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BUILDING REMARKABLE BRANDS I N A Y O U T H - D R I V E N C U LT U R E N

TI O A N H

T U O Y

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Contents

Foreword

ix

Introduction: Forever Young Chapter 1

From Status Symbol to Status Update

xxi

1

Chapter 2

From Things to Thrills

13

Chapter 3

The Rise of Electronic Dance Music

35

Chapter 4

Access Over Ownership

45

Chapter 5

The Communal Table

55

Chapter 6

The Peer-to-Peer Economy

67

Chapter 7

The Power of the Crowd

81

Chapter 8

Free Agency

97

Chapter 9

Lifehacking

115

Chapter 10 The Field Guide to Lifehackers Let’s Pivot to Brand Building

131 145

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viii

CONTENTS

TV, The NFL, and The End of Demographics

147

The Game Changing Science of Media

155

Chapter 13

Big Data 101

171

Chapter 14

People Are Brands

181

Chapter 15

Brands Are People

209

Chapter 16

A Story Worth Sharing

217

Chapter 11 Chapter 12

End Notes

243

Epilogue

251

Index

261

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Foreword

The most important leadership characteristic to thrive in this ever-changing world is resilience. Resilience is the ability to fall, pick ourselves up from the floor quickly, learn and continue with our journey. Behind resilience there is an inherent positive outlook on life based on unwavering faith in our purpose, our abilities and the capability of the teams around us. – Antonio Lucio

As Global Chief Marketing and Communications Officer at Visa, I have been at the center of YouthNation’s massive disruption to business and culture. Despite the fact that Visa a brand of enormous scale, processing over 96 billion transactions in 200 countries during the past year, in many ways we are now forced to think and act like a nimble startup to ensure our long term vitality. I was deeply honored when Matt asked me to write the foreword for his first book. Matt has been an important thought partner and a key driver of change in our global organization. His electric passion for driving

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cultural change through social media and his deep knowledge of youth were key elements in Visa’s marketing evolution. The drivers of change below are not specific to the payments industry, but have implications for businesses of all types in every corner around the world. 1. The over 2 billion smartphone users1 around the world have forever changed the way our world communicates, and consumers transact. 2. The over 3 billion Internet users around the world now have real-time access to data, tools, and content on a 24-hour news cycle, forever impacting the ways we reach and influence them. 3. The pace of innovation in the marketplace has spawned a wave of Millennial inspired start-ups, which have reimagined our industry. For Visa, as for all businesses today, the way in which we manage change will determine whether we will be future leaders in our industry, or another case study of a company that has been left in the dust. I believe that digital natives will rule the world. Whether you are a global organization with thousands of employees like Visa or a local, family-owned business, your ability to understand the principals of YouthNation is now mission critical. There is simply no way you can replace the experience of being hardwired in the new reality we live in, as today’s youth are. It is imperative, therefore, for business leaders today to empower YouthNation to directly drive change

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Foreword

xi

within our organizations. Only by tearing down walls and challenging legacy systems can we truly disrupt ourselves before we become disrupted into obsolescence. At Visa, we are working hard to deploy the principles of YouthNation in our brand, our products, and all of our marketing efforts – Principles which you will learn about in this timely book: 1. Put consumers at the center: No longer can we rely on talking at consumers, but rather, we need to engage them in a conversation. We need to fully understand the needs of our various consumer segments and interact with them in ways that add value to their lives. 2. Embrace social-at-the core: We must design our communications with shareability in mind at every touch point. We want the consumer to feel a sense of ownership in our brand so advocacy must be earned and authentic. 3. Everything is marketing: Whether its the way consumers interact with our products, the way we activate global events like the World Cup or the Olympics, or the way we interact with our great merchant and banking partners, they are all reflections of Visa and must be consistent and continually deliver excellence. I am excited to be part of this book because even as the CMO of a Fortune 500 organization, my challenges are not unique. Anyone who is looking to navigate their way

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FOREWORD

to success through today’s white water of change must meet the demands of disruption with the principles of YouthNation. These are indeed challenging times, but these are also times of enormous opportunity. I am hopeful and optimistic that the impact of YouthNation on our economic and cultural landscape will bring about great innovation, impact, and ultimately advancement for America, and for the rest of the world. Antonio Lucio is Global Chief Marketing and Communications Officer at Visa Inc. In this role, he oversees Visa’s global branding, corporate relations and marketing activities. Prior to joining Visa as CMO in December 2007, Lucio was the chief innovation and health and wellness officer for PepsiCo Inc. and, prior to that, was the senior vice president and chief marketing officer at Pepsi Cola International Beverages. Lucio has more than 25 years of global marketing and brand management experience earned at some of the world’s most successful consumer packaged goods companies including Kraft General Foods, RJR Foods International and Procter & Gamble. Consistently recognized as one of the most active CMOs on social media, you can connect with him on Twitter @ajlucio5 and LinkedIn.

Endnote 1

http://www.dazeinfo.com/2014/01/23/smartphone -users-growth-mobile-internet-2014-2017/

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How to connect with me and learn more about YouthNation

encourage you to reach out and connect with me to dive into the topics discussed in this book further. Below are the best ways to do so:

I

Twitter: This is the best way to reach me directly for one on one dialogue, response times may vary. My handle is @MattyB or visit https://twitter.com/mattyb Facebook: Follow this page as new topics related to the book will be updated often. Feel free to join the discussion and get involved. https://www.facebook.com /youthnation Instagram: Follow this page for daily inspiration and new findings: http://instagram.com/youthnation I hope you enjoy this book as much as I enjoyed writing it! Matt Brtton - @MattyB

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Introduction: Forever Young

YouthNation (Yooth-nay-shun) 1. Noun: A highly influential group of over 80 million American citizens born between 1982 and 1998. They are currently aged between 18 to 34 and nearly all of them cannot remember a time when the Internet did not exist. 2. Verb: A movement of influential individuals who possess disruptive power over cultural, business, and political issues in the United States.

Youth is not just a state of mind; it’s the state of the art.

YouthNation is a new phenomenon. When America itself was young, there was no youth culture to speak of. There was no place set aside for young people to discuss and share things that were of particular interest to them. In most cases, young people were never really together as a

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group, and as a result, had no opportunity to form a culture that was unique to them. Historically, children were at home, sequestered away from other kids their own age, and by the time they were 10 years old were expected to take their place in the adult world of work. At the beginning of America, people weren’t young for very long. In those days, the information about the world that young people received came only from adults. When they had problems or concerns, they shared it with their elders. It wasn’t until very recently from a historical perspective that young people were able to spend enough time with each other, separated and apart from the worldview of adults, to find the opportunity to be youthful. Even adolescence itself is largely a twentieth century phenomenon. As the middle class expanded, kids began spending longer and longer periods of time in classrooms, grouped by age, outside of the influence of adults. With growing middle class family budgets, and a burgeoning industrial economy, kids suddenly had consumer power and an identity unto themselves. As a consequence, a youth culture began to emerge, and with it a specific language and a shared appreciation for the music, literature, movies, fashion, places, ideals, and activities that spoke directly to youth, because it came directly from youth. Suddenly, youth culture had a voice and sought out channels of communication to express that voice. Through college radio stations, self-published magazines and newsletters, grassroots movements, or homebrew computer clubs, America’s youth found a way to communicate with one another, and began to establish their footprint on the culture of the adult world. But even as

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Disclosures

xxiii

recently as the sixties and seventies, our nation’s youth remained a fringe culture with crude tools and few resources. It was, at most, a reaction against mainstream culture that lived on the outside looking in. Today, far from a fringe or counterculture, our nation’s youth have become the driving force behind American innovation, growth, and competitive advantage globally. As a result of our technological revolution, we are now living in a YouthNation, and all the old bets are off. The power and influence of YouthNation stands to dramatically shift every business, consumer, politician, nation, city, town, and village around the world. This epic shift is disrupting just about everything that we took for granted about the old economy: • The importance of a college education • The vision of the American dream • What success actually means • What and how we buy • What and how we sell • What brands must do to embrace this new national and global ethos and compete YouthNation has broken free from the hold that big media and big advertising have had on culture, and completely transformed the approach that brands must take in order to appeal to today’s target market. The ripple effect from this monumental sea change has and will continue to completely transform the way we work, play, and live,

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DISCLOSURES

and is demanding and encouraging us all to be in many ways, forever young if we want to compete. So let’s be clear. For brands today, the old marketing models are over. The status quo is dead. Today’s rapidly shifting marketplace requires businesses to be agile, connected, authentic, artful, meaningful, immersive, and socially responsible. In other words, today, businesses have to embody the ideals of YouthNation, regardless of age or size, in order to succeed. In YouthNation’s hyper-socialized, Instagram fanatical, experience-obsessed marketplace, youth is no longer an age, or even a demographic, but the primary catalyst of business and culture. Fortunately, thanks to technology and the progressive ideals that social media has engendered, youth has become a commodity that is available to everyone; all we have to do is figure out how to tap these new and rapidly evolving resources in our businesses, as well as in our lives. So how do you harness the enormous power of today’s youth-driven economy, where everything is changing at the pace of a teenager’s attention span, and future-fit your business for long-term success? This is the book that will give you all the tools and understanding that you will need to understand the nuances of YouthNation and harness the enormous power of the perpetual youth economy. As the founder and CEO of MRY (formerly known as Mr. Youth), an NYC-based creative and technology agency which has specialized for well over a decade in marketing to youth for such brand titans as Visa, Johnson & Johnson, and Microsoft, I’ve learned a lot about how

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YouthNation thinks, works, plays, and spends. Since I was a freshman at Boston University two decades ago handing out nightclub flyers on the corner of Kenmore Square, I’ve made a career out of effectively engaging YouthNation on behalf of brands, and leveraging technology in order to keep pace with the counterculture that has now become the mainstream culture itself. From Big Data 101, which explains how to use New-Gen psychographics to market effectively in a post demographic world to how to tell a brand story worth sharing that builds engagement and evangelism to tips for co-creating immersive and engaging experiences that build viral followings and loyal brand communities, YouthNation will offer businesses large and small an indispensible map to navigate the radically changed landscape of the present and the future marketplace. So let’s get started, and right away, because in YouthNation, everything happens in real time, and in the blink of a Snapchat.

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CHAPTER

1 From Status Symbol to Status Update

Page 1


The notion of the status symbol goes back as far as human history. In ancient China once a man reached 20, he was permitted to wear a cap. This was celebrated with a ceremony called Guanli, or Ceremony of the Cap. As each new dynasty took hold, the caste system of the cap evolved, developing ever more specific rules and privileges associated with each style. What your cap looked like and what shape or color it was, said very important things about you. For example, in the Han Dynasty a “lowly person” had to be content wearing only a headband, whereas the elite could get really decadent and wear a headband with a matching hat. Since its early beginnings with the highly nuanced Chinese cap trend, the notion of the status symbol really took off, taking hold all over the globe in an ever widening array of objects and styles, all designed to tell a story about the importance of the owner. In America today, Maybach vehicles, Christian Louboutin shoes, Hublot watches, and real estate in glamorous places like the Hamptons or Malibu are the de rigeur status symbols of opulence and power amongst the super wealthy. YouthNation has had a love/hate relationship with status symbols. For one, the glittering objects of the affluent elite have been by and large out of reach for them. In earlier generations, young people were motivated to work hard and long to reach the point where status symbols such as a beautiful home or a nice car were attainable. As the gap between aspirational youth and the affluent mainstream widened, however, YouthNation rejected the status quo and turned to anti-status symbols to express a different kind of importance within their own cultural sphere. 3

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YOUTHNATION

Along with this shift away from traditional status symbols, came a new set of values to support this new anti-status iconography. In the sixties, for example, ripped jeans, flag t-shirts, and long hair became counterculture status symbols. Along with these symbols came a lifestyle and world vision centered on experiences that were not about luxury but about the pure enjoyment of life in its simplest and purest form. Be-ins, happenings, and protests, became the status alternatives for a youth culture in revolt against a system that had shut them out entirely, and stood for materialism over existentialism. For YouthNation in those days, poverty became chic, and wealth became tacky. And so a schism grew up between the mainstream and the counterculture with regard to visions of what status really meant, what was truly important and valuable in life, and how that was expressed. Mainstream Status Symbols in the Sixties • Lincoln Continental • Travel aboard a Pan Am jet clipper • Color TV • A royal title • A suburban bungalow Counterculture Status Symbols in the Sixties • The peace sign • The Afro • Levi’s • Psychedelic drugs

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• Tie dye T-shirts • Communes

The Hip-Hop Invasion and the Reimagined Status Symbol YouthNation’s feelings about mainstream status symbols changed dramatically in the nineties. Suddenly, traditional status symbols of luxury and affluence became more accessible to youth culture. The accessibility of luxury opened up enormous windows of opportunities for brands and entertainers alike. The emergence of hip-hop culture combined with a booming economy towards the end of the twentieth century brought status symbols to YouthNation in a whole new way. An infinite and innovative variety of status symbols, which were accessible and available everywhere from suburban malls to urban street corners across the U.S., exploded out of the suburbs and led a hip-hop renaissance, along with a world vision that supported this new emphasis on accessible affluence for youth.

Hip-hop status symbol highlights Through pervasive lyrics from the likes of Notorious B.I.G., Jay Z, Kanye West, Mase, Nas, and others, the new importance of status symbols to young America came through loud and clear. This new youth narrative, which stressed affordable opulence, helped usher in a wave of accessible luxury goods creating status symbols

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YOUTHNATION

in every section of the economy. Here are some of the more notable examples. • One of the first status symbols that emerged from Hip Hop’s early influence was from Run DMC in 1986 by way of their hit song “My Adidas.” These early rap pioneers received a multimillion dollar endorsement deal as Adidas’ three-striped sneakers tread the streets from Queens to Long Beach CA in heavy rotation. • In 1994 Snoop Dogg donned some Tommy Hilfiger gear on Saturday Night Live, and sales reportedly jumped by over $90MM that year. Prior to the SNL endorsement, Tommy Hilfiger was largely an elitist fashion brand relatively unknown in inner cities and hip-hop culture. • Leading into 2001 at least 10 Rap and R&B songs by artists including Jennifer Lopez had mentioned Cadillac’s Escalade brand in their song lyrics. During the MTV video awards that year, Ludacris drove an Escalade right onto the stage. His hit song that year “Southern Hospitality” started with the lyrics: “Cadillac grills, Cadillac mills, Cadillac fills.” Suddenly Cadillac, which had an average consumer age of 62, had its Escalade SUV on back order in the dealerships of major cities where a whole new generation was lining up to be a reimagined Cadillac owner. • In 2003 after Justin Timberlake wore a Von Dutch trucker hat to the Grammy after parties, stars like Britney Spears and Ashton Kutcher quickly followed

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suit. The Von Dutch had been in fringe existence for five years before this fortuitous set of events. After its celebrity patronage, it became a status symbol at suburban malls in white upper middle class enclaves across America, selling out of stores at prices exceeding $100. Through hats, cars, and sneakers, America’s hip-hop and pop culture icons of the new millennium became core drivers of discretionary spending amongst America’s youth. Logos meant more than ever before and played an increasingly important role in showcasing social status, wealth, and style, the very same way that wearing hats did in ancient China. Logos from companies like GAP, Abercrombie & Fitch, and FUBU were brazenly branded across outerwear and considered high fashion simply because of their label. By the mid 2000s, hip-hop would go on to reach arguably its cultural peak as whimsical lyrics about Gulfstream private jets, Cristal champagne, and Jacob the Jeweler bling were commonplace in songs on Casey Kasem’s top 40 lists.

Status Symbols Disrupted While much has been written about the effect of the 2008 financial collapse on American culture, its impact on pop culture and music has largely been understated. In fact a strong argument can be made that the experience of parental stress and deflated 401k accounts made

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YouthNation rethink the importance of the material status symbols that had become so important in defining their identity in the nineties. The logos once proudly emblazoned across their chests, YouthNation realized, were nothing more than manufactured corporate symbols of a crumbling and sometimes corrupt empire. Somehow, having mom or dad splurge on a $200 pair of Air Yeezys when they were trying to piece together the monthly mortgage payment just didn’t seem as cool anymore. The foundational belief that home prices and stock values would always rise, and every generation would do better than the one before it, came crashing down with every word out of Maria Bartiromo’s mouth those scary fall 2008 mornings on CNBC. Suddenly it was no longer cool to drive an Escalade to school, and despite the continued popularity of a select group of hip-hop artists who became bona fide crossover stars into mainstream pop (Jay-Z, Kanye West, Lil’ Wayne), 2008 created a palpable shift within popular music as the once dominant genre of hip-hop gradually lost its hold on YouthNation’s imagination. A new measure of importance and a new definition of status emerged out of the social media trend that was beginning to entrance our culture. Shiny new stuff started to lose its glimmer, and in its place came a new form of status, based not on material items, but on experiences.

YouthNation’s guide to creating a status symbol Though status symbols may differ widely in form, shape, and design, there are a few key elements that all status

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symbols have in common. Here are the critical components that go into the creation of any breakout status symbol to guide you in the creation of your own luxury offerings: 1. Cost: In modern society, few things play a bigger role in establishing something as a status symbol than the amount of money it takes acquire it. The ownership of certain things that come at great cost – a mansion, a luxury vehicle, a yacht, or vacation home – signifies economic class and, in some cases, power. In fact, the purchase of some items, such as a private jet, can propel you into an even higher social class, in this case the “jet set” which travels the world from the privacy of their own aircraft. Note: If you want to see YouthNation’s take on the “jet set” follow “RichKidsOfInstagram” on Instagram (but don’t procrastinate on that for too long). Some high-cost status symbols even seem to defy the basic principles of economics and are known as Veblen goods. The price of Veblen goods will always remain high, regardless of low demand, and in fact, lowering their cost would make them less desirable to those few with the money to burn. 2. Exclusivity: The more difficult something is to obtain, the more desirable it becomes as a status symbol. This is true for both goods such as the Veblen goods that defy economic principles, as well as certain services and memberships. The American Express Centurion Card, for example, is an invitation-only card made available exclusively to those who meet a set of eligibility criteria. The same

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applies for highly coveted nightlife establishments such as New York City’s Provocateur which is widely known for only catering to the uber rich, super cool, or beautiful. For Provacatuer and others like it, its who cant get in which maintains its level of exclusivity. 3. Identity: Status symbols express important qualities about the identity of their owner. Ownership of expensive items and membership to exclusive clubs and services immediately mark one as wealthy, powerful, or both. But even everyday items can be imbued with powerful symbolism, especially in today’s tech-obsessed culture. Early adopters of Google Glass, for example, were immediately identified as tech elites. Owners of Mac computers are associated with creativity more often than their PC-using counterparts. 4. Cultural significance: Perhaps the most critical aspect of a status symbol is that it reflects the social and cultural dynamics of its time and place. For example, the tie-dyed t-shirt held little meaning before becoming popular in the late 1960s and early 1970s as a symbol of the counterculture movements taking place across the country. In the 1980s, a cordless phone signified wealth and early adoption of technology in America, but in 2015 it has become difficult to imagine using anything but a smartphone. Every status symbol is a product of its own time and place in our cultural history.

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5. Celebrity endorsement: There is a reason why brands throw down millions of dollars for celebrities to endorse their products – it works. However, as we saw with the hip-hop movement, even when unpaid, the simple association of a product with a celebrity or culturally significant figure can cause it to go flying off of the shelves or lot. There was a 45 percent increase in consumer interest for OMEGA’s Seamaster collection after it appeared on James Bond in the 2013 film, Skyfall. While a fictional celebrity, James Bond represents an aspirational lifestyle that has historically held great appeal for men, and OMEGA capitalized on this association to drive sales. The marketing around Dr. Dre’s Beats by Dre brand has always relied on celebrities wearing and using the product. From Lady Gaga to Pharrell to legendary producer Dre himself, who better to recommend a pair of headphones than your favorite musician? When Apple acquired Beats for $3 billion in 2014, they were buying more than just a product but also the all-important aura of “cool” that has resulted from Beat’s savvy marketing and celebrity endorsements.

