The Original Algorithm of Value

Since the advent of commerce three things have held true:

(1) Customers seek the voice of the craftsman — the authentic provider — to help them facilitate their lives.
(2) Markets are conversations.
(3) Networks greatly facilitate the sharing of relevant knowledge within a community joined by like interests; listening and reacting to those conversations has spelled success or failure ad infinitum.
(Paraphrased from The Cluetrain Manifesto by Christopher Locke, David “Doc” Searls, and David Weinberger)

At a recent L2 clinic Scott Galloway, founder of L2 and Professor of Marketing at NY Stern University, described brands poised to significantly gain market share in 2017.

“[Winners are those companies] that are able to not only have huge audiences and really robust receptors (data gathering capabilities), but almost invisibly incorporate these usage patterns — and the intelligence they get from the usage — back into the end user experience, and every day it gets better and better.”

Facebook and Amazon exemplifying winners due to their exhibiting the greatest reach, best behavior analytics data capturing capabilities, and the fastest response in improving the user experience. These organizations manifest the use of big data the most efficiently to affect growth and profitability. Mr. Galloway describes this approach as “The New Algorithm of Value.”

The New Algorithm of Value

This newly proposed algorithm is not the first time and won’t be the last time a research analyst, business pundit, or author attempts to wrap our collective heads around a market place advantage exhibited by the few and presented as a solution for the masses.

In 2014 Forrester Research coined the phrase “The Age of the Customer,” based on observations that companies tuned into their customers’ needs outperformed their competition. CRM companies including Adobe, SalesForce, IBM, among others, have rushed to provide deployment solutions enabling brands to deliver their message at the right time, in the right place.

The Age of the Customer

“The Experience Economy” entered the scene back in 1997 when Joseph Pine II and James Gilmore divined the competitive business environment would give way to those companies that “stage experiences” for their customers, thus adding value to what might otherwise be commodity goods and services.

The Experience Economy

The “Brand Culture Model” is a recent twist on what has always been the Holy Grail: customer loyalty. Winning long-term repeat-buying behavior has historically been sought by brands either through rewards programs or by attempting to ‘do everything better than everyone else.’ Chasing superior product quality, service, pricing, and accessibility is typically a fools errand given most markets are chock full of companies that make great product, provide high quality customer service, and are making the purchase and delivery of goods nearly frictionless. Ultimately customers commit to long-term buying relationships on more than simply superior quality, price, and service. They engage deepest by forming emotional connections based on shared beliefs. The Brand Culture Model is one such example offered as a means to developing compelling consumer engagement by tapping into the wisdom of human behavioral sciences in an attempt to create cult like followers.

“[We] draw upon the anthropological concept of culture to introduce a new model for brands. The old brand model, which advocated the creation of an external brand image to influence consumers, is a thing of the past. We think it’s time to do things differently. In the new model a company’s true values replace the external brand image. In other words, looking good is no longer enough. To compete in today’s fast paced landscape, brands must be better from the inside out. They must embrace a cultural shift. We call this new model Brand Culture — and we think it has the potential to transform companies into truly amazing brands.” —Dennis Hahn, Chief Strategy Officer, Liquid Agency
The Brand Culture Model

And, finally, and definitely not comprehensively, there is the concept of “The Responsible Company” brought to the forefront by the founder of Patagonia, Yvon Chouinard, in a treatise on corporate environmental responsibility. The result being a new found corporate structure, the B-Corp, enabling business operators to manage to the quadruple bottom line of social, ethical, environmental and financial responsibility.

The Responsible Company

This, all told in the vernacular of defining trends, is the “Profit-from-Purpose” model now in vogue among impact investors. According to Ted Rheingold, Fast Company contributor and Sr. Advisor with Bloom Credit:

“Competitors can’t simply knock [purpose driven brands] off by matching product, price, and convenience, they have to also match brand message, good governance, customer experience and satisfaction, supply chain excellence, and company values. It’s also important to understand income isn’t lost on purpose spend: it’s usually a wash thanks to reduced marketing budgets and higher employee and customer retention.”

Mr. Rheingold is, in other words, describing being “Ethos-Fortified,” the creation of a defensible moat that is uniquely steeped in your purpose, your reason for being.

All compelling approaches to succeeding in a constantly morphing landscape, all with stalwart proof points of success. This short list however is not meant as a decisive expounding of possible approaches and models to provide competitive advantage. Although all have merit, building any one of them occurs limited in contrast to the others. The debate is not whether to become one or the other, to become a responsible company, a customer centric company, a cult brand, an experiential brand, or to adhere to the “New Algorithm of Value.” The mistake conducting one’s business based on any one of these movements, or even a combination thereof, is that each are prisoners of circumstance, which belies the deeper principles at work that ultimately conspire to make any one example of the particular trend or movement a success.

Implicit among these various models however, are principles that deem success of each, over time, regardless of market and product trends, economic and political circumstances, or social and environmental concerns.

What then makes for success?

Focusing on the positive, four common attributes conspire to predict, prescribe, and near guarantee winning: being data driven, digitally native, multi-channel, and ethos-fortified. The formula looks like this:

(1) They are data driven; i.e. they listen closely to the response in the market place to what they do, produce, and say.

(2) They are staffed by teams native to digital communications and direct marketing disciplines responsible for designing and enacting a customer experience reflective of the culture of the organization helping facilitate their constituency’s life.

(3) They utilize multiple channels to provide access to, and interact with, their customer uniquely channel by channel — This the distinction between “multi”-channel and “omni”-channel.

(4) They are founded on principles and can clearly articulate their ethos as organizing principles enabling fast, consistent decision making throughout their organization while also providing distinction as a unique presence in the market place. This ultimately is the breakthrough value proposition.

This, at the risk of coining a movement, is the Data Driven, Digitally Native, Multi-Channel, Ethos-Fortified Enterprise. Interestingly, this combination has always ruled commerce. Locke, Searls, and Weinberger got it right.