much like Microsoft’s twenty years earlier against Apple, came from the strength of its existing network. It cross-promoted its games…

Chapter 10: Create to Connect

They lead us to believe that traditional media is threatened by better and more varied digital content that lures customers in droves — when fixed costs are the real culprit.

But managing user connections doesn’t come naturally, and there are two reasons for that.

First, the center of gravity in organizations tends to be products, not users. The value of newspapers was thought to reside in news; of cable operators, in channels; of PC manufacturers, in ease of use of their devices. But the real value came from classifieds, pipes, and interoperability.
Second, the tendency is to treat as the unit of analysis the individual user, rather than connections between them. This trap is even more insidious than the first, arising as it does in organizations that are ostensibly user-centric or aspire to be.

Part II: Concerts — Product Connections

Chapter 11: Jerry Maguire

[The story of IMG founder and sports agent Mark McCormack]

[Mark] saw that someone like Palmer — an accomplished athlete with an appealing personality — had the potential not only to earn money off the course because companies could heighten their images from such endorsements , but also to take the sport to a new level .

No, the secret to understanding IMG’s success comes from a simple business principle — managing connections across products.

Chapter 12: Music

In other words, the real reason why artists didn’t appear to care about CD declines was that they had never made much money off CDs anyway. And the place where they had — live tours — was now booming.
Two products are complements if a user’s value from consuming both is greater than the sum of her values from consuming each alone. One way to think about complements is that the value of one product depends on the availability of another…Specifically, the demand for a product goes up when the price of its complement goes down.

Chapter 13: Apple and Complements

And the real lesson from Apple’s history is this: While the quality of its products can be directly traced to the factors like design, organizational makeup, and vision, the company’s fortunes have stemmed in large part from how well — or poorly — it has managed its product complements.
How did a product coming late to market, in an environment where a six-month head start can be crucial, overwhelm its rivals? The reason for the iPod’s early success came in large part from the availability of its software complement, iTunes.
Apple had transitioned from a company that churned out great hardware to one that also aggressively stimulated (music) content and software. It had transitioned from one that priced all its products high to one unafraid to price its complements low. It had transitioned from one that erected proprietary barriers everywhere to one that knew when to let them fall.

Chapter 14: Four Lessons About Complements

Expand your vision, not narrow it: To do this, ask what complements your customers find useful when they buy from you, not just what features they care about in your product alone. Growth and innovation often come not from offering better content, but from offering better and cheaper complements. They come from product connections.
Dare to price low— but know where to do so: Indeed the real lesson about complements pricing turns out to be this: Price according to where you have a competitive advantage, not just based on rules that make sense for others.
Exclusive connections: from industry complements to product complements: Complements are good. Proprietary complements are better.
Ask not what your core business is, but know when you’re someone else’s complement: Complements are marvelous when it comes to creating value for your customer. But when it comes to capturing that value, they invariably benefit at your expense. Consider razors and razor blades, printers and cartridges, CDs and concerts: In each case, one product benefits from lowered prices of the other. So it’s important not just to know what business you are in — an increasingly popular strategic question — but to know whether you’re someone else’s complement.

Therein lies perhaps the greatest challenge for content producers: Their future will depend not only on what they make but on how effectively they manage value-creating opportunities in adjacent areas. Otherwise complements will continue to capture value — often at their expense.

Chapter 15: A Detection Challenge

Diagnosing the music industry problem is not simply a question of seeing that CD declines are coincident with trends in file sharing. It requires separating cause from effect. The problem with the diagnosis stems from an age-old problem in statistical inference: separating correlation from causation.
We’re not good at recognizing connections. When we do, we often mistake positive connections for negative ones. Or we see a negative connection when no connection exists at all. There are at least three reasons for this difficulty.

A Problem of Mindset — Embrace a complements mindset instead — following value where it leads — and you’ll find new opportunities.
A Problem of Language — But many of the ideas of recent years — the blurring of industry boundaries, product convergence, and disruption — are neatly captured in a concept conceived by economists more than a century ago: the concept of a substitute.
A Problem of Data — The first task in any corporate change effort is to correctly diagnose the problem — the problem of “perception”…More data doesn’t pay — the right data does. And having the wrong data can be worse than having none at all.

Chapter 16: Spillovers

FOX’s NFL deal accomplished three things for FOX

Established them in 100% of the markets
Lead in effect for other programs that followed NFL broadcasts
Promotional strategy to draw in millions of viewers and cross-promote the rest of its lineup.

Try to explain the explosion in sports rights, cable fees, and superstar incomes by looking at direct popularity and you’d be hard-pressed to explain the phenomenon. Hits matter not only because of their direct revenue streams but also because of large indirect follow-on streams. They command apparently disproportionate sums not because they are popular assets but because of the spillovers they create across products and the complements that increase their value.

In summary, popularity doesn’t explain apparent overinvestment in hits; connections do.

Chapter 17: Getting Noticed

More effective, and increasingly common, are approaches that rely on connections. Rather than spend more, it pays to connect to known products. Such “informational spillovers” are paying off in a range of settings.