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Contents

Foreword by Jeffrey Bewkes, Chairman and CEO, Time Warner Preface: A Book About a Topic Nobody Wants to Talk About Chapter 1 PART I

What’s in It for Me? Your Personal Guided Book Tour What: The Facts and Facets of Failure

xv xvii 1 11

Chapter 2

The Other F Word: “Failure” Is Such a Loaded Word

13

Chapter 3

The Gravity of Failure and Failure’s Gravity

21

Chapter 4

Defining Failure: Mistakes and Unwelcome Outcomes That Matter

27

Fear and Memory: Failure’s Force Multipliers

37

Chapter 5 PART II

Chapter 6

Chapter 7

When and Where: How Failure Appears at Different Organizational Phases

47

Start-Ups: Launching Your Venture in the Land of Failure Your Role: Passionate Convincer

49

Keep-Ups: Surviving and Thriving After You Meet Payroll Your Role: Confident Juggler

67

xi

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PART III

Chapter 9

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Contents Grown-Ups: Dodging the Oxymoron of “Big Company Agility” Your Role: Trusted Colleague How: Using the Failure Value Cycle to Advance Your Organization The Failure Value Cycle: Seven Stages Where You Can Leverage or Flunk Failure

Chapter 10 Stage One—Respect: Acknowledge the Gravity of Failure Your Role: Straight Talker Chapter 11 Stage Two—Rehearse: It’s Not Just About Fire Drills Your Role: Tenacious Coach Chapter 12 Stage Three—Recognize: Pick Up the Signals of Failure Earlier Your Role: Watchful Monitor Chapter 13 Stage Four—React: Deal with It! Your Role: Team Captain Chapter 14 Stage Five—Reflect: Turn Failure from a Regret to a Resource Your Role: Inquisitive Student Chapter 15 Stage Six—Rebound: Retake the Initiative Your Role: Field General Chapter 16 Stage Seven—Remember: Embed Failure Savvy in Your Culture Your Role: Proud Storyteller Chapter 17 The Failure Value Report Card: A Practical Tool to Help You Put Failure to Work

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Contents

xiii

Now: Put the Other F Word to Work

193

Chapter 18 Creating the Failure-Savvy Organization

195

Chapter 19 Escape the Gravity of Failure: Leading the Fallible Organization

209

Afterword by China Gorman, CEO, Great Place to Work Institute

213

Appendix—Our Classrooms: Putting Failure to Work in Creating Value

215

Acknowledgments

225

About the Authors

227

Notes

229

Index

249

Presenting The Other “F” Word Keynote

259

PART IV

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.

Preface: A Book About a Topic Nobody Wants to Talk About

Everybody wants to talk about success. But nobody wants to talk about failure. Whether you’re an executive, an entrepreneur, or a member of a team in your organization, you’d probably like to improve your odds for success—and are willing to take steps to do that. Plus, you don’t want to fail. In your quest, you can become a more charismatic, inspiring, and effective leader. You can concentrate on creating disruptive innovations that transform your organization or industry. You can develop your skills as a thinker, a listener, a communicator, or a practitioner of your particular job skills. These are each valuable paths to success. But you are likely sitting on top of a largely untapped and misunderstood strategic resource that can help you get there faster. That resource is failure. xvii

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Failure is one resource you and your organization create virtually every day. It’s the result of the mistakes you and your colleagues make, the unfortunate results of good faith efforts by hard-working teams, the superiority of your competition or adversaries, or even the bad luck events that upset your organizations’ best-laid plans. Whatever its causes, failure is today’s lesson for tomorrow. It contains the secrets that can show you what you still need to know, how you need to change your strategy and, handled wisely, can help you build and maintain an organizational culture that pursues excellence while accommodating fallibility. Failure isn’t just an unfortunate event. It’s an everyday reality leaders and teams must address. Managed correctly, it can be a vital resource for resiliency in your career and company. But fear of failure limits most organizations’ willingness to take risks, innovate, expand creativity, and fully engage their workforce—thus compromising their chances for success. We’ve seen this issue from many different angles. As executives, consultants, speakers, board members, and teachers, both of us have spent decades helping businesses, nonprofits, and government organizations develop strategies, drive innovation, accelerate growth, and strengthen culture. We advise senior management teams at major global enterprises and startup ventures around the world. And we anchor executive education programs, leadership seminars, and keynote conferences on five continents. We’re also fortunate enough to teach leadership, innovation, and entrepreneurship at two of the finest universities in the world, the University of California Berkeley and Princeton. In fact, this book’s title comes from a pioneering course called “The Other F Word,” which we created at Berkeley’s Haas School of Business to help MBA students figure out how to use failure to their advantage.

Why Did We Write This Book? First, because our audiences, clients, and students asked us to. When we give talks on this topic the most frequent questions we receive are “How can we address this in my company, where failure is not an accepted topic of discussion?” and “What advice can you give me to help get started?” We suspect that, like so many others, you and your organization share this

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interest. You want ideas and suggestions to improve your odds of success. We will show you how to address failure in a more meaningful, productive way, so you can liberate it from the confines of whispered conversations. Failure benefits no one when it is the unmentioned elephant in the conference room. Failure is a huge topic that impacts every aspect of business. As executives and advisors, we encounter failure in virtually every major organizational function and level—from the C-suite to the factory floor and from frontline sales teams to back-office support managers. In our work as consultants, we’ve tackled it firsthand at organizations in different phases in the business life cycle, from early-stage startups to well-established global enterprises. In all these settings, despite their many differences and shared commitment to success, the other F word looms large as a leadership and operational challenge. We see the other F word in our classrooms, too. In our executive education programs, managers from across the organizational landscape and around the world offer candid examples of their struggles in pursuing their enterprises’ innovation imperative while accommodating the fear of failure in their organizational culture. Finally, we have not seen another book that offers truly practical suggestions for how savvy leaders can turn failure from a regrettable reality into a resource for resiliency. Numerous books and articles exist about failure, from the “I struggled, I persevered, I succeeded” personal memoirs to the “fail fast, fail often” cheerleading of Silicon Valley, and even spiritual and psychological self-help manuals. This book is not one of those. We will offer you specific ideas on what you can do with failure to improve your odds of success. After all, that’s really what we’re each looking for, isn’t it?

Our Failure Bona Fides Everybody’s an expert at failing. We all do it all the time. So, what credentials do we bring to writing a book about the other F word? Fortunately, in addition to our university and teaching roles, we each start from the perspective of several successes we’ve enjoyed thus far. John has advised CEOs and senior management teams since his college years. He

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co-founded a widely read national newspaper for health-care executives, was a key staffer for then-governor Bill Clinton, helped launch the U.S. Department of Education, and practiced law at a prestigious international firm. Mark co-founded and built a substantial new business unit for Sony, has held leadership roles in startups and global enterprises alike, and led online-payments company WebOrder from its early stages through growth and acquisition (now part of Google). But aside from the fact that we’ve thought, researched, and taught about the other F word, perhaps our most important qualification is that we, like you, have experienced failure directly. A sampling? John here: I almost got kicked out of Harvard. I advised one of my first clients, CBS, not to buy a then-fledgling company called MCI (which later went on to reshape the modern telecom industry). I didn’t make partner at that law firm (a blessing in disguise), launched a business that never made money, and sold my 100 shares of Walmart stock in 1981 for $40/share to help pay for a cross-country road trip with my wife (those shares would be worth close to $1M today—but that trip was great). Mark’s turn: I sold my company WebOrder as the stock market hit alltime highs (good for my investors) and then learned more than I wanted about restricted stock as the market plunged (not so good for me). While at Sony I led several new business initiatives that never made it to market. A number of the startups I advised have failed, and as an angel investor I own more than a few worthless stock certificates. So we know the other F word firsthand. We also both come by this topic honestly through the work of our fathers. Mark’s dad, Stanley, was a prominent psychologist, an early pioneer studying the importance of selfesteem in shaping classroom behavior and expectations. In fact, 40 years ago he noted just how strong the link between self-esteem and fear of failure can be. John’s father dealt with failure through a different lens, but in a no less human way. He was a minister, and helped his congregations understand human fallibility, even while striving to live better lives. But ours is not a book about self-esteem or sin; the first is too difficult to get a handle on, and the second too judgmental to help much. In fact, we think most people’s fear of failure is already far too closely linked with their fear of shame, blame, and guilt. And none of that is very helpful to our task at hand—helping you address and leverage the power of failure to drive innovation, engagement, and success in your organization.

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We wrote this book with the humility and authenticity our experiences have offered us, and encourage you to read it through the lens of some of your own. Welcome to the conversation.∗ Now, let’s put failure to work.

John Danner

∗

Mark Coopersmith

To do just that, we invite you to share your comments, suggestions, and experiences with us on our website: www.theotherfwordbook.com.

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1 What’s in It for Me? Your Personal Guided Book Tour

This book will make you a better leader by helping you tap into a phenomenal resource all around you. You may not always be aware of it, and chances are you’re not utilizing it very well right now. But the good news is you’ve already paid for it, and you and your organization continue to add to it every day in many ways. It’s failure, the other F word. Although no one likes to fail, truly successful leaders know how to turn a bad experience from a regret into a resource. They put failure to work, driving innovation, strengthening genuine collaboration, and accelerating growth in their organizations. We teach about innovation, leadership, strategy, and entrepreneurship. Our executive, graduate, and undergraduate students at University of California Berkeley and Princeton come from backgrounds ranging from business to engineering and healthcare to energy. In all our classes, we stress that entrepreneurs, innovators, product designers, and leaders of change 1

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The Other “F” Word

initiatives need to answer the one key question on the minds of their potential customers, users, and colleagues: WIIFM? That’s short for: What’s In It For Me? Translate what you are trying to do into terms your audience can understand and benefits they can appreciate. We’re holding ourselves to that same standard. So to begin, we’ve created a personal crib sheet for you on the key points we’d like you to think about . . . 1. Failure matters. Why? Because we spend much, if not most, of our lives creating it, dealing with it, and trying to learn from it. 2. Failure’s like gravity. It’s everywhere—a fact of life for every organization at every organizational phase, from startup to growing business and established enterprise. 3. Failure is too often a taboo topic. That’s why we call it the other F word. If you can’t talk about it, you can’t manage it, or learn from it. Take it out of the shadows. 4. You’ve already paid for it, so use it. As a leader or team member, you can convert failure from a repeated regret to a strategic resource that can help you drive innovation, better engage your colleagues’ real capabilities, and accelerate growth. 5. Fear of failure is failure’s force multiplier. It distorts the likelihood of failure and exaggerates its consequences. It is one of your most important challenges in getting your organization to go where you want it to go. 6. While we suggest a more open and practical direct relationship with failure, that doesn’t mean tolerating it as an excuse for incompetence, negligence, or indifference. 7. How you deal with failures of your team members is the acid test of whether you trust them, and vice versa. And trust is essential to address the biggest failure in most organizations: Employees are not meaningfully engaged in their work or mission. 8. If you’re serious about innovation or entrepreneurship, be prepared for the failure that often comes with the experiments and risks associated with those objectives. Use it to understand what you don’t know or haven’t yet delivered. 9. Our seven-stage Failure Value Cycle framework can help your organization to better understand and harness failure as a value-add resource: 1. Respect the power and likelihood of failure 2. Rehearse for your most significant failure scenarios to develop better, faster reflexes 3. Recognize its signs sooner

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What’s in It for Me?

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4. React to failure situations more appropriately in the moment 5. Reflect deeply and honestly on their underlying causes so you can craft better strategies going forward 6. Rebound confidently, based on the lessons learned 7. Remember the insights you gained, to strengthen your culture’s ability to leverage future failures 10. Failure is today’s lesson for tomorrow. Put it to work to help you accelerate innovation, intensify employee engagement, and drive growth. You and your organization are fallible. Admitting that reality and leveraging the failures you create builds the trust you need to create those results.

Now that you know where we’re headed, let’s tell you four places we won’t take you. First, we won’t waste your time exploring the usual clichés about the other F word, like to err is human and learn from your mistakes. While we know how difficult it can be to put that understanding into action, ours is not a personal psychology book or self-help manual. Second, we’re not going to take out our pom-poms to join the fail fast, fail often cheerleading chorus from Silicon Valley. We think you’ve already heard that enough, too. Third, this is not another one of those “I struggled, I persevered, I succeeded” heroic personal memoirs. Great, inspiring stuff, but we’ll leave that genre to others. Fourth, although we are teachers, this is not an academic book per se. We hope it will be used in classrooms worldwide, but it is not written as a textbook. Our tone is informal and straightforward. We want to engage in a conversation, not a lecture. We invite you to share your experience and perspectives with us on our book website: www.theotherfwordbook.com.

FIND YOURSELF HERE We’ve written this book with a practical agenda in mind: to challenge you to think about failure differently, manage it more effectively, and leverage it more creatively in your organization. We’ll offer you specific, straightforward suggestions for how to do that, with examples drawn from our own extensive research and experience as well as insights from effective leaders

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we’ve interviewed across different organizational settings and professions, both domestically and internationally. You’ll learn how to deal more effectively with the reality and inevitability of failure. We’ll offer you a practical, seven-stage framework, the Failure Value Cycle, which you can use to apply these lessons in your organization, starting tomorrow. Along the way, we provide practical exercises for you and your team to better understand key issues and put these insights to work. There are more specific ways you can benefit from our book, depending on your particular responsibilities and interests. We trust you can find them yourself after scanning the following dozen profiles, whether you run a large established organization or a small to medium-sized business, are starting a new venture, or are simply curious about our topic: ■

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If you’re in charge of your organization, you’ll benefit from insights of successful peers who are leading or have led global Fortune 100 enterprises, high-potential startups, thriving mid-size businesses, important government organizations, and highly respected nonprofits, to name a few. They’ll share lessons learned and suggestions for how you can more effectively address the fear of failure as well as leverage the power of the other F word to drive innovation and growth. In our Failure Value Cycle, you’ll learn specific steps you can take to bring out the best in the people you are leading. You should see the payoff in greater candor among your colleagues as you consider the choices ahead of you and their risks. You should witness increased evidence of creativity across your organization as your workers get more comfortable with a less-punitive culture that embraces excellence while accommodating good-faith experimentation. If you’re in marketing or sales, you deal with the other F word every day, unless you are converting and closing 100 percent of your target prospects (in which case, you should be writing a book). A marketing campaign or sales call that doesn’t yield what you’d hoped for, while unfortunate, also indicates what you don’t know, or haven’t yet shown, to convince your potential customers you’re the answer to their needs. Our book can help you be more effective on your next foray into the marketplace. Since you deal most directly with your competition and see firsthand new trends in the market, your insights are essential to the success of your firm. Imagine how much more your cash register

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would ring if you could improve your yield by just a few percentage points. If you manage the technology/IT side of your organization, you understand the accelerating and disruptive pace of change. Offensively, these changes can unleash opportunities for new, creative products and services, redefine how you leverage ideas and resources, and even redesign core business processes. Defensively, they pose brand-tarnishing risks like network security breaches, getting outflanked by more nimble competitors and startups, and being hampered by legacy systems and outdated technology. Stay tuned. Our Failure Value Cycle can help you align your agenda with the most important priorities of your clients, even if they don’t know the difference between the Zachman Stack and a short stack of pancakes. Applied rigorously to your own domain, it can complement your existing tools to anticipate, identify, and preempt potential failures-in-waiting, whether occasioned by malevolent hackers from the outside or inadequately examined failure scenarios inside. If you work in finance, you’re concerned with how your organization manages its resources to get the best results from its investments and spending. You’re also keenly aware of the disparity between the strategic objectives and commitments your CEO has established and the limited resources you have to allocate. We can’t promise you a silver bullet, but we can offer you silver buckshot to help hit your targets. We’ll show you how to extract unexpected value from your organization’s “garden mulch pile,” the accumulated residue from past product, technology, or market failures. We’ll provide examples of how others have increased their ROSI (return on sunk investments), whether in the form of reconfiguring product offerings or repositioning solutions for entirely new markets. We can help you get more mileage out of your investments in innovation and operational improvement by facilitating an environment in which potential failures get flagged more rapidly, and better ideas for future actions get discussed and critiqued more openly. You know better than most how relatively small improvements in your working capital or net portfolio returns can cascade into dramatic positive results for your organization. If you’re involved with strategic planning, you’re in the business of recommending and making bets about the future. While leadership is fundamentally assertion in the face of uncertainty, your role is to advise the heads of your organization about which direction and mix of actions offer the best prospect for success. You must constantly balance the

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possibility for the results you want with the probability of the risks you will encounter. Our book will not replace your traditional arsenal (e.g., scenario planning, Monte Carlo analyses, SWOT charts, BHAGs [big, hairy, audacious goals], affinity diagrams, etc.), but we’ll help you improve the range of possibilities you are considering and the value of their vetting by your colleagues. Simply stated, if your organizational culture does not tolerate failure, you are never likely to hear what your fellow workers really think, whether the issue is where the organization should be headed, ideas for new products and marketing initiatives, or what the real chances are for implementing a particular strategic agenda. If you’re an operations executive, you know what it’s like to try to convert lofty strategy into practical results. What’s in this book for you as a head-down, roll-up-your-sleeves leader? We’ll show you how overemphasis on operational improvement in the vein of Six Sigma and total quality management (TQM) programs can inadvertently jeopardize real strategic performance improvement, especially when it comes to reinforcing a culture of innovation. This is exactly what happened at 3M, one of the best-run, most highly respected organizations around. We’ll help you change the conversation you have with your direct reports so you’re better able to identify failures faster and embed best practices in applying the lessons learned. If you’re a key talent or HR executive, you’re already attuned to the cultural strengths and weaknesses of your organization. You know in your gut whether your company’s office environment is closer to a Dilbert cartoon1 or one of Fortune’s Best Companies to Work For. And you are keenly aware of the difficulty of both continually invigorating your workforce while improving their skills and finding the next generation of talent to drive your organization’s future success. We’re not going to solve your comp design or succession planning problems, but we can help you strengthen your fundamental workplace culture. Fear of failure greatly compromises an organization’s ability to inspire, retain, reward, recognize, and replace great talent. We will show you examples of how others have successfully confronted this issue and how to best change the conversation and culture in your organization. If you’re an entrepreneur, you already know failure is your constant companion as you try to keep your investors’ support, motivate your team, gain a toehold in a competitive market, and, above all, convince customers you have something they need. We’ve been there. We know what it’s like to bootstrap a venture, convince your friends and family it’s

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worth supporting with their patience and money, and go about converting a dream into a bona fide business. We can help improve your odds of success by balancing your tenacity and love for your product, strategy, and vision with the openminded curiosity to be alert to the wisdom contained in the setbacks you and your team will undoubtedly encounter. We share the experiences of other entrepreneurs who have struck the right balance between confident leadership and wise insight in launching successful businesses. Consider them honorary members of your startup team. If you’re running a small or medium-sized enterprise, this book lets you compare notes with others facing similar agendas. We understand how lonely and isolated your job can be and have reached out to leading players in the SME arena to elicit ideas on how to best address the challenge of failure as you build and grow your organization. We’ll share examples of how they’ve done it and suggest other possibilities you might want to experiment with. Our Failure Value Cycle isn’t just for the big guys; you can start using it today in your business. If you’re a board member or advisor, you’re already attuned to thinking independently about opportunities, risks, and failures; how to prepare for them; and how to respond. How have other organizations addressed these failure-related issues? What examples, frameworks, or failure-savvy practices have helped? What questions should you ask of leaders and teams? We’ll offer specific suggestions of how other companies and leaders have tackled the other F word to improve their performance—examples that can strengthen your role as well. If you’re a student or still early in your career and aspiring to leadership roles, prepare for a guided expedition across a fascinating landscape of organizations, cultures, functions, and settings in which failure appears and is addressed by men and women in the kinds of positions you see in your future. As you read about their experiences, ask yourself how you might do things differently. What other strategies or techniques could you use in the situation at hand? After all, we are all experts at creating failures, but it’s much harder to expertly leverage the underlying value failures create. So try your own hand. Take a look at how we approach the other F word in our classes in the Appendix. We welcome your vicarious involvement, and you don’t even have to pay tuition to Berkeley or Princeton to sit in. (Grading is pass/fail, of course.) Finally, if you’re just curious about the phenomenon of failure in contemporary organizations, we welcome you on our tour of this fascinating frontier. It can be uncomfortable and unfamiliar terrain,

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The Other “F” Word but it can also offer unexpected resources and insights that may change how you think, how you live, and how you lead.

However, if you’re the kind of executive who firmly believes fear is the best motivator of performance, please buy another book. The good news for you is you’re not alone. Many organizations and the people working there live in an atmosphere of fear; if it’s not overt then it’s just below the surface. If that’s your style, good luck. But if your first instinct when failure happens is to look for someone to blame, you might think of this book as a mirror: be willing to see your own fingerprints on the situation. And welcome to the family of the fallible.

OUR ROLES IN THIS BOOK We will be wearing three hats during our time together. First, we will be your scouts, exploring the frontier of failure and pointing out valuable insights based on our research, teaching, and professional experience as well as the insights of others. Second, we’ll be your challengers, inviting you to rethink your assumptions about the other F word. Third, we’ll be your coaches, helping you identify a range of specific, practical actions you can take as a leader in your organization to make it more failure-savvy and successful. Not all of these suggestions will fit every style of leadership, culture, or organization; but we offer them as possibilities worth experimenting with on your journey to becoming a more failure-savvy leader. Think of them as a playbook of options, some offensive, some defensive; some plays work best with a less experienced team, while others are best left to seasoned veterans. As professors, we’ve read lots of research studies and books about leadership, strategy, innovation, and growth. Many of those books, including classic bestsellers, rightfully urge their readers to think big and lead boldly. Jim Collins understandably wants more companies to escape mediocrity on their climb from “good to great,”2 and a few do just that, at least temporarily. Clayton Christensen lays out a comparably daunting challenge in his two classics, The Innovator’s Dilemma3 and its companion, The Innovator’s Solution.4 Christensen throws down the gauntlet of disruptive innovation, those with far-reaching strategic impacts capable of creating and defining entire new industries or business platforms.

