Technology is a medium for strategy.

In my last post I wrote about how Google has turned the tables (again) on social networks through applying strategic thinking to its technology development. This is the second time I've made this observation. The first was when they announced Open Social after having been snubbed by Facebook and outbid by Microsoft.

Both examples illustrate how quickly positions of strength can be reversed through strategic technology development.

As a planner, I think technology is perhaps the purest demonstration of the power of strategy. Nowhere in any of the discussions around the strategic maneuvering that's taken place is any mention of execution. While it's undeniable that the quality of Google's code, the amount spent on production, and the individual talent of the people involved are factors that come into play with Google's implementation of its strategy, the big bang is in the strategy itself not in the execution.

Technology is also almost completely malleable to fit thought. In the real world there are barriers to doing things, physical laws and stuff like that which prevent pure strategic imagination. In the world of technology there are far fewer obstacles.

To me this makes technology a medium for strategy in the same way that television is a medium for film and video. Technology is the place where you can "see" the best strategic thinking, and where (I think) the best strategic thinkers are gathering. I think it also helps to explain some of the differences in the types of marketing/advertising people who have embraced technology versus those who haven't.

In the world of film (or print for that matter), I think strategy (rightly) takes a back seat to execution. The quality of the film, the amount spent on production and the individual talent of the people working on it are far more impactful in the overall scheme of things than the strategy. I think we see this in some of the latest ads that are making the rounds. The power of these pieces of film is almost entirely in how they're done, the strategies are secondary.

Before the flaming starts in the comments, this is presented as an observation not a judgment. Obviously I have a personal preference here but that's far from a condemnation of one side or the other. Also while this is true for technology development it's not true for the creation of digital interfaces and experiences. Execution is just as important there as it is in film, perhaps even more so.

Social value the new gold rush.

Seems to me there's a strategic battle of epic proportions playing out right now around who owns the true value on the web. Regular readers will know I've written a lot about how value is social - value is in the relationships of things and people to one another, more than it is in the things or people themselves.

I think it's this insight that is now driving many of the latest developments in technology. In the past week I have been reading with some amusement and some awe about the recent jockeying between Marc Andreesen and Google around Friend-Connect.

Essentially as I understand it the difference is this: Ning allows you to build a social network by building your site on Ning. Friend-Connect allows you to build a social network by adding social features to your existing site. As in any saga there are layers upon layers of intrigue and strategy at play. I've tried to think about some of the ones I can see:

1. Preservation of the status quo versus disruption: At its core, a lot of this comes down to an ad revenue play. Ning, Facebook and almost everyone else apart from Google are trying to create "walled gardens" where masses of traffic can be siphoned off and owned 100% rather than being licensed from Google. As the 800lb gorilla in the ad revenue world, Google is much more interested in preserving the status quo where traffic remains on (Google adsense) regular websites.
   
   
2. Philosophical differences around sociability: In the Ning and even more so in the Facebook model, socialising is its own end. We gather and come together to connect - all else is incidental. In the Google world, we socialise over things, objects, pieces of content or information. This is also around preservation of the status quo because Google's communication products like Gmail have a lot of traction. Therefore it's in Google's best interests to keep socialising to email and IM rather than creating another channel.
   
   
3. Philosophical differences around technology: This is where my head starts to spin a bit because I realise that some very smart people are thinking on a much larger scale than I am. However, I think that the two approaches also define differences in opinion between what's a platform, what's a service and so on. In the Ning model, the platform is the social network. The function of the platform is to connect like-minded people and to allow content and applications to be delivered to these people. In Google's model the Internet is the platform. It already performs the function of connecting like-minded people and allowing content and applications to be delivered. In Google's model, Ning (or Facebook) is simply another service that can be delivered. Yet again using technology, Google has turned the tables on its competition.
   
   
4. Differences in strategic thinking: As the last point starts to show, I think that Google's biggest strength and biggest vulnerability is its strategic brilliance. It is quite clear that Google isn't outclassing its competition on technical ability as much as it is dressing everyone else down through its strategic ability. Moves like Friend-Connect, which were clearly started a while ago, speak of a company that thinks on a galactic scale about its remit. This is why I think it is also their greatest vulnerability, because that's scary to people like you and me. I think it's even scarier to people in the industry like Andreesen but it feels like they're all playing in a lower division right now.
   
   
5. Differences in thinking around value: If you buy my thesis that value is social, then I think one approach has far more promise than the other (can you guess who I'm backing?). The relationships of things and people change over time. This is a key factor in why relationships are so valuable. In the Ning model (and I think this is a problem that Facebook will have to deal with) the relationships that are captured are static. They feel like points in time rather than ongoing, living, mutable things. Because the Google model is more flexible, it has the promise of being able to encompass the shifts and changes in relationships over time. Also, because the Google model is more expansive, it has the ability to capture the full picture of all our relationships not just the ones we conduct over Vampires.
   