Negative spillovers with Tiger Woods’ fall from grace
Backward spillovers from the Da Vinci Code into Dan Brown’s prior books
Spillover across formats. Print promoting digital and vice versa.
Piggybacking less known content on established content is the product connection case for integration.
Brands provide informational connections. And thus, the stronger the informational ties across programs — say, because of a clearer brand image or a more distinct identity — the greater the benefits to brand marketing. The weaker the informational ties — because of widely varying product offerings or because consumers are well informed about each — the less one gains from emphasizing brands over products.

The delicious irony in all this is that a better understanding of product connections doesn’t require a better understanding of the product or of new technologies. It requires a better understanding of customers. Product connections are pervasive in so many arenas because they result from user behavior, not from managerial choices or new technologies forced on users.
The mantra “focus on what you do best” is one of the most common today. But often it’s not product focus that wins; it’s product connections.

Chapter 18: IMG

IMG’s story is a story of product connections. But it’s not just a story of complements, of spillovers, or of piggybacking. Instead, it’s a story of all these things.
IMG’s is a story of recognizing and managing connections. It’s a story of creating connections across products, talent, and life cycles, and benefiting from each one.
These examples call up the question: How do you make 1 + 1 = 3? It might appear a strange question — but it’s the only relevant question in portfolio management and corporate strategy. It’s the only test any executive or entrepreneur considering a business expansion ought to pay attention to. And it’s a question that forces you to look for connections.
Indeed, when looked at more closely, it turns out that the share of diversified firms that systematically outperform their focused counterparts over the long haul is a robust 40 percent — an impressively large figure. Diversification can pay off — if it’s done the right way.

Chapter 19: Expand to Preserve

Successful companies think more, not less, expansively about the products they offer and the businesses they compete in.
Product connections are the second part of the Connections Triad. Instead of defending your existing product at all costs, look for value-creating opportunities beyond it. Instead of defining your business in terms of the “content” you make, recognize when you’re someone else’s complement. Instead of fighting every fire that comes your way, find the seeds of regrowth amid devastation.

Part III: Context — Functional Connections

Chapter 20: A Digital Contrast

In other words, at the center of The Economist’s appeal is not a celebration of a large and diverse set of voices but an emphasis on a single voice. This comes not from a rigid style guide or blueprint but from collective production and debate. The important aspect is consistency more than superior quality. And the consistency is preserved across dozens of articles, across coverage of hundreds of countries, across decades of time. The result is “an editorial approach so institutionalized,” Stibbs noted, “that if several of our most senior journalists left tomorrow, that approach would still be very embedded in what we do.”
Stibbs was highlighting not what makes The Economist better in its marketing approach but what makes it different.

It is interested primarily in full-paying subscribers.
Its approach is driven by a careful assessment of who its potential global subscribers are
The product isn’t customized for different markets.

Indeed, understand these things and you’ll understand a far more general message: Consumer experience matters more than content quality in the abstract.

Chapter 21: Connections and Strategy

First, connected choices made it harder for others to rediscover the successful strategy — seeing the various choices that others made wasn’t a guarantee that you could decode the connections among them.
Second, it was undesirable to mimic a successful firm’s decisions one by one — since by doing so, you’d miss the benefits from the connections across them.
Third, mimicking a competitor’s entire set of connected decisions was nearly impossible, since that could quickly get overwhelmingly complex. And even if a rival imitated most aspects of a firm and missed a mere handful, it might still fail.

Starting in the 1970s Walmart invested billions of dollars in sophisticated IT systems that could provide daily information on every single SKU — what was selling and what wasn’t. This enabled them to:

Remove regional offices
Create everyday low prices and a no sales policy
Locate in small towns

The reason that Walmart’s success was so hard for others to mimic — the reason for its sustained success over five decades — wasn’t that all these choices were “better” or “smarter” than its rivals’, but that they were so well connected.
We make trade-offs. We know what they are. And we respect them. Few other organizations have ever said this quite as simply or gained so much advantage from the idea. The reason for Edward Jones’s advantage was not that it had somehow figured out a way to overcome the trade-offs embedded in its decisions, but that it deliberately made them.

Chapter 22: From Atoms to Bits

What really set Netflix apart was its back-end, highly complex physical infrastructure for sorting, distributing, and delivering DVDs.

When it comes to the ease of creating a business, bits win any day of the week. When it comes to creating business advantage relative to others, however, bits are more challenging. The reason for this? The easier it is for you to peddle bits, the easier it is for your competitors to do so, too — thereby reducing your uniqueness. The insight that had been missed was that business advantage comes not from lower cost or higher customer value but from lower cost and higher value relative to your competitors.

Although content and innovation can create success, they rarely allow a business to preserve it, as other firms copy, borrow, and learn. Connections preserve differentiation by making it harder for others to mimic.
In every case the error in decoding the success or failure of a content initiative lies in misidentifying or entirely missing the role of context — the set of other choices organizations make, or the features of the geographic markets in which they reside. The error lies in missing these connections.