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Venture capitalists also shoot for the stars. They can do very well if as few as 1 in 10 of their portfolio investments hits the big time, earning a huge multiple on their money. Those big wins can outweigh the underperformance of the other nine, including some otherwise fine businesses as well as outright losers. Of course, it would be wonderful if every startup venture could become the next IPO darling of Silicon Valley, New York, Chicago, Paris, São Paulo, Hong Kong, Mumbai, or wherever you are; every enterprise could go from good to great; every leader could pursue and attain excellence; and every major company could re-innovate itself. These moon-shot objectives are inspiring and admirable, but they don’t reflect everyday reality for most executives and organizations. What most executives need now is help dealing with and improving the on-the-ground reality they face every day. We understand most of you may not have all the “right people on your bus,” and your company may not need or be able to dramatically innovate, but you still have high expectations for the future and your role in shaping it. We wrote this book with that in mind. We don’t assume you are Batman or Wonder Woman, even though you might covet their superpowers. We don’t presume your business has had a rocket trajectory like Facebook or Google, or that your organization is awash with cash like Apple. And we doubt your workforce is God’s gift to exceptional talent, extraordinary commitment, and brilliant judgment. We wrote this book for you to read where you are now, with the team you have, in the business you’re leading today and tomorrow. We encourage you to shoot for the stars, but our focus is preparing you to lead better while you’re on the ground. We’ve organized the book into four main parts, each addressing a major dimension of the other F word and the issues it poses: ■ ■

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Part I. What: The Facts and Facets of Failure Part II. When and Where: How Failure Appears at Different Organizational Phases Part III. How: Using the Failure Value Cycle to Advance Your Organization Part IV. Now: Put the Other F Word to Work

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Each chapter includes specific tools you can start using immediately, and closes with a handful of WIIFM takeaways. The frameworks, tools, and resources you find in these pages will help you truly set yourself and your organization up for failure—the right way. If we aren’t offering you new ways to think about failure and how to use it to advance your leadership agenda, please stop reading and accept our apologies for spending your hard-earned money. In that case, we will have failed you.

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PART

I

What The Facts and Facets of Failure

Failure’s like gravity. A pervasive, albeit occasionally inconvenient, fact of life—and one we absolutely depend upon. We ignore it at our peril because, like gravity, the other F word has the potential to simultaneously ground, elevate, and accelerate our efforts to drive innovation and growth. If we are wise enough to pay attention. In this section, we orient you to the issues and facts surrounding the other F word, including the baggage the word “failure” itself evokes. Most new businesses, acquisitions, products, major IT projects, new hires—the list goes on—fail either totally or significantly. It’s a fact of life we need to recognize and respect before we can harness its potential. We define failure as “mistakes and unwelcome outcomes that matter.” This encompasses both unexpected outside events that happen to us and those failures created or even invited by us, as in results from intentional experiments. Failure is also a quintessentially personal, painful, and emotional experience, which is why it can be so hard to address. Its memory lingers and deepens our fear of failure going forward. In fact, both the memory and fear 11

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of failure distort our ability to realistically confront and manage it rationally. Fear of failure is one of the biggest challenges you face as a leader trying to accelerate growth and ignite more innovation in your organization, whether it’s a startup venture, a growing business, a major company, or an established firm in distress.

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2 The Other F Word “Failure” Is Such a Loaded Word FAILURE Stand back from that word a bit. Think about it. What experiences or memories does it bring to your mind? How does it make you feel?

Chances are the word “failure” triggers all sorts of negative connotations for you, and maybe a few positive ones. It’s a very powerful word—often loaded with intense emotions, strong memories, and conflicting interpretations. Most of us don’t like to talk about it, admit when it happens, or spend much time in its company.

13

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The Other “F” Word Take a look at this (partial) list of synonyms and examples of failure1: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Bankruptcy Breakdown Collapse Defeat Catastrophe Mistake Loss Misstep Crash and burn Bomb Botch Bungle Bust Zero Downfall Fiasco Flop

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Bad move Implosion Lemon Loser Mess Disaster Screw-up Stalemate Turkey Washout Wreck False step Faux pas Flash in the pan Lead balloon Sinking ship

From bankruptcy to sinking ship, there’s not an upbeat word or phrase in the whole bunch! No wonder “failure” has become a linguistic pariah in many organizations; it’s either not discussed or it’s disguised with euphemisms, but that doesn’t fool anyone. People know failure when they create it or see it. As authors, we struggle with the other F word ourselves. When we were circulating our proposal for this book, one publisher reflexively turned us down because they thought having the word “failure” in the subtitle would guarantee low sales. (By buying this book, you’ve helped us show the failure in their logic, so thank you.) Because for all its baggage, we think most of us are fascinated and perplexed by failure. We know it’s part of our everyday lives and we even understand it has lessons to offer us. But we still don’t like it. We wouldn’t ask failure out for a date or invite it over for dinner. We get that. That’s why we’re offering you this new perspective. Our focus is not on the myriad reasons why failure happens, but rather what you as a leader can do about it before, when, and after it occurs.

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The Other F Word

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FROM VERB TO VERDICT: HOW FAILING BECOMES FAILURE Nobody wants to fail. Ever. It hurts. It’s embarrassing. It’s lonely. Organizations, too, hate failure. They penalize it, rationalize it, ignore it, and some try to cover it up altogether. One of the major problems with the other F word is that too often we shift instantly from describing a situation as a failure to describing the individuals involved as failures. And that tendency makes it especially difficult for people to think clearly and talk honestly about failure in the first place. David Kelley, a co-founder of IDEO, the global design consultancy firm, doesn’t even use the term “failure” anymore. When we caught up with him at the TED conference recently, he explained that after serving colleagues and clients over the years, he thinks “failure” is itself a failed word. The real issue, he suggests, is “fear of being judged.” In other words, it’s not failure itself that is the problem, but rather the judgment applied to those involved that poses the real challenge. We also spoke with executive coach Peter L. West, who has worked with hundreds of executives, helping them improve their personal and professional effectiveness. West notes this tendency to jump from calling a situation a failure to describing an individual as one is all too common. He observed that in their eagerness to distance themselves from a “failure,” executive teams sometimes behave like the proverbial mob hunting for the village ogre, pitchforks in one hand and torches in the other. They want to fix blame on someone or some group; and usually punish the unfortunate individuals by firing them or exiling them to some lowly post where their failures (and successes) will never matter. Not coincidentally, by assigning blame they often avoid the harder work of looking at their own contributions to the failure in question. Peter also notes that in many organizations if you fail once, you are forever marked internally. Imagine wearing a scarlet F on your back for the rest of your career. One senior executive we spoke with shared with us his experiences after being fired as CEO of a publicly traded company. The executive recruiters who had previously hounded him with enticing offers suddenly wouldn’t return his calls. After decades of success and increasing responsibility he found that this one very public failure had tainted his reputation and impacted his career.

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No wonder people are so worried about the other F word and so reluctant to acknowledge their roles or talk about failures at all. Let’s offload some of that fear and the baggage that goes with it. This is a book about success, about harnessing the power of failure to better lead your organization. It’s not about wallowing in failure or celebrating it. We wish we had a better word for it, but “failure” at least has the virtue of directness. So let’s begin this expedition into the frontier of failure, baggage and all. We warned you we were teachers. We’ll start with a quick quiz: a simple 10-question 10-minute survey of your own attitudes about failure and how you deal with it as an executive, team member, or entrepreneur.

Exercise: Assess Your Failure Leadership Profile 1. What is the strategic position of your business now? □ In imminent danger of closing □ In peril on several fronts □ Not particularly vulnerable □ Relatively strong □ Powerfully dominant 2. If you had to choose between better executing your “today” business versus experimenting to find your “tomorrow” business, how would you allocate your resources between those two agendas? □ 100:0 Execute today’s business:Experiment to find tomorrow’s □ 75:25 □ 50:50 □ 25:75 □ 10:90 3. How do you view the relationship between innovation and failure? (Select all statements you agree with.) □ Failure is an absolute prerequisite for innovation □ If we want/need innovation, we have to accept the possibility of failures along the way □ It is possible to manage or control failure in our quest for innovation □ Failure is not required to innovate

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4. Thinking back honestly on how you initially deal with failure in your organization, how would you describe your actions? (select all statements you agree with) □ I want to find who is responsible and hold them accountable □ I tend to avoid dealing with it unless it’s serious □ I try to not make a public display of the situation inside my organization if at all avoidable □ I try to uncover the underlying reasons for the failure so we can learn something positive from it □ Other: __________________________________ 5. Do you think most people in your organization would agree with your answer(s) to Question 4? (pick one) □ Absolutely yes □ Probably yes □ Possibly yes □ Probably not □ Definitely not □ Not at all sure 6. On a scale of 1 to 10 (1 = not important at all; 10 = most important), how important do you see fear of failure as a challenge for your leadership? (circle one) Not Important Most Important 1-----2-----3-----4------5------6------7------8------9------10 7. How would you characterize your fundamental message about failure in your organization? (select one) □ “Failure is not an option.” □ “Fail once, you’re okay; fail twice, you should probably look for another job.” □ “Failure is okay as long as we learn something valuable from it.” □ “To err is human. We have a forgiving culture here, provided you acted competently and in good faith.” □ “Fail often, fail fast. It’s the only way we’re going to get where we need to go.” □ Other: “_____________________________________________.” 8. Are there examples in your organization of people who have been promoted or otherwise positively recognized, either because of, or in spite of, a significant failure and how they managed it? (select one) □ Nobody □ One person (continued )

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(continued ) □ A couple people □ Several people □ Many people 9. On a scale of 1 to 10 (1 = very dissatisfied; 10 = very satisfied), how satisfied are you with the level of innovation, creativity, and initiative in your organization? Very Dissatisfied Very Satisfied 1------2-----3-----4------5------6------7------8------9-----10 10. To the extent you are dissatisfied with this level, why do you think your organization is not stepping up to the level of innovation, creativity, and initiative you would like to see? (Weight each possible factor so your total percentage equals 100.) □ ____% Fear of losing their jobs if things don’t turn out well □ ____% Fear of losing credibility if things don’t turn out well □ ____% Uncertainty about what needs to be done where and when □ ____% No apparent reward or recognition for success □ ____% No training or resources to support these activities □ ____% No apparent management emphasis on this agenda □ ____% Other: ____________________________________ □ 100% TOTAL Please put your pencil down. This concludes your test. (We put that in for old times’ sake.)

While this is clearly not a scientific survey, we are not aware of any widely used instruments that focus directly on these failure-relevant issues, including the benchmark Multifactor Leadership Questionnaire (MLQ). You obviously don’t need to share your answers with anybody, but we hope it gives you some clues about your own leadership approach to the other F word in various contexts. Let’s take a look at what your answers might suggest: Q1. Strategic Position—If you checked the “imminent danger” box, you might have bought this book a little late. If you picked “powerfully dominant,” we’d like to know more about the secret to your business success. Assuming you didn’t check either of those, your answer should suggest the degree to which your business needs new thinking, strategy, positioning, and maybe a new team—and how soon.

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The Other F Word

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Q2. Today:Tomorrow Balance—Presumably this reflects your answer to Question 1, and is an indication of the degree to which you are comfortable with the status quo and current direction of your business. Regardless of how comfortable you may be, we suggest a little humility about your present circumstances could stand you in good stead going forward. Think about what kinds of questions or assumptions are involved in your current business model and strategy. Consider what new customers or markets might make sense for you to target. Reflect on what your competitors are doing differently or what new startups are appearing in your traditional space. Any or all of those will probably suggest issues worth examining and then potential solutions worth testing. Q3. Relationship Between Innovation and Failure—Your answer(s) here may give you some insight into your overall approach to the other F word in your organization. It’s your default position, perhaps subject to change once you’ve finished this book. Q4. Your Initial Failure Response—This question checks your consistency. If you answered it fundamentally differently than the philosophy you selected in Question 3, you might be perceived as disingenuous or even hypocritical by your colleagues. At the very least, a misalignment between the two answers might suggest a need for some further thinking about how your actions match your understanding. Don’t feel bad about it. Most of us react poorly in the heat of the moment when failure occurs; and we’ve all been guilty of perhaps making things worse in the process. Q5. Alignment with Your Team—This is a potential Dilbert situation. If your organization sees things fundamentally differently than you do, or is confused about how you are likely to deal with failure, chances are good your colleagues feel they are on uneasy ground. They are less likely to take risks, express their real opinions, volunteer their best ideas, or align closely with your fundamental agenda if they are uncertain how you will deal with failures along the way. Q6. Fear of Failure—This one’s tough to get a handle on, precisely because your employees are highly unlikely to acknowledge their fear to you. Instead of taking a shot in the dark, consider this question as an invitation for you to be creative in trying to ascertain the real culture in your organization. To the degree fear of failure is prevalent, you are unlikely to see

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much creative innovation from your people, and you may be on your way to a complacent culture rather than a highly competitive one. Conversely, if there’s no real fear of failure, you may have created an environment where recklessness reigns. Q7. Your Fundamental Failure Message—There’s no right answer here, and you may have come up with your own short phrase that better captures your approach. Again, you might find it instructive to see the degree to which the message you think you are communicating is in fact being received with some fidelity by your organization. Q8. Examples versus Scapegoats—This is a highly symbolic matter. Your team will be intensely curious about these situations, and is likely to vividly remember how you handled them. After all, it’s easy for them to put themselves in the position of the individuals involved in a significant failure circumstance. Q9. Level of Innovation, Creativity, and Initiative—This one speaks for itself. Think of it as your own call to action if you scored from 1 through 3. And if you scored in the 8-to-10 range, you might ask yourself how your toughest competitor or your best employees might answer the same question. Q10. Your Possible Agenda—There’s no shortage of things you can do as a leader to reduce the fear of failure in your organization and encourage greater initiative. That’s what this book is all about.

∗ ∗ ∗ With these initial insights in hand, let’s take a deeper look into the nature and territory of failure.

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3 The Gravity of Failure and Failure’s Gravity

A UNIVERSAL FORCE Most new products fail, most new businesses fail, most mergers and acquisitions fail, most big IT projects fail—and that’s just a partial list of the endeavors on the most-likely-to-fail list. Add to that the endless array of less likely but still frequent failures: new hires or promotions that don’t work out, ad campaigns that fizzle, stores that close, strategies that falter, new policies that backfire. You get the picture. In fact, when you think about all the failures we live with dayto-day, it’s amazing anything significant or lasting ever gets done. As we thought about this landscape of failure, we struggled to find an appropriate analogy or metaphor to capture its ubiquity, its pervasiveness, and, perhaps, its inevitability. Finally, we hit upon one: Failure is like gravity. 21

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It is all around us all the time. It’s an inexorable and unavoidable fact of life, one we ignore at our peril. It affects virtually everything we do or try to do. The gravity of failure limits and, in a profound sense, humbles us, whether we acknowledge it or not. But it’s also the gift that keeps on giving, because it often contains the very seeds of the success we so desperately want—if only we can unlock its secrets. As much as we might like to deny or defy it, we (and the organizations we work in) spend most of our respective lives immersed in failure, with occasional and temporary success along the way, if we’re lucky. Too strong a statement for you? Consider the following facts: ■

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Startups: Between 50 and 70 percent of all new businesses in the United States fail within the first 18 months.1 Venture Capital–Backed Startups: Statistics for this group are even grimmer: 75 percent of VC–backed startups, presumably the best-vetted cream of the crop, fail to earn back even their invested capital. More than 95 percent fail to meet investor expectations.2 Profitability: Publicly traded companies are losing their mojo. Based on their return-on-asset performance, they are one-fourth as profitable as their counterparts were in 1965, according to Deloitte Research.3 New CEOs: Two out of five fail to last 18 months. Even in the Fortune 500, almost a third of CEOs will be gone before their fourth anniversary on the job.4 New Products: As many as 95 percent of new products introduced each year fail, including those with enormous research and marketing muscle behind them. New Coke, anyone?5 Mergers and Acquisitions: Between 70 and 90 percent of mergers and acquisitions fail to add to shareholder value or meet their objectives.6 New Hires: A recent three-year study among 5,000 hiring managers of major firms found that 81 percent of new hires don’t work out.7 Sales: Most sales calls are failures, as are most advertising impressions on TV, the web, or in print. Internet ads, for example, get clicked about once for every 1,000 views.8,9 Patents: More than 99 percent of U.S.-approved patents fail to earn a cent for their inventors. Of 1.5 million patents in effect, only 3,000 of them are being used for something commercially viable (if they’re being used at all).10 IT Projects: An estimated 68 percent of major IT projects fail to meet their goals.11,12

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And business is hardly alone. Failure’s a fact of life in virtually every field of human endeavor and experience: ■

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Love: Almost half of new marriages end in divorce; just imagine how many more are in a state of deep unhappiness.13 Sports: Even superstars like Michael Jordan (49.7 field goal percentage),14 Ty Cobb (.367 batting average),15 and Wayne Gretzky 17.6 shooting percentage)16 failed more often than they succeeded. New Year’s Resolutions: About 88 percent end in failure.17 Life: 100 percent of human bodies ultimately fail. It’s called death.

We not only live with failure; we live in it every day.

GRAVITY’S SILVER LINING But before you despair, take heart. Gravity has both a positive and a negative character. It is one of the four fundamental forces known to physics (along with the electromagnetic force and the weak and strong nuclear forces). Experts argue that although it’s the weakest of these four, in the words of one prominent scientist: “the central theme of the story of the Universe turns out to be gravity.”18 It is the cosmic glue that holds our entire universe together. Without it, we quite literally couldn’t live, walk, drive, fly, cook, or go to the bathroom. It makes hydroelectric power possible, and even allows interplanetary space travel by allowing spaceships to slingshot around planets, accelerating their journeys thanks to a boost from gravitational forces. In a fundamental sense, our world depends on gravity. On the one hand, just as gravity is essential to life, failure may be as essential to other things we want and value, like innovation and growth. And as Icarus discovered at his peril with his wax wings, you need to be properly, not blithely, prepared if you’re going to try to defy gravity. We can’t ignore failure even as we crave success. We can learn to fly, but only when we respect gravity’s pull. We can succeed, but only when we respect the grip that failure and fear holds on our plans and aspirations.

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Two Real Space Cadets If anybody should know something about failure’s relationship with gravity, it’s Franklin Chang Diaz, who shares the record for most flights to space. Physicist, engineer, astronaut, and company president, Diaz says, “I expect failure all the time. Things usually don’t work out the way you’d planned, so you just have to learn to be patient, deal with problems as they arise, and move on.” On every one of his spaceflights, something went wrong. During one flight, the Space Shuttle Atlantis’ cooling system broke down and the shuttle almost had to land in Africa carrying the nuclear-powered Galileo spacecraft in its cargo bay, not exactly a convenient backup location to Cape Canaveral in Florida, or Edwards Air Force Base in California. On another mission, a very delicate 13-mile (20 km) electrical conducting cable tethering the shuttle to an experimental satellite, broke, leaving his crew to figure out how to prevent the ship from becoming entangled with the equivalent of a 100-pound (50 kg) “space kite” and its 20 km string. “You can’t get innovation without failure,” notes Diaz. As chief executive of his own company and board member of others, he sees fear of failure as a “huge challenge for leaders.” Executives are simply afraid of making a mistake, especially when they’re laying it on the line for investors—for fear they may lose their job. Not surprisingly given his career trajectory (pardon the pun), Diaz actually likes taking risks: “There’s no risk like sitting on top of a rocket, waiting for someone to light the fuse.” We’ll take his word for it. Diaz highlights his failure-savvy leadership style this way: 1. “I expect I will fail. It’s the first thing in my mind, so I can condition myself psychologically to think about how I will react when failure does happen . . . After all, you don’t have to prepare yourself very much for success.” 2. “I try to ensure smaller failures from which I can recover rather than making big jumps from which I cannot. I can afford to twist an ankle or break a bone but not to kill myself.” 3. “You have to be optimistic to be a leader. You have to sometimes walk into a room with the feeling you can overcome whatever obstacle is there, even if you don’t have the answer right now.”

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4. “When my team faces a seemingly insurmountable mountain, I often tell them to look backwards—to see how far we’ve already come. This helps bring perspective that mountains seem tall when they’re close, but small when they’re far away.”

Another astronaut, Yi So-yeon, knows something about insurmountable odds. As a young girl, she dreamt of becoming an astronaut, not an easy aspiration for a woman in Korean society. In 2006, she was selected and trained by the Korean government and Russian experts as one of two International Space Station flight candidates out of 36,000 applicants. In her book about her experiences, she talked candidly about the failures and setbacks she encountered, from difficulties getting funding for her PhD program to resistance by the government to approve her flight. As she said to us: Failure is like a vaccine—it helps keep you from getting a disease that kills you, but it can make you sick and uncomfortable in the short term. You need pain to have glorious success.