The myth of storytelling in new marketing.

Back in the day, many of you may remember an arcade game called Dragon's Lair. At a time when the graphics in most games was rudimentary at best, Dragon's Lair sported visuals that were (almost literally) pulled from the scenes of a Disney movie. It was a sensation. Instead of having to imagine the blobs on the screen were trolls, goblins, or princesses, Dragon's Lair presented them in their full glory, letting you completely immerse yourself in the role of Dirk the Daring...

...well actually not quite.

The price you paid for all of that visual splendour was excruciatingly limited gameplay. Because the animation was stored on a laserdisc, the game essentially presented a set of choices at various intervals which would load and play the corresponding cut scenes. Basically, you walked down a path that had been pre-defined and pre-configured by the game's designers. It grew boring very quickly. So while the game attracted a lot of people initially, it failed to have a lasting impact in the long run because it offered an incredibly limited amount of interaction and an overly prescriptive narrative.

I was reminded of this by the recent remarks from Lee Clow at a 4As event. He said:

“Online advertising is still semi-nowhere. It’s very intrusive and annoying and kind of the worst of our business in terms of pop-up and flash, and jump up and down.”

However, there is hope:

“The ability to use the internet in terms of great brand storytelling is still at its infancy,” he said. “The internet advertising media, cross my fingers and hope to God, with bandwidth and with some ability, is going to become more artful; it’s going to become more interesting. … But it’s going to take creative people to embrace the possibilities of what you can do on the internet in terms of advertising and storytelling and make it a little better and smarter”.

There's no doubt that online advertising is generally pretty dire, but then the Web isn't really a great medium for delivering traditional advertising. But even more importantly it's absolutely the wrong medium if all you want to do is tell stories.

The web isn't just a communications medium, it is a medium for interacting with people. Storytelling is inherently one-way, in fact, the main use for stories in the history of humans has been to teach. Using the Web for teaching and one-way dissemination of information are a waste its talents.

The application of a storytelling model has IMHO, led to overly rigid segmentation of users and overly prescriptive user-scenarios that assume far too much about users. These are behind the all too familiar navigation choices:

Click here if you're a business user
Click here if you're a home user
And so on...

Storytelling leads to the kind of design that hobbled Dragon's Lair. High-production, visually stunning but functionally crippled.

I have enormous respect for Lee Clow, and I think Chiat/Day is one of the best agencies in the world. They're also far from being a laggard in pioneering new media, and most would put them on the progressive end. However, I think that agencies have to re-engineer a lot more than just their media departments if they want to stay relevant.

Brian Morrissey from Adweek came to town last week and gave a talk at a Tim Brunelle organised session - conversations about the future of advertising. Apart from saying some nice stuff about us, Brian also said some smart stuff about where advertising is headed. It was a pretty good turn out and I also found the Q&A quite revealing and informative.

As far as I could tell, the majority of the crowd were client-side marketers. Given the subject matter, I was pretty surprised that more agency folks didn't come along - especially as it was a free talk. Check out the full presentation here.

Even more on functional and aesthetic beauty

We're in the whittling phase on a bunch of recent projects. This is the part of the process where a bunch of great thinking/functionality/insight/etc. gets pared down to its core essence. The job here is distillation down to only what's completely necessary.

I love this part.

Whether its in the crafting of a strategy, interface, presentation or whatever - this is one of the bits of my job that's the most magical to me. Thinking about it this morning I remembered Murray Gell-Mann's speech at Ted. He talked about a similar thing in physics: elegant equations tend to be correct more often than inelegant ones. In fact, he shows how proofs were built on top of existing proofs through the process of refining the equations and paring them down to a simpler, more elegant form.

This is probably not co-incidental. As a part of nature, we will inevitably view natural forms as more elegant - we will instinctively be drawn to them. So in a way, the process of distillation is a process of uncovering beauty - and perhaps that's what appeals to me.

I think we see this all around us. In a small way it is part of the appeal of Twitter. Expressing complex ideas within 140 characters is a bit like poetry. It's also part of great experiences like the iPhone and Wii which have created disruptions through the process of uncovering the essential beauty of their respective categories.

In designing interactions, thinking like this comes to the fore. By and large, good interactions shouldn't be intrusive, draw attention to themselves or distract from the larger task at hand. Sadly this tends to be completely opposite to the brief that most communications are created from.

Sustaining innovation in services.

