GM is hemorrhaging cash and wants to merge with Chrysler. Banks are buying and dying like lottery-winning centenarians.  GM and Chrysler say a merger would make for a stronger, more competitive company. The buying-banks argue that they’ll be in a better position to lend if they buy up all the dying-banks. Good strategic moves, all around, right? Bigger companies means fewer competitors and economies of scale– synergy. No. That’s not strategy.

Strategy isn’t arbitrage. Take the big record labels, for example. They exist because distributing a record to the market was expensive– and they controlled distribution. Because of economies of scale, they were able to get a lower unit cost. Low unit cost + wide distribution = music for the masses. Then, in the struggle between art and commerce, commerce won: they sucked the life out of the music biz. Bob Lefsetz puts it quite well:

“Major labels depended on Mariah Carey, who was built for a system that exposed product on MTV and Top Forty radio to a captive audience with few alternative media choices.  To try and sell a ubiquitous twit today is like selling Corvairs, it’s just not going to happen.” 

Then, to make matters worse, they went on a buying-binge and gobbled up all the traditional competition. But they didn’t create any value, they just moved some numbers around. And they missed a big strategic threat: I can record a song on my computer with a couple hundred dollars worth of gear and upload it to any number of places. Seriously low unit cost and wide distribution. The labels aren’t competing with each other, they’re competing with little ol’ me. Big is not necessarily a strategic advantage anymore.

Before Al Gore created the Internet, we needed big companies to sort through the myriad ideas, pick out the best for the most people, and distribute those good & services. We ended up with some pretty bland stuff from big faceless corporations that treat us like moo-ing masses. But I think we’ve crashed into the law of diminishing marginal returns– economically and socially. Now we want to know and be known. And with tools like Google, Facebook, and Twitter, we are the filter. With the help of our friends, we decide what’s best for us. I wonder if, as a society, we’re done with growth for growth’s sake. Leave it to a company like IDEO to lead the way (paraphrased): don’t limit your ROI measurement to dollars and cents. Ask “what’s your social impact?”

So, back to cars & banks.  I can’t make a car in my garage. But GM can’t make one profitably either. They should look at what Honda and Toyota have done: no unions, just mutual respect between management and labor. J.P. Morgan is now the largest U.S. bank… but if I call them, I still have to press 13 keys to talk to a real human being. It’s time to start measuring the human impact. Big does not make my life better. The small things, the micro-interactions, that build up over time are much stronger than big because they’re based on mutual respect and support.

As E.F. Schumacher said way back in 1973: “[I am] small, and, therefore, small is beautiful.”

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Posted by Seth on November 14th, 2008 :: Filed under business, strategy
Tags :: arbitrage, big, Chrysler, GM, small, small is beautiful, strategy

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Posted by Seth on November 9th, 2008 :: Filed under Uncategorized

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Barack Obama tapped into the Groundswell during his campaign. He recognized that people were connecting with each other to get the things they need, rather than going to traditional institutions. He recognized the power of a bottom-up strategy and how an army of energized campaign partners–not just supporters– is infinitely more effective than the old way. Top down just doesn’t work like it used to!

Now they’ve won the election. What’s next?

Governing.

How will the Obama administration tap into the Groundswell when it comes time to govern? How will we be involved? How will we involve ourselves? What if you got an email or a Tweet or a text message from the President explaining why he needs your support for Project A? Telling you where to find more information, and asking you to act. To call, email, fax, and write to your Senators and Representatives. To go out canvasing, knocking on doors. Think about what that would do to the traditional seats of power in our nation– in the world! Asymetrical competition at its finest. 

So, what lessons can business learn from the Obama victory?

• Trade control for conversation. The idea of control is stupid anyway– you don’t own your brand, your customers do. No matter how big, how strong, how old you are, your customers actually hold the power. And they know it. So listen to them. Talk with them. And listen some more. If you’re authentic, they will embrace you and can become your most valuable marketing stewards.
• Segmentation sucks. We marketing types love to slice and dice the market and tell different stories to the different parts. And that still works. Sort of. Top-down strategy starts broad and progressively segments, targets and positions more and more. It gets so granular that you need a cheesecloth to collect the pieces. Bottom-up starts with the little bits and pieces, finds the common themes and molds all those disparate pieces into something much better, much grander, much more desireable than the pieces on their own. So focus on the common, not the differences. 
• Your competition isn’t who you think it is. Obama wasn’t even an underdog–by all traditional measures of advantage, he didn’t stand a chance against the Clinton political machine. He didn’t have traditional advantages, but he had new ones. He had a clear, compelling and consistent message: yes we can. He wasn’t selling anything; he was supporting us. New strategy isn’t about how well you can sell, or even how well you can market. It’s about how well you support your users. It’s about helping them be the change the wish to see in the world. That’s the company you should be. And that’s the kind of company you should watch out for.
• Block by block, brick by brick, calloused hand by calloused hand. The Obama campaign built a truly vast network of campaign partners, and they did it one conversation at a time, one micro-interaction at a time to spread that clear, compelling, consistent message. When you get people involved and emotionally invested, they’ll take ownership. Ownership = loyal customers.

There are exciting times ahead and I can’t wait.

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Posted by Seth on November 6th, 2008 :: Filed under branding, marketing, strategy
Tags :: groundswell, marketing, obama, politics, strategy

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