FAILURE’S GRAVITY Failure’s not just like gravity in the physical sense; it creates its own gravity in an emotional sense. It often dramatically and negatively affects a person’s selfconfidence, esteem, compensation, job, and even career. Its effects on organizations can be equally significant, with losses of shareholder value, investor confidence, and morale. The gravity with which most of your employees and colleagues view failure makes it an essential issue to address as a leader. Simply stated, while you can joke about the other F word, you should never take it lightly. We assure you, the people in your organization don’t; and they are looking closely at how you deal with failure. When we’ve talked with people about their experiences with a failed project or product, they frequently describe one common response by their organizations: isolation. Nobody wants to be associated with failure or those involved with it, for fear that the taint may jeopardize their own positions in the company. They want to distance themselves from it.

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For the individuals involved in and even responsible for the failure, this can be not only an embarrassing, but all too frequently, an excruciating experience. Your job as a leader is to understand the seriousness of these ripple effects and keep the team from falling into the equivalent of a black hole—a place where gravity absorbs everything around it, even light itself. We don’t suggest you necessarily celebrate failure. Nor do we recommend tolerating it as the norm in an organization. Accepting failure without learning from and leveraging it is a recipe for mediocrity. In fact, it is the very human effort to try things that may lie well beyond our reach that creates the preconditions for failure. In fact, we often set ourselves up for failure time and time again. And that’s a good thing; it’s what drives innovation, progress, and growth. But the opposite of tolerating failure is just as unproductive. Castigating and humiliating those involved with failures is even less useful than denying it in the first place. “Failure is not an option” sounds great as a slogan, but it ignores reality in most circumstances. Failure is always an option, and if you want your organization to grow, become more innovative, and elicit the best from your employees, then failure will probably be a key driver. We can fly because we understand and respect the power of gravity, an occasionally inconvenient but nonetheless essential force. Similarly, you can use the inherent power of failure to your advantage to inform, teach, and inspire your organization to lift its own level of performance.

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Contents Foreword by Guy Kawasaki Introduction

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Chapter 1: An Introduction to the Social Media Landscape

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What Exactly Is Social Media? Social Media Really Is a Big Deal The Different Types of Social Media Sites—Content to Suit Every Market A Closer Look at Microblogging Introducing . . . Twitter!

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Chapter 2: Why Is Twitter So Powerful? Twitter and Its Successes The Power of Twitter’s Immediate Feedback Instant Access to Smart People 24/7

Chapter 3: Getting Started the Right Way

8 13 15 19 19 21 23

on Twitter

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Signing Up—Does Twitter Have the Web’s Most Friendly Registration Page? Who’s on Twitter? Your First Followers! Create an Inviting Twitter Profile Building Out Your Profile Checking Out Security and Privacy Notifications to Notice Tweeting with Your Mobile Phone A Winning Social Media Philosophy

25 30 33 44 55 57 59 60

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Contents Sending Your Very First Tweet Becoming a Follower A Word about Security

Chapter 4: Twitter Setup and Design

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Twitter Name Twitter Setup The Twitter Profile Photo Twitter Interface Basics Twitter Graphics Now . . . What about TweetPages?

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Chapter 5: Building a Following on Twitter

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Quantity or Quality: Choosing the Type of Following You Want Quality: How to Be Intentional about Creating Your Own Network of Experts Quantity: Seven Killer Strategies to Reaching Critical Mass on Twitter Klout and Page Rank

Chapter 6: The Art of the Tweet Tweet Etiquette The Benefits of Following before Tweeting How to Join a Conversation How to Be Interesting on Twitter How to Drive Behavior

Chapter 7: The Magic of Connecting with Customers on Twitter

Identifying Problems and Soliciting Feedback Discovering Your Top Fans, Promoters, and Evangelists Your Personal Help Desk

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90 98 112 115 116 124 125 128 148 151 152 155 160

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Chapter 8: Leveraging Twitter for Team

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Communication

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Twitter for Virtual Team Leaders Creating a Twitter Account for a Virtual Team Building a Team with Twitter

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Chapter 9: Using Twitter to Help Build Your

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Brand

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Create a Story Portraying Your Brand with Your Profile Tweet Style—What to Say When You’re Building a Brand and How to Say It Reinforce the Core Message Repetition, Repetition, Repetition Writing the Tweets Win Retweets Create Hashtags and Run Hashtag Chats

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Chapter 10: Leveraging Twitter to Drive Follower

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Behavior

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Driving Followers to a Website Promoting a Blog on Twitter Twitter as a Resource for Post Ideas Driving Followers to the Mall Can You Put Affiliate Links on Twitter? Driving Followers to Register Tracking Results and Testing Strategies Tracking Multiple Tweets Making the Most of Twitter’s Trends

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Chapter 11: How to Make Money on Twitter Earn with Advertising on Twitter Barter, Buy, and Sell Your Way to Profit

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Chapter 12: Beyond Twitter.com: Third-Party Tools You Will Want to Know About

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SocialOomph Twitterrific Twhirl Twitterfeed Trendistic Twellow TweetBeep TwitterCounter TweetDeck TwitThis TweetAways Hootsuite

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Directory of Recommended Twitter Members to Follow

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Index

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Foreword

I started on Twitter in August 2007 after exhortations from some friends. At first I didn’t get it: “Why do I care if LonelyBoy15’s cat rolled over?” The light went on when I started searching for my name, people I knew, and topics that interested me. Seven years later, I’ve connected with people from all over the world. I have 1.4 million followers and have tweeted 132,000 times. Sometimes I tweet when my dog rolls over, too. Twitter has become a fantastic tool for me. You don’t need to spend seven years and 132,000 tweets to learn how to use Twitter because Joel Comm and Dave Taylor have written Twitter Power 3.0: How to Dominate Your Market One Tweet at a Time. Lucky you! I wish it had been that easy for me. This book will give you a big head start toward mastering Twitter from two people who already have. So buy this book, read it, and then go forth and tweet up a storm! —Guy Kawasaki, chief evangelist for Canva

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INTRODUCTION

It seems like just yesterday that my publisher asked me to write the first edition of Twitter Power. With just more than 5,000 followers to my name in 2008, I was an early adopter of the now-ubiquitous social media site known for 140-character posts. It thrills me that the first and second editions of Twitter Power have become the top-selling books in the world on the subject of using Twitter! I knew that Twitter was onto something, but I never imagined that it would become such a significant part of our culture. The hashtag is now a part of our discourse and has influenced many other social media sites to include hashtag support on their service. The Twittersphere’s ability to discover and broadcast breaking news faster than any of the major networks makes every member a potential man or woman on the street. The connection we feel with musicians, celebrities, politicians, athletes, and authors has never been greater because Twitter has allowed us to interact with some of the people whom everyone knows. And businesses are discovering that Twitter is an incredibly powerful branding tool useful for engaging with prospects and customers, as well as providing top-quality customer support. With more than 250 million monthly active Twitter members and a member base exceeding 1 billion accounts, the Twitter hashtag and well-known @username appear on television shows, in film promotions, on billboards, in magazines, and in a variety of other promotional materials. Twitter is everywhere, and it is here to stay.

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And although the 140-character limit hasn’t changed, much has evolved since the release of Twitter Power 2.0 in 2010. Lists for organizing those you follow, the ability to embed photos and images in your tweets, an official Twitter advertising system designed to help businesses engage and drive followers to take specific action, and a better understanding of how Twitter members like to engage are just some of the new things covered in this book. One of the other changes to this completely updated and revised third edition is the addition of a coauthor, Dave Taylor (of AskDaveTaylor.com). A prolific author of many business and technical books, Dave has been a good friend of mine for many years. Because of his involvement in the social space, I thought it would be fun for us to coauthor this book. To avoid confusing you, the reader, as to who is speaking, we refer to ourselves in the third person throughout the book. So, whether you are a seasoned Twitter user, someone who has dabbled in tweeting from time to time, or a complete newbie to Twitter, you are in for a treat. Dave and I believe this is the best edition of Twitter Power yet, and we’re excited for you to jump in and discover how to make your Twitter experience as great as possible! If you use Twitter to connect with friends or family, or if you manage a Twitter account for your own small business or as part of a large corporate team, the pages that follow are dedicated to helping you leverage the power of Twitter like never before. Who knew 140 characters could be so powerful? —Joel Comm

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An Introduction to the Social Media Landscape

Once upon a time, anyone could be a media publisher. All you needed was several million dollars, a team of editors and writers, a printing press capable of shooting out a dozen copies a second, and a distribution network that would put your publication in stores across the country. Unless, of course, you wanted to go into radio or television. In that case, things were just a little harder. The result was that information came down from on high. We didn’t talk among ourselves, and we weren’t part of the conversation; we were talked to by writers, editors, and producers who controlled the conversation. If we liked what we were reading, we kept tuning in, and the publishing company made money. If we didn’t like it, we stopped buying the magazine, or we switched channels. Advertisers turned away, and all the millions of dollars the publication took to create disappeared. Today, it’s all very different. It now costs as little as nothing more than time to create great content and make it available for other people to enjoy. That low cost means that it doesn’t matter if millions or even thousands do not read it if your target market is smaller or nascent. The rise of social media means you can profitably focus on even tiny markets—such as stamp collectors in Mozambique—and still find enough people to form an online community and profit through advertising and product sales.

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The buzzword for this rise of small and micro communities, as Wired editor Chris Anderson coined it, is the long tail, and it’s absolutely been rocket fuel for our Internet race to the moon. But the lowered barrier to entry for publishing online has had another positive effect: We aren’t being talked to by professional writers and publishers anymore; we’re talking to each other. Average folk like you and me—the kind of people who didn’t study writing at college, who never spent years as cub reporters covering local court cases or high school sports, and who were never even very good at Scrabble or Words with Friends—are now writing about the topics they love and sharing their views and opinions online. And they’re hearing from their readers, too. The conversation is flowing in both directions. Anyone can now launch a website or blog, write articles, share their thoughts and views on Facebook or other social media, or even create videos and upload them to YouTube. And anyone can comment on that content, affecting both its nature and the direction of the publication. That’s social media; it’s a publishing revolution, and we’re smack-dab in the middle of it!

What Exactly Is Social Media? Social media can be all sorts of different things, and it can be produced in all sorts of different ways. Perhaps the best definition of social media, though, is content that has been created cooperatively with its audience. Facebook, for example, is not a publishing company. It doesn’t create any of its own content. It doesn’t write articles or posts, and it doesn’t upload films or images for people to view and enjoy. It allows its users to do all of that for their own amusement, edification, and profit. Facebook is a platform, a set of tools that enable this activity. It’s as though the National Broadcasting Company (NBC) or Showtime were to fire all its actors, producers, news anchors, and scriptwriters; throw open its doors; and tell the world that all are

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welcome to come in, shoot their own programs, and broadcast them on the channel. Or as though People magazine were to open its pages up to anyone who wanted to publish a photograph or write some celebrity gossip. That would be sweet, wouldn’t it? Of course, if that were to happen, you’d still have to tell people what channel you were on and when they could see your program. You’d still have to produce content that other people might actually enjoy and, inevitably, the people who took the most professional approach, put time and effort into what they were doing, and connected with their audiences would be the most successful. But even that wouldn’t allow viewers to take part in the program, to participate in the creation of something bigger than a video segment or article in the next issue of the magazine. That participation is the cornerstone of social media. Create a group on a site such as Facebook, and you won’t need to supply all of the text and all of the images to keep it lively and interesting. You’ll be expecting other group members to add their stories and photographs, to engage in discussions, and to share their own experiences. Even bloggers, when they write a post, hope that their readers will join the discussion by leaving comments at the bottom of the post, taking the conversation in new directions and adding new information and perspectives. This is the social part of social media, and it means that publishing is now about participation. Let’s say that again because it’s so darn important to Twitter Power and to success on social media in any venue: publishing is now about participation. Someone who uses social media successfully doesn’t just create content; he or she also creates conversations, and those conversations create communities. That’s the real beauty of social media, and although creating a separate community may or may not be a primary goal— depending on the site—the result of social media can always be solid connections among participants. When those connections form around businesses, the results can be the sort of brand loyalty and commitment that sales

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professionals have been dreaming about since the first days of direct marketing. We’ll admit it; our definition of social media is rather vague. At its broadest, it describes a form of publishing in which people swap rather than publish stories and the exchange of content happens within a community, rather like a chat in a restaurant. At its narrowest, it describes a tool set that lets publishers and marketers put their messages in front of thousands of people and encourage them to build strong connections and firm loyalty. However it’s defined, social media has proved incredibly popular! As of September 2014, Facebook claims to have 864 million active daily members—that’s active members, not just people who created a profile and never used it—and 703 million active daily mobile users. Expand the data to monthly active users, and there are more than 1.3 billion people busily posting and discussing things in the Facebook community. That’s billion with a b. Twitter, which launched almost a decade ago—a lifetime in Internet terms—has similarly impressive statistics, and its growth has been phenomenal. As of this writing in late 2014, Twitter has 271 million active users, 78 percent of whom are on mobile devices. Together, we send more than 500 million tweets per day, and the system supports more than 35 languages. Helped by the appearance on the site of celebrities, such as Katy Perry, Taylor Swift, Rihanna, Ellen DeGeneres, Britney Spears, Ashton Kutcher, and Oprah Winfrey (who posted her first tweet live on her TV show, assisted by Twitter cofounder Evan Williams), Twitter’s growth chart has changed from a gentle climb into a hockey stick, a phenomenal accomplishment. There is another fact about Twitter that’s particularly interesting, though: It’s massively underused. The average Twitterer has 126 followers and has sent out fewer than 300 tweets across the life of his or her account. Not only that, but 30 to 40 percent of Twitter accounts are also dormant, never having posted a single tweet. To put a few numbers here, Joel currently has 81,119 followers and follows 1,372 people, and Dave has 12,574 followers and follows 932 people. And to put things in perspective, when Joel

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was asked to write the first edition of Twitter Power back in 2009, he had only 5,000 followers, and not a single person had yet come close to having 1 million followers. Twitter’s growth has turned it into a massive marketing opportunity. All of these figures just scratch the surface of the popularity of social media, though. YouTube attracts more than 1 billion unique visitors each month. Visitors watch more than 6 billion hours of video content each month. Oh, and 100 hours of video are uploaded to YouTube every minute. Every minute! Throw in the countless millions of blogs and social networks, such as Pinterest, Instagram, Google Plus, and Reddit, and it becomes pretty clear that social media is a massive phenomenon that’s changed the way all of us create and use content—and the way that businesses use that content and their distribution channels, too.

Social Media Really Is a Big Deal So we can see that social media sites and users can be big. Really, really big. But so what? There are lots of people in the telephone book, and that’s very big, too. Being big doesn’t make it a particularly useful marketing tool. Social media sites don’t just list people, though, and they don’t just list any old people. Each site lists a very special group of people. At first glance, that might seem a little strange. Whether you’re browsing through Facebook, Pinterest, Flickr, or Twitter, you’re going to see small pictures of people, short messages among them, and profiles in which those people share things about themselves, such as where they work, where they’re from, and what they do in their spare time. Look a little closer, though, and you’ll start to notice differences because although the sites may seem similar, in fact, each site has its own unique feel and its own unique demographic. Because Facebook started at Harvard University, for example (it had signed up half the undergraduate population within a month of going live), and because it was initially restricted to

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university students, it continues to have a higher percentage of well-educated members than of the general population. Clearly, that suggests many of Facebook’s users are also college students—a fantastic market for companies hoping to acquire buyers and fans, then turn them into invaluable lifetime customers and evangelists. By comparison, tracking Twitter’s demographics isn’t easy. Although some people have had fun following the frequency with which certain wealth-related terms (such as well-to-do neighborhoods) turn up, there’s no easy way to conduct a demographic survey of the site’s users. Hitwise, an Internet monitoring service, did, however, manage to produce some very interesting, and some very impressive, results. Figure 1.1 shows some Twitter stats from the company. Pew Internet reports that as of January 2014, 18 percent of online adults use Twitter, broken down into 17 percent of online

Figure 1.1 Now you know how much coffee they consume at Twitter’s headquarters!

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adult males and 18 percent of online women, with 16 percent of white, 29 percent of African American, and 16 percent of Hispanic ethnicities represented. Twitter also biases younger: 31 percent of users are 18- to 29-year-olds, 19 percent are 30 to 49, and less than 10 percent are older than 50. Most fascinating of all, though, 18 percent of Twitter users have completed some college, and another 18 percent have an undergrad or graduate degree. When you consider earnings, the greatest percentage of online users who are on Twitter are those who earn $75,000 or more. That’s a lot of dough! Although a number of twentysomethings might have joined Twitter out of curiosity, it is clear that the site isn’t just used by young people as an alternative to text messaging and Facebook chats. Twitter has a large following among older, professional audiences, and a full quarter of Twitter’s users are high earners, a valuable piece of information that makes the service a must for any serious marketer. We can see that social media sites aren’t just attracting kids looking for places to chat with their friends and find out where to load up on free music downloads. They’re also attracting smart, educated people with money to burn. They’re attracting experts, too. You can see this most clearly on specialist sites, such as Flickr, a photo-sharing service. Although Flickr too isn’t very forthcoming about its demographic details, spend any time at all on the site, and you can’t help but notice the number of professional photographers who use it. Part of the site’s appeal isn’t just the pictures; enthusiasts also can pick up advice from experts who are working in their field and are ready to share the benefits of their experience. Whatever site we look at, there’s no question at this point in the evolution of the Internet that social media sites attract huge numbers of people. We can see too that many of those people are highly educated, are well paid, and are experts in their fields. You should be realizing that social media offers a gigantic opportunity for business owners to promote their products to exactly the sort of market they want to reach, whether it’s

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predominantly male, female, rich, poor, geographically based, or of a specific ethnic group.

The Different Types of Social Media Sites—Content to Suit Every Market One of the reasons that social media has proved to be so popular is that it’s available in all sorts of different forms. Although the networking sites with their tens of millions of members might be the most familiar, there are actually all sorts of different ways of creating and sharing social media content.

BLOGS Yes, blogs are a form of social media, too. They’re written by people on every topic you can imagine. (See Figure 1.2.) And only a tiny fraction of them are produced by professionals, even though all have the potential to generate revenue. Figure 1.2 is Joel’s blog.

Figure 1.2 Joel’s blog’s home page at JoelComm.com. He writes it; you read it and comment on it. And yes, Comm is his real last name!

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Meanwhile, Dave has three blogs. Really! Check out GoFatherhood.com to learn about his life as a dad, visit DaveOnFilm.com to read his film reviews, and then hang out at AskDaveTaylor.com to read his daily tech questions and answers and product reviews! What really makes blogging part of social media is that it has incredibly minimal costs associated with getting started and running your site. Sure, if you want to have your own domain name and place the blog on your own server, you might have to pay a small fee—and when we say small, we mean less than $10 per month. There are strategies you can use to bring in readers that will cost money, too. But you don’t actually need to do any of that. To become a blogger, you don’t need to do any more than sign up at Blogger.com, WordPress.com, or any of the other free blogging services and start writing. Within minutes, you’ll be creating content, and you’ll form a part of the social media world. Blogs, though, do take some effort. They have to be updated regularly, and although you can put anything on a blog, from favorite quotes to short stories to feature-length videos, you’ll have to work to keep your readers entertained, informed, and engaged. Blogging is fun and can be very profitable, too, but it’s not a sweat-free business. Most important, although you can accept guest posts and hire writers, and although your comments will be a crucial element of your site’s attraction, it will still be you guiding the content and setting the subjects. Blogs are a form of social media, but blogging is a society with a clear ruler, someone who has to head to the mines every morning and work for those gems. They don’t just fall into your lap!

MEMBERSHIP SITES That top-down feel that can be present in some social media channels is also present in membership sites. There are far fewer of these on the Web than there are blogs, but there’s still no

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Figure 1.3 All dating sites are membership sites. shortage of them; like any social media site, they rely on the members to produce the content and discussion that serves as the site’s primary attraction. A great example of a membership site is Match.com. In fact, all dating sites are a narrowly targeted form of social media, with people identifying their own attributes as they sign up, as shown in Figure 1.3. The content that people are paying to use are the profiles and pictures that the site’s members have created and uploaded. Match.com might have an online magazine, but no one is paying $20 to $25 per month to read the magazine. Users are paying that price month after month to read the descriptions and look at the photos that other people have posted, and to contact those people. It’s not the site that’s the attraction of social media sites; it’s the society.

PHOTO SITES Ever since cameras went digital, there’s been a need for a lowcost—and even free—way to share those images with anyone

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who wants to see them online. In addition to the millions of photos posted every day on Facebook, sites and services are dedicated just to photos and images, notably including Pinterest and Instagram. What makes these sites, and photo gallery sites such as Flickr, so cool is that they’re designed specifically around displaying and sharing photographs, so the presentation is bigger, bolder, and more visually engaging, all of which is good! Let’s focus on Flickr for just a moment, because it’s the granddaddy of photo-sharing sites. As a social media site, it of course depends entirely on the photos that users upload to bring in other users. (See Figure 1.4.) That broad-based content sourcing already makes sites such as Flickr—one of the most popular photo-sharing sites—part of the social media phenomenon, but Flickr also has the networking power of those sites. Like Facebook, it’s possible to create large lists of friends and join groups where you can submit images, enter competitions,

Figure 1.4 Flickr is the big daddy of photo-sharing websites.

