Why UX is better marketing than marketing

Attending MX 2012, I was struck by a pattern that I’ve been eager to share, but have waited until the videos from the conference were posted, which happened yesterday.

I saw the pattern after connecting three dots. The first dot came long before MX, when I found out that the reason you no longer see television ads for Amazon is that they shifted all the money they spent on advertising to Amazon Prime, their $79/year service that provides 2-day shipping on any item, streaming videos, and the Kindle Lending Library.

The second dot was Hotwire’s’ Melissa Matross’ talk at MX, where she explained how she turned “bad revenue” into good. Her approach was to take meaningless banner ads that existed solely as a tacked-on income stream, and use that screen real estate to allow shoppers to easily compare Hotwire’s prices with competitors. That might seem nuts(“You’re sending traffic to the competition!”), but her research had shown that users were comparing across multiple sites anyway, and wouldn’t it be better for Hotwire to get some money (through referral fees) rather than no money at all? The strategy paid off big — users were happier, and Hotwire had more revenue.

The third dot came from Brandon Schauer’s closing talk. Among his examples were Tesco’s initiative to offer grocery shopping in South Korean subway stations — not by locating a physical store there, but providing QR-coded wall-sized print outs of store shelves, where advertising was typically shown. Commuters photograph desired items through a smartphone app, which are then delivered to your home. South Korea is infamous for its overtaxed workforce, and this service allows people to complete necessary household chores without taking additional time from their day.

In each case, we have resources that were once dedicated to advertising instead being used to enhance a customer’s experience, and proving far more beneficial both to the customer and the business. Traditional advertising grew up in an industrial age world dominated by mass-manufacture and products. As we shift into a connected age built on services and customer relationships, savvy businesses are those that recognize money is best spent not cramming messages down people’s throats, but tirelessly figuring out how to enhance the service experience.

Addendum (1:31pm May 16, 2012)

Something I meant to mention, but forgot in my original writing, was since MX, I found out about the phenomenon of the Growth Hacker. The idea is that a web service’s best marketing opportunity is to figure out how to embed the service meaningfully into user’s lives, to go where they are, not with messages, but with a functional aspect of the service.

I fucking hate organization charts

As I wrote in an earlier post, the most significant impediment to deliverIng great experiences is not design or execution or planning, but bureaucratic organizations whose values are anathema to human engagement. And one of my biggest frustrations is the assumption that because organizations operate this way now, they most always have and always will do so.

In fact, the tools and processes that organizations use were created to solve specific problems of their time. One such tool was the organization chart, created in modern business by Daniel C. McCallum to help manage the Erie railroad line, mostly around communication and coordination (to prevent accidents which were becoming prevalent). As businesses grew, they adopted hierarchical organization structures, the better to execute on the command-and-control necessary for mass manufacturing. And the org chart emerged as the tool for visualizing this organizational structure.

IBM/Tabulating Machine Co. organization chart
from mwichary

The problem with the org chart is that it seems to have affected how people are able to think of organizational structure, because even today, organizations essentially resemble those of 100 years ago. It’s as if people were drawing org charts for so long, they just thought that represented the natural structure of the organization. Org chart software assumes such hierarchy. People mistook the map for the territory, and these diagrams became reified in practice.

The reason I fucking hate organization charts is because they are emblematic of how broken standard business practice is. Command-and-control hierarchies are appropriate for an Industrial Age mindset that favors control in order to achieve consistency, efficiency, and quantifiability. That was fine because the offerings being produced were relatively simple. Once you bring CPUs, software, and networking into such a system, the offerings become mindbogglingly complex. Org charts diagram how to take a problem and break it down into a set of components. This kind of specialization and piecemealing that suited the Industrial Age is exactly wrong for Connected Age business.

Departmental silos are no longer practical, because solutions necessarily have to cross functions. I’ve worked with numerous companies who claim to get this, who talk about the need for “cross-channel” approaches, who want to “cross-sell”. However, these companies still maintain organizational silos, where the people at the top of these silos are still rewarded for their silo’s performance (regardless of how it effects the rest of the organization), and this means that coordination across silos is discouraged. It’s like we’re helpless to overcome this.

Org charts are so good at depicting bureaucracy, where each box is like a drawer in the larger “bureau”, that they’ve become part of the operating system of companies. In turn, they drive things like job titles (and the attendant responsibilities), pay grades, authority, and people’s relationships to others within and outside the corporation. As such, people are defined not by who they are, or their skills, but by their box on the chart. Sadly, this means that when companies face problems, among their go-to solutions are a “re-org.” And what this ends up looking like is simple a redrawing of an org chart. Processes, mindsets, and values don’t change. Just who reports to whom. What percentage of re-orgs are successful? What do they actually accomplish?

Another thing I hate, related to org charts, are job titles. Job titles are associated with a set of qualifications and responsibilities, with the idea that anyone who has that job title can do the same activities. Basically, people are made as interchangeable as the parts of a machine. But, we know that just because two people have the same title, they are not identical. We know that job titles do not describe the extent of a person’s responsibilities. I watch a lot of basketball. Basketball teams have “job titles” — point guard, shooting guard, small forward, power forward, and center. But any fan knows that folks with the same title are far from identical, and that the secret to success is the chemistry that emerges from the combination of the right set of individuals. We need to apply this mindset within our companies.

If we’re going to get away from the bureaucratic thinking that defined the Industrial Age, we need to set aside outmoded tools that were created for wholly different needs than what we have now. We need to stop assuming that the way we were taught is the way it always was (and always should be) done, and we need to come up with new models and approaches to address our current reality. The org chart is a graphic icon of a retrograde mentality; I urge you to question, if not destroy, them every chance you get.