Chapter 23: A Strategy Process for All Seasons

Where will you play, and how will you win?
In the context of business, these questions force us to remember the basics of good management and what’s at the center of it — your customers and the value you create for them. So when it comes to strategy for business, rather than for the battlefield or politics, here’s an even sharper and simpler set of considerations to guide you:

Figure out which customers to go after and what they really want. Then deliver on it in a unique way.

Understand your customer: Creating a point of view — To guide strategy, don’t ask why your customers come to you — do exactly the opposite, first taking yourself, your product, and your organization entirely out of the picture when trying to understand customers. That’s what will help you figure out where to play. “It’s not about your organization at all,” Andrew Rashbass once told me. “It’s only about the outside world, and having a point of view about what’s happening in that world.”
Know what to deliver uniquely: Prioritization and alignment — Once you’ve formed a worldview about customer behavior, you’re ready to tackle the second part of the strategy process: figuring out what to offer customers in a way that matches their behavior with your unique capabilities. This question gets at the heart of differentiation and competitive advantage. It’s the question that determines where you will focus your efforts as an organization, and what you will prioritize. It’s the question that speaks to how you will win.

Respect your mission. Recognize your strengths. Prioritize and then align.
Less is more.

Chapter 24: Dare to Not Mimic

Winning strategies come from recognizing the context you operate in, not the content you make. They come from recognizing the connections among choices, not from viewing choices in isolation. They come from setting priorities and saying no, rather than following the herd and grabbing every opportunity that comes your way.
They come from going back to the basics of strategy: Know your customers and what they want, and align your organization to deliver it in a unique way. That requires seeing, respecting, and making connections across your decisions.

Part IV: Everyone’s a Media Company

Chapter 25: Advertising

In other words, the promise of advertising was never about reach and eyeballs — simply placing more ads in front of a user, expecting they’d respond. Nor was it merely about more user data. It’s about the same question as it’s always been: ad effectiveness — figuring out why ads work at all, and how they do.
The bottom line: Done the right way, advertising doesn’t help only advertisers; it can also help publishers and readers.

Chapter 26: Reimagining Advertising

It involved a simple equation. R = b × z, the authors noted, describes the spread of infectious diseases, where R is the reproduction rate, or the expected number of new infections generated by each existing one (b is the probability that a disease transmission actually occurs between one person and any other, and z is the average number of persons whom any one person might “infect”). Conventional wisdom was that if R was greater than 1, each person would spread the disease to more than one other person, resulting in an epidemic. If R was less than 1, the rate of spread would drop, resulting in “failure.”
Patagonia’s strength — the real reason for its deep customer loyalty, “cultlike following” (as competitors often put it), and impressive growth — lay not in its ability to produce good products or market them well. It came from its “community” — the group of users, employees, climbers, and environmentalists it had built up over the years. It came from connecting them all.
His takeaway for companies trying to leverage social connections: Stop trying to sell your product. Think social first, product later. The possibilities become not only more and more powerful, but also more authentic.
Advertising today is consumed by three questions. First, from the advertisers’ perspective, how to reach more eyeballs at the lowest cost. Second, from the publishers’ perspective, how to preserve ad revenue in a world of falling ad prices. Third, what new metrics to use in a world of digital advertising, social media, and hypertargeting.
The promise of advertising lies not in trying to mimic the leaders in social media or TV advertising; it lies in understanding your needs, your context, and your strengths. Create a network effect around your product and you won’t need to advertise — users will be your advertisers. Create an ad that users love and you won’t need to target; users will do it for you. Create a community that is specific to your culture and you won’t have to seek customers out; they’ll find you. Every company faces different possibilities — which can be harnessed by understanding functional connections.
Today’s new technologies seem to bring limitless possibilities, too. But the real potential for marketing doesn’t lie in the technologies themselves but in the ability to embrace them with a mindset that’s both old and frankly new, one built around user centricity and user connections.

Chapter 29: From Strategy to Launch

Disruption Theory:

First, incumbents get disrupted by new technologies not because they are unaware of them or unable to embrace them but because they rationally choose to ignore them. Why? New technologies often express themselves initially in products that are inferior in quality to existing ones. So firms focus on the needs of their current customers and rationally reject newer but lower-quality alternatives.
Beware of this, Christensen says: The behavior of customers on the periphery is often a harbinger of what’s coming in your core business. This goes to his second observation: Things can change, sometimes quickly. Competitors who appear unthreatening today will migrate up a “quality spectrum” and become threatening tomorrow. In this sense, the theory warns against a static, once-and-for-all view of customer needs or competitor behaviors, and against ignoring those products or companies with ostensibly worse product quality today.
This leads to the third and related observation and prescription: Don’t be too protective of your core. Eat your lunch today, or others will. The only chance of success, Christensen argues, lies in creating a separate organization that disrupts or destroys your core. It’s the only way to be free from both the shackles and the seductive riches of your existing one.

The more general point was that disruption is hardly a law of nature, as so many observers had come to believe. It is merely a possibility.