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and participate in discussions about the best way to light a child’s portrait or which lens to use in which conditions. Flickr also allows its members to mark images as favorites and to place comments beneath them. Both of those activities can be valuable ways of adding new friends. Pro members, who pay a subscription fee of $44.95 for two years, can even see stats that indicate how many views, faves, and comments each image has produced and even where their visitors came from. All of that networking is vital to success on the site, and that success can have some spectacular results. Even way back in 2006, Rebekka Guðleifsdóttir, an Icelandic art student whose images and networking had brought her a huge following on Flickr, was spotted by an advertising executive on the site who hired her to shoot a series of billboard shots for the Toyota Prius. Many of the images used in various versions of Microsoft Windows were bought from photographers commissioned after they were discovered on the site. Every day, images are licensed and prints are sold on Flickr, and it’s all based on the content created by the site’s users and promoted through careful networking. That’s classic social media.

MICROBLOGS And finally, we come to microblogging. This is a whole new thing in social media, though teens have been embracing this low-attention-span-friendly social networking for years. In fact, in some ways it’s the exact opposite of everything we’ve seen so far. Social media sites tend to want their members to contribute as much content as possible. They may restrict that content to just photographs or video (e.g., Flickr and Pinterest), restrict it to participating in the site only through a mobile device (e.g., Instagram), or restrict membership to a select few (in the case of dating sites, to dedicated singles), but on the whole they want their members to offer as much content as possible. Microblog sites place strict limits on the content that can be uploaded, and they find that those limits encourage creativity.

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And some microblogging sites are completely hands-off, including Tumblr and WeHeartIt.

A Closer Look at Microblogging Just as there are many different kinds of social media sites, so also there are many different ways to microblog. One of the most popular ways now actually takes place within the larger social media sites. When Facebook realized that its members loved the idea of being able to update their followers on what they were doing, it added the status update feature, which sure seems a lot like microblogging. (See Figure 1.5.) Facebook’s system only works within the site, though, so unlike Twitter, which can broadcast your tweets to mobile telephones as well, updates are visible only to friends who happen to be on the site at the time. For Facebook users, though, it’s still very powerful, and Twitter users who want their updates to reach further can use Facebook’s Twitter application. This lets them send tweets from within Facebook itself. We use it, and think it’s great. You can find it at https://apps.facebook.com/twitter/ or by searching the apps for Twitter. Facebook isn’t the only social media site to add microblogging to its list of features, though. Google Plus and LinkedIn are also social networks targeting specific communities. LinkedIn, for example, is geared toward your professional life, with a system that lets you share status updates just like Facebook, but also lets you create blog posts within your LinkedIn account, as shown in Figure 1.6.

Figure 1.5 Facebook status updates = microblogging.

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Figure 1.6 LinkedIn supports blogging, too. Just as important, the site also lets its users track what people are saying in their posts, what new jobs they get, and much more. And that’s just smart business, and social.

YAMMER Microblogging services thrive most when they ask users to answer a simple question and allow anyone to see the answer. Yammer (www.yammer.com) keeps to those roots but narrows the focus of the question—and the audience, too. (See Figure 1.7.) Instead of inviting people to share what they’re doing (and receiving answers that might range from saving an oil-soaked bird to eating an avocado sandwich), it asks users to explain what they’re working on. But it reveals those answers only to people on the network with the same corporate e-mail address, making it what geeks would call an intranet system, which makes it a useful tool for

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Figure 1.7 Yammer’s restrictions make Twitter look like a free-for-all. communicating within a business, but not so useful for marketing of any sort.

Introducing . . . Twitter! And finally, we come to Twitter—the site that has really set the standard in microblogging. Twitter, originally called twttr, was founded by programmers Evan Williams, Jack Dorsey, Biz Stone, and Noah Glass in July 2006. Williams was a serial entrepreneur who had founded a company called Pyra Labs that made project management software. A note-taking feature on that software went on to become Blogger, the free blogging service later bought by Google. In fact, some people credit Williams with coining the word blogger to describe people who write Weblogs. In 2004, Williams left Google to form podcasting company Odeo, and two years later, he created Obvious with Stone, a

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programmer who had joined Blogger after its acquisition by the search engine giant. The new company bought Odeo, which it later sold to a company called Sonic Mountain. Round and round. It’s a game of musical chairs that makes our heads swim, too. The important thing is that Odeo launched and then began to focus exclusively on a simple chat application called Twitter. The original idea for Twitter came from Dorsey, an Odeo employee. In an interview for ReadWriteTalk.com Stone described the moment when they first discussed the idea: A few of us were thinking about what are some interesting ways that maybe we can merge SMS [short message service] to the Web,” he said. “[Dorsey] had come up with this idea where if you just look at only the status field of an instant message application like AIM, and you just look at that as a sort of really small version of what people are already doing . . . and you just make it super simple, ‘Here’s what I’m doing.’ . . . [W]e kind of went off in a corner and we worked for two weeks and we created a prototype. We showed the rest of the team and everyone just sort of giggled. They all kind of loved it. It was really fun. We used it over the weekend. We found it very compelling and we decided that we would keep working on it. That was in March 2006, and initially Twitter was used by the company’s employees as a fun form of internal communication. (Tech companies, it seems, might have lava lamps and pinball machines, but they never seem to have watercoolers!) The service launched officially in October 2006, picked up a South by Southwest (SXSW) Web Award in March 2007, and by April was a hot, up-and-coming social media business, structured as a separate company headed by Dorsey. Helped by the publicity the SXSW award generated, boosted by references on Blogger (where the company, of course, had good connections), and most important, making itself attractive with an open platform that let other developers extend the service, the site started to take off.

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This growth, however, led to some problems. In 2007, Twitter was reported to have had just 98 percent uptime—a loss of three whole days over the year—and tended to suffer particularly badly during major tech conferences (which says something about many of its users, too). (See Figure 1.8.) It has had some very impressive successes though. Some of the world’s leading personalities, corporations, and government bodies are known to use the service, including Barack Obama (@barackobama), former California governor and film star Arnold Schwarzenegger (@schwarzenegger), popular writer Neil Gaiman (@neilhimself), Whole Foods Market (@WholeFoods), and the British Parliament (@UKParliament). The American Red Cross (@RedCross) and other emergency response organizations, such as the U.S. Federal Emergency

Figure 1.8 Twitter’s iconic “fail whale.” Designed by Yiying Lu, the beluga whale supported by twittering birds is now a brand in its own right after its frequent appearance on an overstrained Twitter site.

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Management Administration (@FEMA), use Twitter as a fast way to communicate information about local disasters. Two things really distinguish Twitter, though. The first is its simplicity. Although the service now has piles of additional tools and add-ons, at its core Twitter remains a way of describing what you’re doing, thinking, hoping, or dreaming in no more than 140 characters. That brevity and simplicity have always been key, and they’re what brought Twitter its second characteristic: critical mass. The most difficult moment for any social network is the beginning. It’s the chicken and egg problem: People don’t want to join a new site until their friends are also online, but those friends are also waiting until their friends join. No one joins precisely because no one’s yet joined. It takes a special push to get a social media site to build a sufficient community for everyone to feel comfortable about climbing on board. For Facebook that came about through it focusing on dating and the social life at Harvard University, and it expanded to other universities only after it already had significant traction in its primary market. For Twitter it was the boost it received with its SXSW award that had people on the Internet, whether they’d attended SXSW that year in Austin, Texas, or not talking about the service as the next big thing. As long as it has that critical mass—and with more than 250 million monthly active users, it certainly has that—Twitter is always going to be the microblogging service to beat. In the next chapter, we’ll explain exactly why it’s likely to retain its position as the leading microblogging service.

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Contents

Foreword by Alexia Tsotsis

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Introduction: The Pursuit of Happiness

1

1

The Honeymoon

7

Believing that what you’re doing is great and knowing nothing of what’s to come

2

The Salad Days

31

Keeping it together when things should be falling apart

3

Going for Broke

57

How to turn down money and keep your company (and your soul)

4

The Bubble Redux

69

Battling circumstances beyond your control

5

The Game Is Not Over

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Getting investors and getting along with your partners

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C O N TE N TS

6

Coming to America

97

Chasing the dream—and dealing with the reality

7

Go West

115

Leveraging location and upending our lives

8

Growing Up

133

Going from building a product to building a company—and messing up along the way

9

Innocence Lost

151

From idealist to realist, and the uncomfortable journey in between

10

Going to the Show

167

Becoming a public company and remembering where we came from

Epilogue

179

A Few More Thoughts

185

It’s all about relationships

Notes

189

Acknowledgments

191

About the Authors

193

Index

197

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1 The Honeymoon Believing that what you’re doing is great and knowing nothing of what’s to come

In March 2014, most of the publicly listed high-growth technology and Software-as-a-Service (SaaS) companies started to experience large pricing corrections. Some stocks lost 25 percent in value in a matter of weeks. Some lost 50 percent. The media was reporting “Valuations Will Be Cut in Half”1 and calling it the “Twilight Zone of SaaS.” Mad Money and Squawk on the Street host Jim Cramer famously yelled, “The software-as-a-disservice to your portfolio days are upon us.”2 In Silicon Valley, people were drawing parallels to Sequoia Capital’s famous “R.I.P. Good Times” milestone presentation from October 2008.3 All of the analyst’s models were ripped apart. Things were messy for tech startups and SaaS companies. At the exact same time we were in the final stages of preparing Zendesk for going public on the New York Stock Exchange. Once again, our timing was not the greatest. But let’s start with the start.

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The IPO and everything that came with it were all vastly different from everything that had started less than seven years before, working in Alex’s tiny loft in Copenhagen, arguing about everything, and trying to turn an idea into a reality. The fact is, most of the time my entrepreneurial adventures hadn’t gone very well, or at least they hadn’t gone according to plan. I’m not just talking about Zendesk. I’m not a big fan of being called a serial entrepreneur. Call me old-fashioned, but nobody brags about how many broken marriages they have behind them. However, for better or for worse, I was no stranger to startups. For most of my working life, I never had a real corporate job. Although Copenhagen—a city of about a million people, in a country with the smallest private sector in Europe—isn’t exactly the epicenter of the startup world, it was what I knew.

Beautifully Simple, Round One After I graduated from business school in the early 1990s, right when a recession hit, job opportunities were scarce. I hardly even looked for employment. Instead, I pursued something I was interested in—making things on computers—and started a small graphic desktop publishing company. At the time, I was fresh out of school, and 3D Magic Eye books, with illusions that allow you to see 3D images by focusing on 2D patterns, were the fad. I created an algorithm to create these types of 3D images or visual illusions called stereograms. I had serious headaches while working on this, but I loved being able to

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adjust my eyes to see the 3D element instantly. Then I turned that into a computer software program that made it easy for users to make these complex illusions. This was my first formal foray into software, but the “software industry” was in such a different state then and had little in common with what we know today. Consumers and businesses had not begun to use the Internet, and software was kept on disks and used on desktop computers. There weren’t any best practices for how to distribute software, and I was a one-man software shop figuring it out along the way. I took the packages to little computer shops to stock and sell. Customers sent me orders, and I shipped out the disks myself. I worked out of a teeny office space in downtown Copenhagen. It had low ceilings and crazy crooked floors. There were parts of the office where I couldn’t stand upright. There was barely any room for me, let alone space to navigate large piles of inventory. This effort didn’t make me rich, but I didn’t lose money. And although it was a terrible business in that it was very labor intensive, without much monetary payoff, I also found it was very satisfying to build a product. I loved creating something and having people use it. I was eager to read the reviews and talk to users. Most of all, I loved that I had taken something that was hard and made it easy for people. This work led me to write a book that taught people how to create these complicated images.4 The book, which was released only in Danish, was sold in bookstores. People bought it and learned how to make these seemingly complicated images rather simply and quickly. I designed the cover for the book: it was a computer monitor with two eyeballs poking out

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(you know, 3D!). I rendered everything in a pirated version of Strata Studio Pro, and I scanned the iris from the cover of The Cure’s Kiss Me, Kiss Me, Kiss Me album (I was a big fan of the album).

Importing the Internet from America Although I was fascinated by computers and grew up using first a Lambda 8300, a ZX-81 clone with 2 KB of memory, and later an Amstrad CPC464 (with a built-in cassette tape!), no one would call Copenhagen a technology haven at that time. In the early nineties there were only metered, very expensive dial-up connections and only one internet provider. And there were very few people on the Internet. This was the early days of Netscape Navigator, and the Web was just becoming searchable, but I certainly didn’t know where the Internet was headed. However, a trip to San Francisco in 1995 made everything more clear—it was going to change everything. In San Francisco, everything related to the Internet was being totally embraced. Everything was about the Web. Billboards advertised companies with “www” addresses. My San Franciscan friends ordered food and DVDs online. The Internet was a part of their daily lives. Everyone communicated saying, “Send me an email,” and everybody had an email address. I experienced emailing between Copenhagen and San Francisco and having these messages arrive instantly. I couldn’t believe how much smaller the world was, now that it

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was connected by the Internet. It was completely fascinating. And I couldn’t help but notice the significant gap between how technology was adopted in San Francisco and how it was integrated into our lives back at home. (It wasn’t.) Mostly what I took home from San Francisco was the sense of being at the start of something big. Today, technology is so extremely refined that it often seems to work by pure magic—you look at your iPhone and it’s hard to distinguish from the supernatural—but back then it was possible to understand the web protocols and learn how to write HTML and have an idea of how to participate. You could see the path to being a creator in this new world. I felt a little bit like I had found oil on a nearby property, and I understood there was immense value in drilling it out of the ground. There were so many things to be inspired by in the United States that I wanted to take everything I saw and bring it back with me. And that’s exactly what a lot of us did. When I returned to Denmark I was obsessed with what I had experienced in California, and I wanted to recreate it. I built a portal, a website that brought information together from multiple diverse sources—this was all the craze back then—and called it Forum.dk. Initially it was almost impossible to buy domain names for a new web service. The Danish system was extremely restrictive, requiring you to document that you owned the name already. It made everything slower and more complicated than I had anticipated. Further exacerbating matters was the fact that there were still so few people on the Internet in Denmark.

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Still, we started toying around with the portal, researching how we could produce and gather content. We struck up a partnership with a source to distribute news for free. We also went outbound and created our own content: I had guys pick up flyers from dance parties and raves, and we put the events in a database so people could see where the best ones were happening. We added community elements and chat rooms (one of the first chat rooms in Denmark). The site gathered users, and although it was not our original intention, it became very popular with teenagers. I kept a small office in the old part of Copenhagen, known for its cobblestone streets and little cafés and shops, and I worked with people who wanted to help out. They were not real employees. After all, there was no real way to pay them. It was hard to monetize this endeavor. Advertising hadn’t really moved to the Internet in Denmark, so that wasn’t an option. Still, making money wasn’t the main point; that was secondary. It was the potential that we were pursuing. (To deal with the more pedestrian matters of making money, I did a variety of unglamorous jobs, including waiting tables and cleaning houses. Living the dream!) Though I had no clue how to make money off this project I loved, an opportunity came along and solved that problem for me. A newspaper offered to buy Forum. We sold off the actual service, and what we had left was the software. Now, instead of being a community portal that didn’t charge anything for its services, we became a software company with products to sell.

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The Danger in Riding Market Waves or Going Kaput Soon I discovered that there was a real market for this software. Companies wanted to have their own websites and provide community services for their users and visitors online. We rebuilt the entire product portfolio in J2EE, the most interesting and forward-looking software framework at the time, but also the most expensive in terms of software stack. We sold it on top of BEA WebLogic and Oracle RDBMS and primarily into large media companies or web properties, but all kinds of organizations including financial institutions became customers. Soon this remnant of our original service turned into a real business. We named the company Caput, which means “the head” in Latin. And of course it also sounds like kaput—or “no longer working,” which was kind of cute in the beginning (kind of ), but in retrospect of course it’s a terrible, terrible name. But we were growing this in the halcyon days of the Internet. Things were both promising and exciting—everything was working. At the same time, I was always working. I had no personal life whatsoever. From the time I woke up in the morning until I went to bed, all I did was work. The company was financed by a few angel investors, but it was funded mostly by selling the software. The dot-com boom that had swept the United States had now hit Copenhagen. We benefited from the hyper-frothy interest in all things Internet-related. I saw something that had the potential to become something much bigger. It was a lot of work, and it was also a lot of fun.

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And then, quite suddenly, it wasn’t. The dot-com crash of 2001 came as fast as the crest had. Our software was sold primarily via value-added resellers (VARs), and these companies were hit hard by the change in the tides. Media companies, a big customer base, were also brutally affected. They couldn’t pay their bills, including ours. We struggled and suffered for a year as customers fell by the wayside. Relying on sales to grow our business, and without a reserve, we had no way to cushion the impact. We had to let a lot of people go. It was really tough to have to do that to people and to go on the next day as if things were normal. I had to let go of people whom I considered very good friends—people whom I felt had built the company with me. And decisions about whom to let go relied more on where we could save most, rather than on what made the most sense for the business. Ironically, one of the über-talented guys I had to let go was David Heinemeier Hansson—who later became the father of Ruby on Rails, the framework we later built Zendesk on, and a cofounder of 37signals (now Basecamp), which became an inspiration for a whole generation of software startups, including Zendesk. Letting people go wasn’t even the worst part. There were many tough things about being in charge of the business. One time, one of our employees didn’t show up for work for several days and we couldn’t understand why. This young guy had struggled with rheumatoid arthritis since his early childhood, and I later learned that the disease had somehow led to a stroke and his far-too-early death. I was too young and too inexperienced to know how to properly deal with the situation. Walking

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into his home with the police was awful. His parents lived at the other end of Denmark, and the local police there would have to visit them to properly deliver the terrible news in person. They couldn’t arrive until the evening, and in the meantime I couldn’t take the parents’ many, many calls. It was terrible. We all went to his funeral. Or rather, what remained of the staff went, and it was good for all of us to get together and come together for this. But the very next day, I had to let more people go. Things like this—terrible things—happened. But we had to go on, and we did. There were abysmal lows, and epic highs, and ultimately unrecoverable blows. At one point, we won a huge deal in Germany that we believed could turn everything around again. We felt hope. We were so far along. The transaction was complete, but before the reseller could pay us, he went into Chapter 11—another victim of the dot-com crash. We were out of money and out of luck. And at this point, a year after the bubble burst, we found that the business could no longer go on. We first had to wind down our activities. Eventually, we had to shut down completely. Caput was fulfilling the prophesy of its name. I was devastated. I had just turned thirty, and for almost four years this was the only thing that I had done. I was not depressed about losing my livelihood; I was depressed about losing the only thing I had. In Silicon Valley there’s a lot of talk about failure—there’s almost a celebration of failure. People recite mantras about “failing fast,” and successful people are always ready to tell you

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what they learned from their failures, claiming they wouldn’t be where they are today without their previous spectacular mess-ups. To me, having experienced the disappointment that comes with failure, all this cheer is a little odd. The truth is, in my experience, failure is a terrible thing. Not being able to pay your bills is a terrible thing. Letting people go and disappointing them and their families is a terrible thing. Not delivering on your promises to customers who believed in you is a terrible thing. Sure, you learn from these ordeals, but there is nothing positive about the failure that led you there. I learned there is an important distinction between promoting a culture that doesn’t make people afraid of making and admitting mistakes, and having a culture that says failure is great. Failure is not something to be proud of. But failure is something you can recover from.

There Are Second Chances My first failure was so tough because I had no perspective. I was ripped out of the reality I knew and thrown into a new reality. It was a reality I hadn’t had a part in for many years. But the human spirit, and its need to move forward, is amazing. After a little time, something interesting happened. I got involved in other projects. Soon I started to make money. And it was a lot easier than I had thought it would be. I had been so immersed in what I was doing that I was estranged from everything else, and anything other than what I already

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knew seemed scary. Now, with a few new opportunities, I slowly settled into my new post–Internet apocalypse life, and I found it was not actually the end of the world. In fact, it was the beginning of something else. Shortly after closing Caput, I took a real job—my first real corporate job—as a general manager for a Scandinavian branch of a German consulting group called Materna. The company, which was named after its founder, had a great reputation, and one of its areas of business was help desks and customer service solutions. My job was to resell various customer service desk software products and deliver the consultants and services to properly implement the software, from a technical and business process perspective. The German group had acquired a company in Denmark and then two additional companies, one in Finland and one in Sweden. When I joined I had to let a lot of people go and hire new people. It wasn’t a terrific time for the local business. We were at an interesting crossroads at Materna in Scandinavia. When you are trying to reboot an organization, you need certain kinds of people: athletes who can achieve many different feats and simultaneously wear multiple hats. They must have the deep intelligence necessary to solve deep problems by themselves, but they also need to be able to communicate effectively. Morten Primdahl, once an intern and then a full-time software programmer at Caput, was a brilliant engineer who had demonstrated that he was also a great athlete, nimble and flexible. I needed his talent at Materna. The problem was that Morten wasn’t so sure he wanted to do it.