Org Charts
from PaDumBumPsh

From Industrial/Information Age to Connected Age

I am endlessly frustrated by how we cling to 19th and 20th century paradigms for conducting business in the 21st century. When it comes to business, much of what we take for granted, which we assume to be just how things are, were actually purpose-built, beginning in the Industrial Age. Before then, you had a combination agrarian and mercantile economy, and business simply didn’t operate at a scale that required systemic management.

Then, in order to take advantage of the big machines made possible by the industrial revolution, to get the most out of their ability to produce in mass and distribute far and wide, business developed tools and practices that enabled such growth. The prevailing management approach was that of the bureaucracy, wherein the organization became a system to produce a predetermined outcome (over and over again). This proved ideal for business (and much of society) in the Industrial Age, because bureaucracy supports the values of efficiency, calculability, consistency, and predictability.

However, it also dehumanizes the people who work within them. They are reduced to job titles and a set of responsibilities. They become figurative cogs in the machine. And when computers and the Information Age arrived, there was talk about how this was going to free people from the drudgery of their work lives, and allow them to think. However, it turns out that the Information Age simply retrenched those bureaucratic values, because computers are great at supporting them.

It wasn’t until the prevalence of networked computers that we found ourselves entering a new age. And you could call this the Networked Age, but I find that to be a little too reductive. Networks are important, but they’re simply an enabling technology. I prefer Connected Age because it speaks to the truly human value of connectedness. Because what’s interesting about the network is how it brings people together.

This connected stimulates new relationships between people, other humanistic values arise. This was the subject of The Cluetrain Manifesto, over 10 years old and one of the seminal works of the Connected Age. People now crave authenticity in their interactions with business, which, as this post from Kottke points out, some companies do well, and others… not so much. These relationships also benefit from mutual trust, which some companies are learning can reap interesting new benefits.

The Connected Age also means that businesses must grapple with the messiness of humanity, because when people are freer to interact, unpredictability occurs. And, the decentralized networks that form the substrate of the Connected Age lead to emergent properties that, byt their very nature, are also unpredictable.

The bureaucratic model that served us in the Industrial and Information Age needs to be set aside for one that is responsive to how business (and society) actually operates today.

Breaking Free From the Iron Cage: Business in the Connected Age

Given the nature of my work, the lens through which I tend to look at things is about how can organizations deliver great experiences. Most people, when thinking about experience design, focus on execution — design and development. And while quality execution is crucial, it’s also the most straightforward element. It requires skill, talent, and experience, but the basics of good design are commonly understood by practitioners.

If the execution of delivering experiences is straightforward, why are so many experiences so bad? When addressing this question, the next step that many take, moving beyond execution, is to consider strategy and planning. The logic being, good experiences aren’t delivered because their execution is muddied by bad planning, or a lack of a coherent strategy to provide a focus, a vision, for those trying to deliver these experiences.

Strategy and planning, by nature being abstract and often ambiguous, is less straightforward than execution. However, we do have tools for tackling these challenges, giving shape to this amorphousness. And as you dig into strategic challenges that organizations face, you realize that the problem isn’t simply one of strategy or planning — given the right tools, any organization can come up with a strategy or plan.

So, if strategy and planning are manageable, it again begs the question, why are so many experiences so bad? And as you dig further, you realize the problem is with the organization itself. Strategies, plans, and execution are all outputs of organizational behavior. And if your organization is broken, if its values are ill-defined, its vision unclear, and its goals too restrictive, this will inevitably lead to mindless strategies, ill-considered plans, and sub-par execution.

So you need to address the extremely challenging aspects of organizational dynamics, interpersonal relationships, and all manner of, well, people stuff. And when you do that, you realize most corporations still operate under the mechanistic and bureaucratic practices of the 19th and 20th centuries, born of railroad functions and mass manufacturing. These bureaucratic approaches are inherently dehumanizing, and so these organizations struggle with the key characteristic of delivering great experiences–human engagement.

And so, as we move from the Industrial Age to what I (and a few others) call the Connected Age, we’re seeing that companies emerging as successful are often those that are the most human. (Where is the Information Age, you might ask? For the purposes of my thesis, I see the Information Age as an extension of the Industrial Age. More on that in later posts.)

This was the thesis for a talk I gave at MX 2011, which has just been posted. Watch it here:

MX 2011 | Peter Merholz | Why Business Must Be Human from Adaptive Path on Vimeo.

This talk was both a culmination of some writing I’d been doing (Innovate Like A Kindergartner, What Trust Brings To Amazon, Zappos, and USAA), and the beginning of an exploration I’m starting on what it means to conduct business in the Connected Age. I plan on posting a lot about my research and thinking about the Connected Age. I will leave you with a simple set of distinctions between values and characteristics of business in the Industrial/Information Age and Connected Age… It’ll give you a sense of where my head is. (And the links refer to where some of these ideas are coming from)

Industrial/Information Age Connected Age
Products Services
Manufacturing Customer experiences
Ownership Access
Stocks Flows
Efficiency Effectiveness
Analytical Generative
Silos Cross-functional
Hierarchical Hyperlinked
Individual Social
Isolation Relationships
Algorithmic Heuristic
Same Path Explore
Work Play
External Rewards Intrinsic Motivation
Control Autonomy
Marketing/Advertising Word of Mouth, sharing

If any of this spurs your thoughts, I’d love to read them in the comments!