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It's been a long time since I did any programming so I'm pretty sure I don't understand most of what's being said in this presentation, but it definitely got me thinking. In particular, the example of an Excel spreadsheet mashup for Oakland crime stats reminded me again of how amazing services can be created through creative combinations of existing data and services.

More and more data goes online everyday, just yesterday NPR did a segment about the city of San Francisco putting open parking meters online. And, with the pace of Web 2.0 startups still showing signs of growth, users are likely to be presented with an embarrassment of riches in terms of useful new services.

However, while all of this innovation in technology progresses, there's been very little innovation in business models. In particular, advertising remains the primary revenue stream for most of the Web 2.0 companies out there. Given the fact that advertising returns on social media properties remain fairly disappointing, it doesn't appear that there will be enough ad money to pay for all this innovation.

Instead of businesses springing up simply to offer a service, services should become a part of how other businesses drive revenue. For example it's easy to see how it might make sense for Starbucks to buy a service like Twitter and create a location-based mashup like Twinkle which also contained Starbucks location information. Assuming Starbucks looked at the cost as a marketing expense, they could possibly justify running it ad free.

For brands like Starbucks (and others) advertising on social media properties instead of simply creating and offering them feels like two steps removed. Of course, this point-of-view may seem self-serving coming from us but I think that an advertising-supported model won't be sufficient to sustain the kind of innovation that advances in technology are creating.

Prediction: Apple's next wave of growth will be driven by services.

The Techcrunch post today around AAPL shares slipping sounded familiar and prompted a quick search for the last time I'd read the same thing. My research turned up 2005, Apple had been on a tear driven by iPod growth and analysts were predicting market saturation and forecasting slower growth. Shortly afterwards, Jobs announced a switch to Intel chips for the entire Mac line and Apple growth resumed. Shares dipped briefly in 2006 when analysts started getting nervous about the transition, but they have gone up since to stratospheric heights.

From a hardware standpoint, it's difficult to see where new growth could come from. Intel's roadmap doesn't have anything amazing happening on it till mid 2009 with the introduction of Nehalem so that will limit big power boosts for the Mac and Macbook lines. The iPod line has fully integrated video, phone and internet and Apple TV has also been upgraded recently. From a software standpoint, Leopard is still pretty new and so it's clear why analysts had pinned so much hope on new revenues coming primarily through AT&T.

With (relatively) disappointing sales, it does appear that Apple has few avenues open now for the kind of growth investors are demanding. However I think they may be missing the imminent launch of the App Store which will enable purchase and downloads of native iPhone and iPod Touch applications over the air.

While Jobs has claimed they aren't looking to make any money from the App Store, this also is very reminiscent of the position he took with iTunes and we all know how that one went. I think the App Store will unlock completely new value for the iPhone and iPod Touch which will ignite sales for both. But I also think that the App Store is likely to be a surprise revenue generator as well. Unlike iTunes where sales are for one time transactions, many of the applications are likely to be recurring services. As far as I know Apple hasn't made any announcements around how they'll handle services revenue through the App Store but if they continue to take 30% of the revenue it could add up fairly quickly.

More on operations as marketing.

I wrote a little while ago about how company operations are starting to subsume the marketing function. Eric pointed out that the recent announcement from American Apparel that they are putting RFID tags on all their garments is another reminder of this fact.

In fact, American Apparel has been a shining example of how an operational decision can become a marketing idea. Its "vertically-integrated, sweatshop free" manufacturing has arguably been more effective at growing its business than its seedy advertising (although the exploits of its founder could top both of these).

It is strange then, that AA appears to view the inclusion of RFID as an simply an inventory management tool. They are quoted on Websitegear saying:

"American Apparel takes pride in being a vertically-integrated manufacturer, distributor and retailer of fashionable, high-quality basics, and we embrace any technology that allows us to further realize this vision to better serve our customers," said Zander Livingston, RFID technology director for American Apparel. "We look forward to deploying the technology on a larger scale so that our entire organization can leverage the value of RFID to improve overall inventory management processes and enhance our customers' shopping experience."

I think AA have an opportunity to take this a lot further by building a website on top of the RFID tracking that exposes the data to its customers as well. For example:

RFID could let me know who at the LA factory made my garment and then let me see its trip to my store.
Adding a simple carbon calculator on top of this would enable AA to show that its products also have lower carbon footprints than its competition.
These data could make celebrities of its employees - imagine if a certain worker's pieces became more sought after?
Additionally there are a host of post-sale opportunities for allowing customers to create communities around the clothing.
Or enable services like outfit configurators based on the AA garments that you own.

The opportunities are quite literally limitless, I'll be eagerly watching to see what happens.