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“The whole setup was slightly boring,” he later told me. I promised I’d make things happen. But I think ultimately it was something else that won him over. I offered him a company car. I also asked Michael Hansen to join. Michael was an old friend, a big loud guy with a big heart who referred to himself as the king of Denmark. He had helped run sales at Caput, and I hired him to revive sales at Materna. Michael has a larger-than-life attitude that’s hard not to fall in love with. People love to do business with Michael, and you can count on him to make things happen. The problem was, we were selling something that was hard to make happen. The services we sold were expensive, the software we sold was expensive, and then it required expensive consultants to help deploy it and have people use it. Often the support and service reps were low on the organizational totem pole and not at all prepared to absorb or operate the software. Even with large organizations, we saw organ rejection and had to cut back on advanced functionality, one limb at a time. There was a lot more appetite to invest in technology than in organization—and service and support operations were considered first and foremost a cost center. And hardly anyone really thought about the customer experience. It was very backward. I saw that all of this effort was more for the benefit of management—or rather, the institution—than for the people using it. In fact, no one really knew what the software did or had any expectations of what it could or should do. That’s because of the backward way the whole traditional enterprise software system worked.

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So, pull up to the fireplace and let grandpa tell you about the old days of enterprise software sales before Softwareas-a-Service. In the old days, people bought software without seeing it or testing it. The people in charge of purchasing, not the people who would be using the software, were in charge of deciding what to buy—and all they ever experienced was a PowerPoint pitch or a demo at a conference resort. It wasn’t until software was purchased and installed and a large number of people were using it that you actually knew what it could do. And when people finally started using it, they found that it was heavy and cumbersome and often not helpful at all.

An Ignored Idea We knew the model we were pitching at Materna was incredibly ironic. Why would companies spend so much money and then ask the lowest-paid employees to deal with this giant unwieldy mess? How could you believe that putting your least sophisticated employees in front of maddeningly complicated screens, with almost no investment in user experience, could lead to great customer service? It didn’t make any sense. But at the time, customer support was a “check the box” exercise; companies spent money on it, but they didn’t really mean it. It wasn’t just what we were selling; the entire industry was flawed. All of the systems on the market were terrible and complicated. It was impossible to do anything in less than six months, and usually it took as much as twelve to eighteen months. And it was very disruptive to the organization.

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There was room and reason for a new generation of software. I knew this could be done in a way that was so much easier. Morten agreed. We both shared a healthy disdain for the traditional enterprise software sales model. The big platforms, the expensive salespeople with the expense accounts, the semireligious conferences, the PowerPoint software, the locked-in relationships—we despised the whole notion that an expensive sales process unnecessarily made the software both more expensive and more complicated. The whole notion that many people believed that complicated actually equals good was so disconcerting. We were motivated by the opportunity to disrupt the very core of the software model by making things easy, elegant, and inexpensive. Morten, ever the engineer, saw it in concrete terms: “People pay a lot of money for this; we could give them 80 percent of that for 20 percent of the price and make it accessible to smaller companies, not just big ones.” It made complete sense to us, but it was very evident that creating this kind of change within Materna would not be doable. I hadn’t seen a corporate job as something I would pursue long term, and Morten didn’t either. I left Materna in the summer of 2005 and started to do consulting work on my own, helping various organizations with their business and IT processes for customer service. Morten left to do security login work for banks. Later in 2005 we got together to sketch out what a new generation of customer service systems could be. A simpler, less expensive system, delivered over the Web, could democratize software and make it easier for everyone to use and eliminate the software provider’s need to hide behind

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complex mumbo jumbo. We were already experiencing that in the consumer world there was less distance between users and software—there people got to try the product and then decide if they wanted to buy it. I reached out to another friend, Alexander Aghassipour, asking him to help us pursue this idea. I knew Alex from Copenhagen’s startup scene, and we shared similar experiences. While I was running Caput, he had a web design agency called Araneum (which means “spider web” in Latin; we know how to pick catchy names in Denmark). When we ran our companies, we sometimes met for lunch, and we did a few projects together, but more important, we regularly hosted summer and Christmas parties together. The parties worked well because Araneum was much better funded than Caput, but Caput had a lot more women on staff. Araneum did beautiful work and grew to be the biggest web agency in Denmark. Alex could have taken it far, but in 2001, when the bubble burst, everybody suffered. Araneum’s customers no longer had the budget for its services. Although it was a healthy company, it was not very well-financed, because in Scandinavia there was not a lot of venture money or any risk-friendly money. That made it impossible to survive a market crash. Alex, sensitive and cerebral and fragile in some ways, had to fire a bunch of people within a very short time. He took it very hard. It was difficult to have a company that was worth a lot on paper, and then suddenly was worth very little in real life, and then almost ceased to exist. In many ways his identity went with

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that company. Alex had a lot of anxiety about being a has-been. He worried he was never going to be successful again. I don’t think I realized any of this when I tried to win Alex over. All I knew was that Alex was super smart and had a modern approach to software and a high aesthetic. He had a great sense of details, of user interface and user experience. He was able to distill disparate ideas into something fundamental. His insight would be invaluable in building a product that people loved. We wanted Alex’s insight on this idea, but he wasn’t interested, and not even because he was burned out on startups. He just didn’t want to pursue this endeavor, calling it “the most boring thing ever.” And there was that word again. The same one Morten had used. Of course, it’s true that at the time making customer support and help desks better was not a very sexy idea. And although that’s probably the best advice that Alex now has to offer to someone wanting to start a business—“Pick an area of an industry that is overlooked, pick something that might be perceived as boring”—it didn’t make it easy to recruit him back then. “It doesn’t sound like the kind of thing I want to wake up every day and do,” said Alex, who had a pointed perspective on what was cool and what wasn’t. Post-Araneum, he had created a system that allowed indie labels and musicians to sell music singles for 99 cents. (It was very much like iTunes, but pre-iTunes, and when iTunes came out they were toast.) Despite his initial complaining, cantankerous Alex soon recognized the beauty of the opportunity to revolutionize the

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industry with clean design—and in that he found motivation and meaning. “I’ll help keep the software beautifully simple,” he said. “We can take something terrible and have a field day and do something different and create something someone wants to use.” Exactly. Alex started exploring the idea with us and brought an innovative concept and new approach to building a modern-day customer service desk. He understood that it rested on leveraging the Internet and cloud computing as a delivery model. But he also challenged every single assumption or paradigm that existed in the customer service desk world. He wanted every feature and capability translated into something that made sense outside of the core industry lingo. He pushed us to build not just a beautifully simple system, but ultimately a system that people enjoyed using, something they felt helped them with their customer relationships rather than obstructing them. He pushed us to build something that users would care for. Passionately.

Boring Is Beautiful Early on I always got the same reaction when I spoke about the idea for Zendesk: Boring. But while help desk and customer service software might not have seemed like the hottest of pursuits, helping build relationships

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with customers was a big opportunity. The Web enabled us to build an on-demand platform to help companies focus on customers and build relationships that are more personal, productive, and meaningful. And over time—and with companies and customers sharing good experiences and a little more joy and personality and fun—the once-boring idea became a beloved one. Now, changing the world of customer service and enabling organizations to build new-generation relationships with their customers has become very sexy. But at its core Zendesk is very much about just making sure companies stay on top of their conversations. Here’s the thing: sexy stuff sometimes happens when you make mundane things easy and accessible. Any aspect of democratization is a good thing. Take a look at a few other companies that have made boring beautiful: • Is file sharing really sexy? Does FTP excite you? Nevertheless, companies like Dropbox and Box suddenly made those tedious tasks very easy, social, interesting, and sexy. • Accepting a credit card in-store is probably the most mundane task in the world, but Square democratized the world of taking credit cards and made it sexy. • I doubt that it was super sexy selling books to nerds online when Jeff Bezos and Amazon started

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their adventure back in 1994. But that “bookstore” is currently changing the world of commerce. • You can’t really call space rockets boring, but with the determined goal of making space flight affordable— democratizing it—suddenly Elon Musk is making the industry sexy again. All of these show us: boring is sexy. Or rather, sexy is not only about colored feathers, appearance, and glamour. Remember, Marilyn Monroe did marry Arthur Miller.

We spent six months sketching out this product while we kept our consulting gigs on the side. It wasn’t intense work. We were just toying with ideas. When we got too bogged down with work that paid, we didn’t do any work on the help desk idea at all. We initially worked in my apartment, sometimes together and sometimes apart. But we quickly moved our work to Alex’s loft, simply because Alex felt more comfortable there and my budding family wasn’t a distraction. (Yes, that too had happened in 2005. I had met my future wife, Mie, at a wedding on a farm. We made out in the old cow barn. She already had a young boy from a previous relationship, and less than a year later we had our first beautiful baby girl.) But back to work. As a team, we worked well. Morten and I were used to working a certain way—he was accustomed to being in a role in which he took instructions from me—and Alex came in and introduced a different viewpoint. It was a

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new dynamic. I think it was helpful for getting us to expand the way we saw things. By constantly asking questions and distilling capabilities down to their core, Alex not only helped us build a new-generation customer service system, but also ultimately helped guide us to our mission of helping organizations and their customers have a better relationship. The three of us were very un-company-minded during this period. Our goal was to build not a big company, but a great product. This was partly influenced by our previous experiences. We didn’t want to build something ambitious just to see it crumble before our eyes again. In an interview with a Danish technology blog, I proudly proclaimed that our ambition was to serve a global audience through the Internet, but to keep only a very small team on staff. We didn’t give much thought to titles, but when we had to incorporate Zendesk in Denmark, we had to appoint a CEO/president—the person formally representing the company. We sat at the table and looked at each other. None of us wanted to take on that role. We knew the responsibility and didn’t really want it. I somehow ended up with the CEO title; Alex became the chief product officer, and Morten took chief technology officer. Initially it felt like I had ended up with the short end of the stick. But I’m probably also the kind of guy who likes to make stuff happen quickly, and therefore, on some level, I was not totally unhappy with the setup. Alex was a PC guy, entrenched in the world of Microsoft. Morten was from the Apple and Java world. And they built the software entirely on Ruby on Rails, which was new, and which they taught themselves. It was a big learning experience.

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As Morten and Alex got more and more entrenched in coding, my role became more about being a sounding board and partner in the product management process and preparing for the product’s launch and go-to-market strategy. This is a difficult phase for many startups. And I think it was for us too. Founders’ contributions can be very asymmetric in different phases of a startup’s lifetime. This is especially true for bootstrapped startups like ours. Morten and Alex could work their asses off in periods when I could make very little difference. And even Alex and Morten had periods where one was way busier than the other. The tension rarely showed its face in our case. But I have no doubt that it was latent the entire time. And we were probably lucky it didn’t get to us. Appreciating and embracing the fact that people contribute different things at different times, and that everybody will have their opportunity to shine in a startup’s lifetime, is easier said than done.

Timing Is Everything Working in this on-and-off manner, it took us a long time to build the product, but maybe that was a blessing. The software industry was shifting, and we felt more and more supported in our original beliefs. The provisioning of software was becoming simpler and less expensive. The trends in the consumer world were starting to sweep through enterprises. Salesforce.com was built on a new delivery model, and founder Marc Benioff was evangelizing “the End of Software” as we knew it.

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37signals in Chicago was lean and small, another company blazing the trail. As mentioned earlier, it’s ironic that one of its key people, Danish programmer David Heinemeier Hansson, had been let go at Caput. (It was assuredly not one of the most joyful times of his career; he had started working for us right before the issues and the problems.) Although we couldn’t keep him, we knew he was incredibly talented, and it was exhilarating to see him create Ruby on Rails as a free web application framework and use it to create 37signals’ first product, Basecamp (now the company name)—transforming the company from a web design firm to a software company. 37signals was almost like a religion; it established a new school focused on placing user experience above fussy features. We were disciples of this school and followed the company with great interest. But we were in customer support—an industry in which these exciting new ideas were totally foreign. We were changing the existing offerings and industry on a philosophical level. We used terms like “love your help desk” and “tender loving customer care.” No one else was putting those things together. Customer support software was an option only for very large and very established companies with deep pockets. And it was supposed to be boring! They were all the same and marketed with stock images of people with headsets. (Stock image banks: where photographers go to die.) We were doing something different. But of course we had no idea whether it would work. However here’s the crazy thing. Despite the hours we put in, the money we invested, the expectations we had, we didn’t set out to build a company. We were driven by a desire to build a product that was lean and self-explanatory and offered a new

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option. We wanted to create something people loved to use. That was our aspiration. The one thing I learned from the little games I made on my home computer when I was twelve; or from building the stereogram software when I graduated business school; or from building Forum.dk; or from my time at Caput, building community sites, was that there was nothing so satisfying as building something that people used. We all have the urge to build and create something. And the amazing thing about the Web was that there was the potential for it to reach a global audience—for it to make a big difference. In the earliest months—those days in my apartment, the initial time in Alex’s loft—it was all about innovation and inspiration. Everything was a blank slate. Anything was possible. It was a pretty great time. But soon the honeymoon ends. The idea becomes a reality, and you discover that even though you never really wanted to build a company, all of a sudden you are doing just that. And the reality is that building a company is hard—it’s no longer about just pursuing an idea. The idea has taken off, and it becomes all about executing and scaling. Before you know it, you have all these real customers who need real attention, and you need to start building the beginnings of an organization. With all the bureaucracy and management that comes with it. And the realities of your own life creep in. No one tells you in advance how little you get paid to get there. How in the early days you are constantly running out of money. How much credit card debt you accumulate. How many fights you have with your cofounders. How you

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have to live with their weaknesses and oddities. How there’s the constant temptation of flashy objects and shiny new things. How much you keep from your spouse. How you overleverage your life. It quickly becomes very complicated. We didn’t know anything about this. We didn’t know anything about anything.

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S. CHRIS EDMONDS

the culture engine

A F R A M E W O R K F O R D R I V I N G R E S U LT S , INSPIRING YOUR EMPLOYEES, AND TRANSFORMING YOUR WORKPLACE

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CONTENTS Foreword Acknowledgments Introduction

Chapter 1

xi xiii xv

How Did I Learn about Organizational Constitutions? How is the book structured?

xvii xix

What is an Organizational Constitution, and Why Do You Need One?

1

What is the Condition of Your Team or Company’s Culture, Right Now? The Concept of Perfection How Civil is Your Workplace? Who is in Charge of Culture? Create a Pocket of Excellence An Organizational Constitution is a “Disruptive Technology” in Your Workplace The Performance-Values Matrix The Costs of Measuring Only Performance How Does an Organizational Constitution Help Your Company, Department, or Team? Client Impact Your Leadership Legacy

Chapter 2

3 8 10 12 14 17 21 24 30 33 35

It Starts with You

39

Clarify Your Personal Purpose Clarify Your Personal Values and Aligned Behaviors Define Your Values Add Observable, Tangible, Measurable Behaviors to Each Value Your Values, Definitions, and Behaviors Formalize Your Leadership Philosophy Key Elements (Present Day) Desirable Outcomes (Future State) Live Well to Serve and Lead Well Servant Leadership is the Foundation

43 46 48

vii

51 54 56 60 61 63 67

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Chapter 3

Chapter 4

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Clarify Your Organization's Purpose

71

What is an Effective Purpose Statement? Communicating Your Company’s Reason for Being What is Your Team’s or Company’s Actual Purpose? Humans are Drawn to and Inspired by Great Purpose Crafting a Compelling, Inspiring Purpose Statement

74 78 79 81 82

Define Values in Behavioral Terms

89

Why Do You Need Values Defined in Behavioral Terms? Your Beliefs May Not be Aligned Build Your Values Foundation on Behaviors Step-by-Step Guidelines for Creating Valued Behaviors Define Your Values Include Observable, Tangible, and Measurable Behaviors for Each Value Your Values, Definitions, and Behaviors

Chapter 5

Outline Strategies and Goals for the Coming Fiscal Year Five-Point Strategic Planning Wheel Who is in Charge of Communicating Your Business Strategies and Goals? Measure the Right Things Build a Draft of Your Team’s or Company’s Strategic Plan and Goals

Chapter 6

Your Organizational Constitution Must Be LIVED Engage All Leaders in Your Organizational Constitution’s Implementation Describe the Way Model the Way Align the Way Contribution Management instead of Performance Management The Values-Aligned Tribe Culture at WD-40 Company

Chapter 7

Gathering Formal Feedback on Valued Behaviors Is it Responsibility or Accountability? Crafting Your Custom Values Survey Leaders Must Be Rated on Their Values Alignment First

91 93 94 97 102 105 108

113 120 123 125 127

133 135 141 147 150 151 154

163 171 174 182

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Chapter 8

Dealing with Resistance What Does Resistance Look Like? How Must a Leader Address Resistance?

Chapter 9

Hiring for Values Alignment How Do You Hire Today? Before the Hire—Recruiting, Interviewing, and Assessing After the Hire—Orientation and Integration What if the New Hire Just Doesn’t Fit?

Chapter 10

Don't Leave Your Organizational Culture to Chance Long-Term Alignment versus Short-Term Results Scoring Your Culture Effectiveness Assessment Implementing an Organizational Constitution is an Ongoing Project Keep Me Informed

Notes About the Author Index

IX

189 196 198

203 205 207 211 216

219 222 222 225 227

229 235 000

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Y

ou sense it the moment you step onto the Southwest Airlines plane.

Flight attendants greet you with a hearty, “Welcome aboard!” They look you squarely in the eye and give you a big smile. One asks how your day has been and genuinely listens to your answer as they walk with you up the aisle to your chosen seat. What you sense and feel so readily is that Southwest Airlines employees care. They enjoy what they do. They enjoy their teammates. They enjoy their customers. They willingly engage with customers and teammates and have fun with both. And, they have fun while flying customers safely to their destinations, consistently on time (arrivals and departures), and with one of the lowest incidences of lost luggage in the industry. Southwest delivers top performance while serving customers happily. Or, you may be shopping on Zappos.com. You don’t see the shoe model you’d like online so you call their toll-free phone number (which is prominently displayed on every page). As you dial, you realize it’s 1:00 a.m. No worries. Zappos team members are available 24/7. Carmen answers the phone and cheerily asks how she can help you. You explain that the web site doesn’t show the shoe you’re looking for. 1

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Carmen says, “Let’s see if I can find a shoe that you might love!” Within moments, Carmen suggests two models with similar features and styling. She points you to their web page on Zappos.com so you can view them and decide if you’d like to try them. You tell Carmen you would like to “hold them in your hands.” She arranges free shipping of both pairs so you can try them on at home. Carmen says, “Keep the pair you love, and ship the other pair back to us. Free!” She explains that if you don’t like either pair, ship them both back for a full refund. Zappos delivers top performance while serving customers happily. Both of these successful, service-driven, and unique companies have formalized their purpose and values. They are intentional about workplace inspiration. They don’t leave their company culture—or the treatment of employees and customers—to chance. Southwest Airlines staff and Zappos team members engage willingly, pleasantly, and enthusiastically with customers because they love serving people. Southwest Airlines and Zappos hire people with a service mindset and a servant heart. Team members who don’t embrace the values of these organizations don’t stay. In these organizations, there is no space for team members who don’t align with the company’s values and who don’t enjoy serving others. You may have experienced other providers that have “it,” that unique, friendly, authentic, inviting environment that envelops you as a customer. It might be your favorite “mom and pop” espresso house or your local dry cleaners. You might not stop to think about it; you might just bask in it! And, maybe you have thought about it. You’ve asked yourself, “How do they do that? How do they create such an inspiring workplace that includes employees who love their work and love their customers?”

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WHY DO YOU NEED ONE?

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What companies like Southwest Airlines and Zappos do is make workplace inspiration—the employee experience—as important as performance and profits.

WHAT IS THE CONDITION OF YOUR TEAM OR COMPANY’S CULTURE, RIGHT NOW? Just as you can sense the customer-focused culture when stepping onto a Southwest Airlines plane or speaking with a Zappos customer service team member, you can gauge the culture of your team or company by walking around your operation, by listening to what is important to staff, and by observing the quality of interactions between leaders, followers, and customers. I encourage you to pay attention to what you pay attention to. Most leaders look exclusively at profits and production. And, results are not the only important product of an organization. How people are treated—and how they treat others—is a vitally important element of workplace inspiration that needs proactive and intentional tending. Leaders of teams and companies need to keep their fingers on the pulse of how their organization is operating, not just how it’s performing. In each chapter, you will find a Culture Effectiveness Assessment that will require you to learn your organization’s “truth,” in order to check your assumptions about what is and is not going well within your team or company. Leaders base plans, decisions, and actions on what they believe to be true about their team or company “in the moment.” To what extent, though, do leaders check their beliefs against others’ perceptions before making a decision or taking an action? This book is designed to help educate leaders and team members about what a high-performing, values-aligned work environment looks, acts, and feels like. The book includes tools like the Culture Effectiveness Assessment, step-by-step ways to craft each element of your

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organizational culture, and proven guidelines for how to communicate, market, and manage to your organizational constitution. Each of these elements is designed to make you hyper-focused on both your team or company’s performance and the values it lives by. The examples, stories, and tools presented in this book will help you to learn your organization’s truth and the reality of how the workplace environment operates today. To understand your organization’s truth, you need to: • De-Insulate Yourself. It is likely that you have, unintentionally, depended upon a select few players to give you information about what’s happening around your workplace daily. Increase the number of your sources inside the company. Dedicate space and time to learn from different players throughout the organization to ensure you’re getting a bigger, more accurate picture. • Genuinely Connect with Team Members. Employees know which leaders are truly interested in them as people, not just in them as contributors or “cogs in a wheel.” Connect with players in every department and function. Learn people’s names. Engage them in conversations about their families and hobbies. Take five minutes to visit, without problem solving. Listen without defending. Over time, these genuine connections will enable others to tell you their perceptions, concerns, and hopes. • Seek Out Truth-Tellers. It is all too common for leaders to, over time, surround themselves with people who reinforce the leader’s current beliefs and perceptions. However, the most effective leaders engage with truth-tellers often. Truth-tellers are unafraid of describing their perceptions, theirs and others’ understanding of the reality of the leader’s plans, decisions, and actions. Knowing more people’s truths can help make the leader’s future decisions more effective. • Share Your Assumptions and Your Learning. Check your assumptions by sharing them with team members. Say, “I

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believe x is an opportunity for us. What do you think?” As you learn more of your organization’s truths, share those. Say, “I’m learning that many of you don’t understand a recent decision of mine. Here’s what I was trying to accomplish . . . .” Listen, and continue to refine your assumptions, plans, decisions, and actions. In the meantime, we need you to learn more about what’s happening in your work environment today. To help you start to understand your organization’s “truth,” I encourage you to take a tour, right now, of your team or company’s work environment. Don’t take notes. Just wander around, and observe the current state of your team or company culture. On your tour, notice whether the work environment is clean, bright, and inviting. Notice if workspaces and hallways are free of any material that might cause someone to stumble or that inhibits free and safe passage. Is signage helpful and clear? Does the facility and equipment “shine” with loving care, or is it dull from years of use and neglect? Do employees greet each other kindly, not so kindly, or not at all (they mostly ignore each other)? How do employees greet customers (if yours is a customerinterfacing environment)? How do team members treat each other—with respect, with distain, or something in between? Are team members doing the work they need to be doing—or are they distracted? Is the work environment one of steady activity, frantic activity, or something in between? How are customers referred to—as valued partners or “distractions” to getting the “real work” done?

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Observe meetings, paying close attention to plans, decisions, and actions. Do those plans, decisions, and actions honor employees, customers, and stakeholders equally—or does one group win out over the others? Take in every function during your tour. Observe behavior and conditions all over your facility. Take notes on your insights. If you have facilities located in far-flung regions, you can phone people you trust in those facilities and ask them to tour, observe, and report back their insights. Before we review your tour notes and insights, let me congratulate you. You’ve just done something that far too few leaders do: examine the condition of your organization’s culture. These culture tours are vital ways for you to keep tabs on how well your culture operates, how inspiring your work environment is, and the degree to which employees are excited to serve in and for your company or team. The best way—our proven way—for you grow skills for proactive culture management is to: • Study the best practices of high-performing, values-aligned organizations (which this book and other avenues provide). • Gather frequent data on the condition of your team or company’s culture (through observation, employee surveys, exit interviews, frequent informal conversations, and other means). • Close identified gaps between your current culture and the high-performance, values-aligned culture you—and your employees—deserve. If you choose to proactively manage your desired team or company culture—and I’m confident you will (after all, you’re reading this book right now)—you’ll be doing more tours more often in the days to come. Let’s review your tour insights by having you rate the statements in the chart on a one to six scale. Circle your score for each item.

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Culture Effectiveness Assessment #1—Informal Tour 1. Workspace Attractiveness Our work environment is bright, clean, and inviting. 2. Workspace Safety Our work environment delivers safe passage and safe operations. 3. Team Member Perceptions and Interactions Leaders and team members enjoy positive, trusting relationships with each other daily. 4. Team Member Performance Team members know what they’re supposed to do and are actively engaged in doing it daily. 5. Customer Perceptions and Interactions Internal and external customers are treated with the utmost dignity and respect during every interaction.

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Strongly Slightly Disagree Disagree Disagree

Slightly Agree

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Tally up your scores. On this first assessment, the total possible point value is 30. A score of 25–30 is very good; that means you rated each item with “agree” or “strongly agree.” It is likely that your total score at this early stage is short of 25 points—maybe even short of 15. You may be a “tough grader,” holding your team or company to high standards. That’s not a bad thing here. You may be an “easy grader,” believing your team is terrific, despite the reality that is evident just below the surface. You need the perspective of the unvarnished truth, a clear understanding of your team or company’s true starting point in this journey towards a high-performing, values-aligned workplace.

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Whether you scored your team or company culture as effective or not so effective at this stage, you probably believe your team or company is performing below it’s potential. You’ve seen opportunities pass the team by, maybe because they weren’t ready for it . . . or they couldn’t see the opportunity for themselves . . . or they didn’t want to work any harder . . . or a multitude of other reasons. “Why wouldn’t the team see this opportunity?” you might ask. You probably see self-serving behavior by leaders or employees, periodically or more frequently. “Why do those players act in selfserving ways?” you might ask. These are a wonderful, insightful example of the “concept of perfection.”

THE CONCEPT OF PERFECTION In the executive coaching world, the concept of perfection can help clients understand that there are very good reasons for why things are the way they are and why things happen the way they do. In this case, perfection doesn’t mean that things are working “perfectly” or “as desired.” It means they are working exactly the way we should expect them to work, desirable or not. In an executive coaching relationship, a coach tries to help a client understand that their behavior, decisions, and actions are logical, rational outcomes of their beliefs and thoughts. The situation they find themselves in at any point in time is entirely driven by their behavior, decisions, and actions up to that point. This is a cause-and-effect circumstance. The cause (the client’s beliefs and thoughts) leads directly to the effect (the client’s behavior, decisions, and actions). A coach can easily see how the resulting effect is entirely driven by the underlying cause. The results are “perfect.” A person wouldn’t expect to see any different behaviors, decisions, or actions, given that client’s core beliefs and thoughts.

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In a culture coaching relationship, a consultant (yours truly, for example) tries to help leaders understand that the team or company’s culture—the way members behave, decide, and act—are logical, rational outcomes of the leader’s beliefs and thoughts about the business and the people in their business. The concept of perfection is a powerful tool to help leaders assess their organization’s culture. A company’s culture evolves over time based upon the beliefs and thoughts of its leaders (cause) that logically leads to consistent behavior, decisions, and actions demonstrated by members that live in that company’s culture (effect). Let’s say that in your team or company you experience caring leaders who demonstrate trust and respect for their team members and who celebrate successes and wins along the way. You are seeing those leaders’ underlying beliefs and thoughts being played out in that culture. It is perfect. Or, in your team or company, you experience leaders who take credit for your work, who pit employees against each other, and who rejoice in “catching people doing things wrong.” You are seeing those leaders’ underlying beliefs and thoughts being played out in that culture. It, too, is perfect. If you experience “less than positive” behaviors, decisions, and actions in your organization’s culture, understand that people are acting exactly as you would expect. The way they are behaving now is being reinforced consistently, albeit maybe unintentionally. If you want to eliminate negative behaviors, decisions, and actions in your organization’s culture, you must change what gets reinforced. You must define a “better way.” Then, you must live the better way, every interaction. You must measure how all leaders are perceived, asking employees to regularly rank leaders on the degree to which they model your team or company’s desired purpose, values, behaviors, strategies, and goals. If you want more positive behaviors, decisions, and actions in your organization’s culture, you must begin work to change the underlying expectations of leaders in your organization. This is exactly what an organizational constitution does.

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HOW CIVIL IS YOUR WORKPLACE? Now that you understand how the concept of perfection is at work, every minute of every day, reinforcing your current workplace environment, let’s look at the five levels of workplace inspiration. In my research and experience I have found that every team and company culture I observe fits into one of these levels. From lowest to highest, the levels of workplace inspiration are: • Dysfunction • Tension-filled • Civility • Acknowledgment • Validation A dysfunctional culture would be evidenced by open conflict and disagreement, rude treatment of employees and customers, and managing by intimidation. Workplace teasing and bullying is common at this level. In a tension-filled culture, cliques isolate select employees. Jokes of a sexual or political nature are shared verbally or by email. Roles and efforts are undermined. Gossip is prevalent. Blaming and finger pointing can be seen daily. Teasing and bullying also happens at this level. Civility is the first of these levels where consistent sanity is the norm. Work relationships are professional, formal, and diplomatic, if distant. The work environment is psychologically safe and respectful. At the acknowledgment level, authentic respect is communicated often. Leaders and team members proactively thank peers for their efforts and their accomplishments. Credit is given willingly. The validation level is the highest degree of workplace inspiration. Not only is credit given for efforts and accomplishment, responsibility and authority is given to engaged, talented team members. Players act independently and cooperatively to move the organization forward and deliver top quality products and services. People

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smile frequently, engage their peers respectfully, and feel trusted and valued. Just as the concept of perfection reinforces a less-than-desirable work environment, it can also create and reinforce the desired validating work environment. It’s all up to the leader, who must be intentional about their desired culture (defining it through an organizational constitution), then reinforcing that validating work environment every minute of every day. There is an interesting dynamic that is very common in the dysfunctional or tension-filled levels: workplace bullying. As you can imagine, bullying has a powerful negative impact on workplace inspiration. Research indicates that workplace bullying is part of many work environments around the world. Monster.com’s 2011 global poll1 found that two-thirds of respondents admit to being victims of workplace bullying. In addition, this study found that half of respondents who have not been bullied have witnessed it in the workplace. The Canadian Centre for Occupational Health and Safety2 reports that people who are the targets of workplace bullying may suffer: • Shock • Anger • Feelings of frustration and/or helplessness • Physical symptoms, like the inability to sleep or a loss of appetite • Psychosomatic symptoms such as stomach pains or headaches • Family tension or stress • Low morale and poor productivity Bullying affects the workplace in broader ways, as well, through: • Increased absenteeism and turnover • Poor customer service

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• Increased frequency of accidents and reportable incidents • Increased costs of employee assistance programs (EAPs) Your team or company cannot afford to reside in the dysfunctional or tension-filled levels. You must build a work environment of civility, acknowledgement, or validation—without delay. We’ll use the Culture Effectiveness Assessment—asking you to rate your team or company culture with questions in each chapter—to gauge your organization’s level of workplace inspiration. And, we’ll outline steps to follow to help your team or company’s work environment evolve.

WHO IS IN CHARGE OF CULTURE? Helping your team or company’s culture evolve into a validating, consistently high-performing and values-aligned work environment is a lot of work. Culture change or, if you prefer, culture refinement is not something to be taken casually. It must be seen as vital work that needs time, energy, and intention to help craft consistent workplace inspiration. So, who must lead your team or company’s culture shift? The player or players who are responsible for culture change are those who: • Can create or modify the organization’s incentives, policies, and procedures, and • Have formal authority to guide the team, department, division, or company In short, the leaders of your team or company are in charge of your team or company’s culture. Leaders get the credit when they have crafted a safe, inspiring, and productive work environment. Leaders also (deservedly) get the blame when they have crafted a tense, fear-driven, “I win, you lose” work environment.

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However your team or company’s culture is operating today, it’s “perfect,” exactly as we’d expect it to be. If leaders want that culture to evolve, they must take action to clarify their desired culture (defining it in behavioral terms), model their desired culture (living it in every interaction), and hold everyone on the team or in the company accountable for living it in every interaction. Here’s the challenge: most leaders have not experienced successful culture change. Even fewer have led a successful culture change. Most team or company leaders simply don’t know how to proactively manage their organization’s culture. That’s what this book is designed to do—it educates leaders about a proven path for designing and aligning their desired culture. The absence of demonstrated skills in managing a team or company’s culture can tempt leaders to delegate the responsibility and authority for culture management to someone else in the organization. Sometimes this temptation is driven by the absence of interest on a leader’s part, so they delegate culture responsibility and authority. Culture responsibility is often delegated to human resources or organization development or a similar function. Delegation of culture responsibility almost always results in the complete failure of the culture change to gain traction. Why? Because only leaders of a team or company: • Can create or modify the organization’s incentives, policies, and procedures, and • Have formal authority to guide the team, department, division, or company If leaders are serious about culture change, they must accept, even embrace, the responsibility for it. To effectively guide their team or company’s culture refinement, leaders must follow the guidance of proven practitioners (like yours truly) so their desired culture comes to fruition. This book provides that guidance.

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NUTTERISMS I introduced you to Jerry Nutter, one of my best bosses, in this book’s introduction. He often taught us through truisms—which we called nutterisms. I’ll share some of these with you here and in later features. “Everything a leader does either helps, hurts, or hinders the creation of a great team culture.” Leaders don’t have neutral impact. They are on duty 24/7. Effective leaders are present, thoughtful, inquisitive, and of service, every moment.

CREATE A POCKET OF EXCELLENCE What if you’re not the CEO of your organization? Can you change the culture of just your team—even when it exists in a “less than perfect” broader organizational culture? Many of you reading this book are not chief executive officers of your company. Your “sphere of influence” may include a plant, a division, a department, or simply your own functional team. Is it possible to institute an organizational constitution and make a positive difference in your sphere of influence, to build workplace inspiration? Absolutely! Is it worth it to engage your team or department in this process, when the overall parent organization isn’t engaging in culture change at the same time? Absolutely! Many of the clients I’ve worked with over the past 20 years have been smaller, distinct units of their broader organization. They were plants, divisions, departments, and teams.

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The leaders of those units realized the culture of their unit just wasn’t helping their team’s performance nor was it inspiring team members to bring their best and do their best, consistently. The catalog printing plant came to our process because they scored so low on their company’s employee engagement survey. They were told they had to, “fix it,” but weren’t told how to fix it. They found us. The large retailer came to us because the new senior vice president wasn’t getting the quick traction he wanted on his vision, which was, “People with Passion drive Performance!” One client implemented our process with his functional team. He had no budget but he did have time and an understanding of our best practices. The work with his team was “below the radar,” not apparent to the rest of his division or the larger organization around him. This leader simply brought his team along on the constitution journey. Each of these units was a part of a larger organization or parent company. In most cases, the larger organization thought the culture work they were doing was, well, dumb. “How much money are you spending on this culture thing?” these unit leaders were asked. “Why are you wasting your time on culture? You won’t see any benefit,” they were told. The questions kept coming until the impact of the culture shift became clear. When tangible benefits such as 30 percent gains in profits and 40 percent gains in customer ratings and 40 percent gains in employee engagement are realized, the questions seem to go away. Tangible benefits usually occur within 6 to 12 months of starting the culture refinement. When leaders stay on the path, fully implementing their organizational constitution, even greater benefits occur, typically in the 18 months to 3 years timeframe. Such pockets of excellence are a delight to behold. We’ve all seen them in our organizations over time. We observe their success, their

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unique teamwork, and think, “I wonder why that team is doing so well— and having so much fun? What is their leader doing to create that?” Then we go about our business, not giving it another thought. We don’t stop and pursue how these “pockets of excellence” operate. You can create a pocket of excellence, starting now. You can craft a team (or department or division or company) culture that inspires high performance and exceptional, respectful teamwork. You can build a team that loves its work, its customers, and its team spirit. Whether you are doing culture refinement with a large or small team, you must embrace the role of proactive culture champion. You must invest time and energy in the communication, coaching, and celebration of traction towards your desired culture. This book will outline the phases and steps required to create an organizational constitution and align people, plans, decisions, and actions to it. Implementing these strategies will help your team or company culture to evolve into a high-performing, values-aligned workplace.

AN ORGANIZATIONAL CONSTITUTION IS A “DISRUPTIVE TECHNOLOGY” IN YOUR WORKPLACE This book is a road map for the creation of an inspiring organizational culture that generates organizational success (performance and profits) while, at the same time, honors its people through a work environment of safety, trust, dignity, and respect. The foundation of workplace inspiration, of high performance and values alignment, is an organizational constitution. To a great extent, implementing an organizational constitution in your team or company is a disruptive technology—it introduces new ways and new demands into an organization that is comfortable with its old ways. It causes pain and confusion as people leave behind what “has been okay around here” and embracing what you, the leader, “want it to be around here.” Creating the clear expectations and liberating rules of an organizational constitution will take time and energy. It will also take time

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and energy to communicate, model, and reinforce these expectations over time. Shifting your team or company culture from “what is” to “high performance and values aligned” will disrupt routines, power structures, and stupid policies. It will create unintended consequences—some good, some not good at all. It’s a disruption, but the shift to a safe, inspiring, and respectful work environment is worth the short-term discomfort. Right? So, what is an organizational constitution, exactly? An organizational constitution is like the Magna Carta or United States Constitution in that it outlines specific expectations and rights of organizational members (leaders and employees). Unlike the Magna Carta or U.S. Constitution, an organizational constitution does not outline the governance of the organization (employee ownership and such). It does describe the proven elements that make an organization’s work environment consistently safe, respectful, productive, and inspiring. An organizational constitution is a living, breathing document that outlines clear agreements on the team or company’s purpose and the values and behaviors that all team leaders and members believe in and commit to. The deeper that leaders drive their organizational constitution into their team, department, division, facility, or organization, the better the impact: higher employee engagement, WOW’ed customers, and boosted profits. When you manage by an organizational constitution, your team or company culture changes for the better, driven by liberating rules that leaders and employees buy into and demonstrate daily. These rules help them through ambiguity, setting standards of great team citizenship as well as great team performance. When organizations don’t have a constitution, people can behave badly—despite them having the “best of intentions.” Players are simply trying to deliver what has been asked of them, using any means possible.

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I hear about these scenarios in client organizations nearly every week. Let me give you an example. Two senior leaders of a small professional services firm found themselves in a heated argument in the corporate offices, in full view of more than 40 staff members. One demanded that a big client receive special treatment. The other argued that creating exceptions makes it hard to keep track of agreements and commitments. She explained how exceptions lead to missed promises more often than not. In minutes they were berating each other using profanity that would make a longshoreman blush. They both stormed off, with no resolution on the issue. Anxious staff members looking at each other, embarrassed. I spoke to the CEO who managed these two senior leaders. I asked, “Why do you tolerate such bad public behavior from your leaders?” [Silent pause.] The CEO said, “I told them to stop, but they keep doing it.” I explained, “Well, telling them doesn’t seem to eliminate the lousy behavior, does it?” [Another silent pause.] I said, “Let’s talk about changing the rules of engagement around here. Would it be helpful to outline standards of behavior that would be respectful of everyone?” “Sure,” the CEO said, “that’d be great.” “Drafting the agreements is easy. Aligning everyone’s behavior is a little harder. But, that’s your primary job as CEO,” I coached. This CEO’s company needed rules of civility, acknowledgement, and validation embedded in a formal organizational constitution. And, this CEO’s company needed to manage to those performance and values standards, consistently.

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Margaret Wheatley, the best selling author and management consultant, states that, “Aggression is the most common behavior used by many organizations.”3 She sees aggression as “a nearly invisible medium that influences all decisions and actions” in a team or company. The problem is that aggression is “one of the greatest barriers to thinking clearly and working well together.” Aggression inhibits high performance and values alignment. An organizational constitution redefines what a “good job” looks like for leaders and employees in your company or team. Most organizations focus entirely on results and performance. Results are certainly important, as financial viability helps the organization succeed another day. But, results aren’t the only thing that leaders should focus upon. High-performing, values-aligned organizations balance the focus on performance as well as the values they want lived by team leaders and members every day. Employees in these companies deliver on performance promises and do so while demonstrating values of, for example, integrity, civility, and creativity. Let’s “take a drive” for a minute to learn more about the parts of an organizational constitution. You’re driving along a North American road and come to an intersection with a four-way stop. As you slow to a stop, you notice a car already stopped on your right. Do you go or do they go? U.S. traffic rules say that the car arriving first has the right of way. Without hesitation, you wave the other driver on. If you both had arrived at the intersection at the same time, you’d honor the traffic rule that says cars to the right have the right of way. Without hesitation, you’d wave the other driver on. By knowing and aligning to traffic rules, drivers are able to get to where they need to go safely. No drama, no road rage—everyone simply “drives friendly” (as they say in Texas). Traffic rules provide drivers with specific rights (the “right of way”) and give drivers specific guidelines to follow in situations that might otherwise be ambiguous.

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Your organization needs a similar set of rules to help leaders and employees understand how to be great corporate citizens as well as how to contribute to the organizations goals. An organizational constitution answers the following questions: • What are we trying to accomplish? (That’s your organization’s present-day purpose.) • How are we expected to treat each other? (Those are your organization’s values and behaviors.) • What is our blueprint for going to market during this performance period? (That’s your organization’s strategy.) • What performance targets will keep us on track, delivering what we’ve promised to our customers and stakeholders? (Those are your organization’s goals.) In most organizations, performance metrics are closely scrutinized with dashboards that frequently update (per hour, per shift, etc.). Performance management systems focus on goal planning, goal accomplishment, exceeding performance expectations, and the like. Little else is consistently measured, monitored, or rewarded in most organizations. If you measure, monitor, and reward only production, that’s what people will focus on. They will get the results being monitored in any way they can—even through aggressive, “I win, you lose,” approaches. Respectful treatment of each other and of customers may or may not happen.

THE PERFORMANCE-VALUES MATRIX A model4 may be helpful here. When Jack Welch was president of General Electric, he mandated that GE’s values be equally as important as performance for everyone in the organization—leaders, managers, supervisors, and employees. Welch was the first corporate leader on the planet to demand both performance and values from every organizational player, including himself.

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Figure 1.1 The Performance-Values Matrix

Source: The “Performance-Values Matrix” was originally published in the “Gung Ho!” Participant Workbook, Item #10832,  2000 Blanchard Family Partnership and Ode to Joy Limited, and is included herein with the authors’ permission.

The performance-values matrix outlines four possible combinations of performance and values. (See Figure 1.1.) The vertical axis describes a player’s performance at any point in time in the organization, with low performance on the bottom and high performance on the top. The horizontal axis describes how well a player demonstrates the organization’s espoused, desired values at any point in time, with low values match on the left and high values match on the right. A caveat: before one can apply this model to their team, department, or organization, clear performance expectations and clear values expectations must be defined and agreed to in advance by the organization’s members. The challenge with this model is how to measure the values match. Values must be as measurable as performance metrics and must be measured regularly (just as performance metrics are monitored).

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The only way to shift values from lofty, vague references is to define values in observable, tangible, measurable behaviors. Behaviors are measurable. Valued behaviors—the defined, specific behaviors that show alignment with your team or organization’s desired values—are as measurable as performance targets and metrics. Once performance and values expectations are clear, one can assess where any player fits in this matrix at any point in time. One simply assesses the degree to which a leader or employees is on the performance scale (missing, meeting, or exceeding performance expectations) and on the values scale (missing, meeting, or exceeding values expectations). The best place for staff (leaders, managers, supervisors, and employees) to exist on this matrix is the upper right quadrant. Players in that quadrant meet or exceed performance standards, and consistently demonstrate desired valued behaviors. What should you do with high performance, values aligned players in your team or company? Trust them, honor them, validate them, compensate them, and, most importantly, keep them. A not-so-good place for staff to reside in this matrix is the lower left quadrant. “Lower left” players fall short of performance expectations and do not consistently demonstrate desired valued behaviors. What should you do with the “low performance/low values match” player? Lovingly set them free. Or, as WD-40 Company president Gary Ridge says, “Share those employees with the competition!” One could invest time and energy to raise these player’s skills (to improve performance) and coach them to modify their interaction behaviors (to increase the values match), but research and experience shows that such time does not pay off in the long run. It’s best to let these folks go work somewhere else. “Lovingly” set them free, with dignity, because the way you treat staff—those that are leaving and those that are staying—says more about your values than any published statement. Players in the bottom-right quadrant present an interesting challenge. What should you do with the values-led players who are

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unable to consistently perform? Train them, build skills, and even move them to different jobs that leverage their skills. You don’t want to lose the values match if you can help it. However, if these players are unable to consistently perform in any role, then you must lovingly set them free. The upper left quadrant is where the most damaging players reside. The high performance/low values match players are poison in your team or organization. They exceed performance expectations (which is good) while demonstrating a very different set of values than those you desire (which is not good, at all). What must you do with these players? Lovingly set them free, as fast as you can. Their very existence in your team or organization erodes your leadership integrity and erodes trust among staff as well as customers. An organizational constitution outlines your team’s purpose, values, strategies, and goals. Holding all staff accountable for both performance and values ensures that your organization is populated by inspired high-performing, values-aligned players.

THE COSTS OF MEASURING ONLY PERFORMANCE What are the risks of not having defined values expectations—or of not managing to those desired valued behaviors? Typically, when organizations don’t have defined values or behaviors, leaders and employees treat each other (and even treat customers) badly because no one is paying attention to values. No one is measuring or monitoring the quality of interactions that happen daily. In such work cultures, people can and will do anything to meet performance expectations—poach customers, overpromise to get the sale, stretch the truth to gain advantage, withhold information so a peer stumbles (or fails), withhold information so a customer makes the buy, and worse. Aggressive, self-serving behavior is the norm. What is missing in these organizations is a clear definition of how “great corporate citizens” behave—and the commitment of all parties to

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Figure 1.2

demonstrate those behaviors. People need to understand exactly how people and customers must be treated in every interaction. Look at Figure 1.2. It shows global responses to one of the survey questions from my Performance-Values Assessment.5 The items in this assessment are ranked on a six-point scale. The two desirable answers are “strongly agree” and “agree.” The other four answers are not desirable. This particular item shows that slightly less than 30 percent of 454 global respondents strongly agree or agree that their team or company has defined what a “good team citizen” acts like. That means just over 70 percent of respondents live in a work environment without behaviorally defined values. Figure 1.3 illustrates a similar item from another research project I have under way: the Great Boss Assessment.6

Figure 1.3 The Great Boss Assessment

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In this item, 38 percent of 271 global respondents believe their boss has defined their team’s constitution (purpose, values, strategies, and goals). That degree of agreement is better than the “good team citizen” data above—but it still leaves 62 percent of respondents that live in a work culture without formally defined purpose, values, strategies, and goals. Let’s look a bit more closely at Zappos, the online shoe and clothing retailer that is one of the most successful and values-aligned organizations on the planet today. Is Zappos a high-performing company? The data supports this. The organization went from startup in 1999 with negligible sales to over $1 billion in gross sales in 2009. That’s the same year Amazon purchased Zappos for $1.2 billion. Zappos’ wunderkind CEO, Tony Hsieh, gives much of the credit for the company’s growth and success to their unique culture. Tony wanted Zappos to be a fun place to work with a family atmosphere that inspires workers. He founded the company on ten formally defined values that employees embrace and make uniquely their own. Delivering happiness is what the company does for employees—and they, in turn, deliver happiness to Zappos customers. Zappos employees see the culture there as an extended family, a club with a very deep sense of belonging to something special. Employees say they are accepted for who they are—they’re not clones, they are unique teammates who trust and support each other. Zapponians (as they call themselves) feel treated like royalty—that’s a powerful indication of workplace inspiration. Amazon’s CEO, Jeff Bezos, stated one thing very boldy when they purchased Zappos: Amazon would not change Zappos unique culture— they were operating beautifully and successfully. Amazon had no desire to change the culture there. Zapponians publish a free culture book7 every other year. Request your copy to learn how inspired and passionate Zappos team members are about their company, their culture, and their customers. WD-40 Company is another benchmark global organization with top performance and significant values alignment. President and

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CEO Garry Ridge says, “Values are the written reminder of the only acceptable behaviors in our organization.” One of WD-40 Company’s values is “do the right thing.” Ridge says this value inspires conversations every day that challenge plans, decisions, and actions to ensure the “right thing” happens for customers. Another WD-40 Company value is “accountability.” Every WD40 Company tribe member makes a pledge, “I am responsible for taking action, asking questions, getting answers, and making decisions. I won’t wait for someone to tell me. If I need to know, I’m responsible for asking. I have no right to be offended that I didn’t ‘get this sooner.’ If I’m doing something others should know about, I’m responsible for telling them.” Garry believes “with rights comes responsibility.” Personal responsibility comes first, and accountability for performance and for values naturally occurs in the WD-40 Company culture. If a player doesn’t demonstrate personal responsibility for performance and values at WD-40 Company, they simply can’t work there anymore. Garry says, “We share those employees with the competition!” We’ll learn more from Garry about the WD-40 Company “tribe’s” culture journey and values in my interview with him in chapter six. Both Zappos and WD-40 Company are WorldBlu “Democratic Workplace”8 multi-year award winners. WorldBlu is an organization that promotes workplace inspiration in their 10 Principles of Organizational Democracy, which emphasizes organizational cultures based on freedom, not fear and control. Unfortunately, workplace inspiration does not happen naturally— it happens only by intention. It requires clear standards, modeling, constant tending, alignment efforts, and celebration of traction towards a high-performing, values-aligned culture. To be effective and actionable, an organizational constitution must include formal statements of organizational purpose, values, strategy, and goals.

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Of these elements, most (not all) companies are familiar with purpose statements, strategic plans, and clear goals. The element that organizations have the least amount of experience developing is values—more specifically, valued behaviors that are observable, tangible, and measurable. Values are the foundation of great corporate citizenship and of workplace inspiration. Only when values are defined in observable, tangible, and measurable terms can they drive desired behaviors every day. Let’s look at a value that is desired by many organizations around the globe: integrity. How would you define integrity for your company or team? What do you mean by integrity in your workplace? Note a phrase or sentence that describes what you mean by integrity. If your team or company has an integrity value defined, feel free to use that definition here. ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ Now, consider how you’d like people to demonstrate integrity, as you’ve defined it. How would they be acting so that, when you observe them, you’d see they were honoring your integrity value? Note two or three behaviors that fit your integrity definition. ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ How, though, might team members define integrity? Would they have different behaviors in mind as they consider how they and peers would model their definition of integrity?

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It is quite likely that they would. Ask 20people in your organization what integrity looks like, and you’ll likely get 20 different answers. You might even get 30 different answers. You see the problem. Everyone has a slightly different version of the value and of the behaviors in mind, and everyone judges others on how well leaders and peers demonstrate their version. An organizational constitution creates common agreements based on shared purpose and values. These “rules of engagement” are formalized so every leader and employee knows what values expectations are—and can model them, praise them, coach to them, and redirect misaligned behaviors. Defining values and behaviors and then holding everyone in the company or team accountable for living them creates continuity and sanity. Every player knows what’s expected of him or her. Valued behaviors are liberating rules for every leader and employee— they describe exactly what’s expected. Players don’t have to spend time hedging or guessing how one should treat others or be treated. There is no more toleration of rude behavior or workplace bullying. Compare your “integrity” notes to how one client outlined its “integrity” value: Value: Integrity Definition: We are accountable for our actions. We do what we say we will do. We do not compromise our organization’s values, no matter what. Behaviors: I hold myself accountable for my commitments and actions; I keep my promises. I attack problems and processes, not people. I accept responsibility and apologize if I jeopardize respect or trust. I align all of my plans, decisions, and actions with the organization’s purpose and values.

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These behaviors are in the form of “I” statements. They describe how every employee, no matter their title, role, or responsibilities, behaves, day to day. These behaviors are positively described; they outline how you want people to actdaily. The behaviors don’t say “I will . . .” because “will” means I might do it, later. I don’t have to do it now. You want every player to do these behaviors now, consistently, always. These behaviors outline what you want members of the organization to do daily (not what you don’t want them to do). This lets every leader and employee know how they are expected to behave in order to demonstrate the organization’s integrity value. Let me offer a brief lesson about the power of “do” messages. The human brain processes “do” messages more quickly and efficiently than “don’t” messages. A couple of examples highlight the importance of stating desired behavior in positive terms. Let’s say you are riding your bike on a narrow trail. If you tell yourself, “Don’t fall!” your brain hears, “Fall!” You lose focus, you lose desired straight-line tracking and momentum, and you fall. Ouch. Or, you are playing golf with friends. You find yourself on the tee box with your driver in hand. A nice, green, mowed, expansive fairway lies before you. There is a lake along the left side of the fairway. As you line up your shot, you say to yourself, “Don’t hit it into the lake!” Your brain hears, “Hit it in the lake!” You lose focus, and—despite your best intentions—your ball goes right into the lake with a splash. “Don’t” messages are used quite often in the work environment (and at home, for that matter). Workplace “don’t” messages include such statements as “Don’t be late” (for meetings or project deadlines), “Don’t be a jerk” (don’t yell or be rude), “Don’t promise what you can’t deliver,” and the like. By stating messages in positive terms and stating desired behaviors (“do” messages), more consistent and frequent alignment to that behavior occurs. By stating, “Be on time,” “Be kind,” or “Be of service,” these messages become much more actionable.

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Valued behaviors become the metrics for great corporate citizenship and for workplace inspiration. Once these valued behaviors are published, leaders must live them and coach them consistently. Leaders must then create systems (like a custom values survey) that measure how well leaders and employees demonstrate these behaviors day to day. We’ll learn about how to measure values alignment in Chapter 7. The results of a leader or employee’s custom values survey profile can be combined with their performance appraisal to provide a more complete picture of that leader or employee’s contributions to the organization.

HOW DOES AN ORGANIZATIONAL CONSTITUTION HELP YOUR COMPANY, DEPARTMENT, OR TEAM? You can’t afford to operate without an organizational constitution. The costs of leaving your team or organization’s culture to chance are too great. The positive financial impact of aligning plans, decisions, and actions to clear purpose, values, and behaviors is impressive and the benefits undeniable. One of the first noticeable changes in the work environments of our culture clients is the growth in employee engagement. In morale surveys, satisfaction surveys, and engagement surveys, our culture clients have seen 35–40 percent engagement gains in 12 to 18 months. What is the benefit to organizations of greater employee engagement? Let’s look at the research. In its 2013 “State of the American Workplace” report,9 Gallup, Inc. describes how engaged workers help their organizations succeed. Engaged workers have significantly higher productivity, profitability, and customer ratings, less turnover and absenteeism, and fewer safety incidents than their disengaged colleagues. However, Gallup’s research indicates that only 30 percent of American workers are engaged, leaving more than two-thirds of workplace populations not engaged or actively disengaged.

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Gallup estimates that actively disengaged workers cost U.S. businesses more than $450 billion in lost productivity each year. In a 2006 study10 of more than 23,000 business units, Gallup found that units in the top 25 percent of employee engagement scores generated 12 percent higher productivity than units in the bottom 25 percent of employee engagement scores. Kenexa’s 2008 study11 of 64 organizations found that companies with highly engaged employees achieve twice the annual net income of companies whose employees are less than highly engaged. Gallup’s 2010 “State of the Global Workplace” report12 found that most countries studied have fewer engaged workers than in U.S. workplaces. Only Brazil, Costa Rica, Guatemala, and Bahrain were close to the U.S. engagement totals. In his book, The Integrity Dividend,13 Dr. Tony Simons describes the benefits of what he calls “behavioral integrity.” Simons defines behavioral integrity as managers demonstrating their organization’s values and doing what they say they will do (keep their commitments). Simon’s found that when employees believe their bosses have behavioral integrity, employee commitment goes up. Committed employees apply discretionary energy in service to the organization’s goals and customers. Customers notice and appreciate employee’s discretionary energy, and support the company by buying and promoting its products and services. The net gain: profits grew 2.5 percent for every one-quarter point bump on a 10-point behavioral integrity scale. For one of Simons’ clients, a hotel chain, every one-quarter point bump earned each hotel $250,000 net profit. This was free money, generated entirely by employee perceptions of their boss’s behavioral integrity. Here are a few more examples that demonstrate the positive impact of employee engagement on business outcomes and customer service rankings: • Morrison Management Specialists increased client satisfaction by 1 percentage point for every 2 percentage point increase in employee engagement.14

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• Fabick CAT, a Caterpillar dealer in southern Missouri, USA, improved “percent of industry net sales” by 300 percent.15 • Highly engaged employees were 87 percent less likely to leave their companies than their disengaged counterparts.16 • MolsonCoors found that engaged employees were five times less likely than nonengaged employees to have a safety incident and seven times less likely to have a lost-time safety incident.17 High-performing, values-aligned companies report higher levels of employee well being than companies that do not ensure valuesalignment. Research reported on the Positivity Works18 web site shows that employees with high well being: • Deliver 31 percent higher productivity than employees with low well being.19 20 • Demonstrate three times higher creativity on the job. 13 • Generate 37 percent higher sales results. 13 • Report being 10 times more engaged by their jobs. 14 • Report being three times more satisfied with their jobs.

CLIENT IMPACT Global research results universally prove that engaged employees generate greater profits and better customer experiences. What about clients that have used our “organizational constitution” process—what do their results show? One client came to us because of low employee engagement survey scores. They scored 32 out of 100 possible points, the worst scores of the 8 business units owned by their corporate parent. This plant’s senior leadership team embraced our culture process fully and promptly. They defined values with observable behaviors so everyone— leaders and employees—understood what the rules were for effective daily interactions. They increased performance accountability across their production lines. They measured how well leaders lived the organization’s new valued behaviors. They praised leaders who modeled

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their values, coached leaders who struggled, and redirected leaders who didn’t model or manage to the new values. Within six months, conflicts, absenteeism, rework, and grievances dropped by 60 percent. Efficiency improved. Customers reported amazement at the “new service attitude” that company staff displayed. When the next employee engagement survey came around twelve months later, their plant scored 62 out of 100 points! Theirs was the biggest gain in engagement scores of any of business unit in their company system, and, theirs was the top score across the organization. At the 18-month mark, employee engagement had grown 45 percent, customer service rankings had grown 45 percent, and profits had grown 35 percent. Plant leaders gave all the credit to every leader and employee’s alignment to their organizational constitution. Another client, a seven-state region of a large retailer, embraced our culture change process because the new senior leader’s vision wasn’t taking hold fast enough. Joel, the region’s senior leader, believed and preached “People with Passion drive Performance!” Joel’s messaging and coaching in his first 18 months in the position helped some store managers “get it.” However, most store managers did not. Twelve months after creating their organizational constitution and managing to it (with our guidance), Joel’s region enjoyed 40 percent gains in employee engagement, 40 percent gains in the customer experience, and 30 percent gains in profits. A manufacturing plant in the Midwestern United States discovered a fabulous peripheral benefit to their organizational constitution. Their small town suffered flash flooding one spring, which caused tremendous damage in their community. Families were evacuated with little time to gather for necessities. Plant employees banded together to provide food, clothing, and transportation for their neighbors. They volunteered hundreds of

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hours for the Red Cross at the evacuation center. They secured funds from the plant’s parent company to rebuild homes and businesses in the following months. The plant manager said in the 40 years the plant had been operating in that town, no one had ever seen employees rally so quickly and confidently to serve their fellow community members. Some of the employees who volunteered to help had also suffered significant losses in the flooding. “Our values and behaviors didn’t just apply inside the plant. These employees made sure they applied in our town, too,” she said. Most clients don’t see these engagement, service, and profit gains quite so quickly—it usually takes 18 to 24 months to align expectations and practices to your unique organizational constitution. However, these leaders—and their organization members—embraced their purpose, values, and behaviors at exactly the right time. These leaders and employees were ready, even primed, for the disruptive technology of an organizational constitution. The moral of the story: if you’re only paying attention to results, you’re leaving money on the table.

YOUR LEADERSHIP LEGACY Let’s discuss one more beneficial impact to creating and managing to an organizational constitution: your leadership legacy. You create your legacy with every plan, decision, and action. Everything you do tells your boss, peers, team members, and customers what you stand for. What you value is transparent through your actions. For many leaders, legacy isn’t something they are conscious about. They are conscious—and intentional—about getting stuff done, getting products out the door, getting services delivered as promised. “Legacy?” one leaders asked me. “I’m not thinking about my leadership legacy. I’m just trying to keep the doors open and make more money today than we spend!”

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I understand the need for leaders to manage output; those are promises that must be kept. And, if your work environment isn’t consistently safe, inspiring, and respectful, that environment erodes every employee’s willingness to engage in the work, and it erodes every employee’s personal well being. That’s not something to be proud of. And, it costs you money: hard dollars . . . in opportunity lost, in mistakes tolerated, in “if they don’t love or trust me, I won’t love or trust them,” lousy efforts by team members, and more. This could be the legacy you’re leaving, right now. Yet every one of us has had great bosses that inspired us, who brought out our best, who treated us like royalty. When I ask leaders what their best bosses did to deserve that coveted title, they consistently report these “great boss” behaviors: • He trusted and respected me. • She had high standards of me. • He listened to my ideas. • She supported me, even when things weren’t going perfectly. • When I made a mistake, he asked me about it, promptly and respectfully. He let me know he was disappointed and needed my best, every moment. • She never blamed me—she knew I was doing my best. We know what a positive leadership legacy requires; we’ve seen it and experienced it. The hectic pace and incredible demands of our jobs have simply taken our eyes off the prize. A few additional items from my research will shed light on the need for a positive leadership legacy. Figure 1.4 shows global responses to another survey item from my Great Boss Assessment.21

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Figure 1.4

Forty-six percent of respondents strongly agree or agree (again, these are the two desirable ratings) that their boss inspires their best efforts each day. That’s not bad—but it means that 54 percent of respondents work for bosses who do notinspire their best efforts. Figure 1.5 shows an additional legacy-related item from the Great Boss Assessment. This item gauges agreement on the degree to which respondents see their leader “coaching team members on behaviors that erode team performance, trust, and respect.” Just under 37 percent believe their leader does; that means 63 percent experience a work environment where leaders do not address such behaviors. One final legacy-related item from the Great Boss Assessment is shown in Figure 1.6. This item asks respondents to rate how quickly their leader addresses team issues. Slightly less than 36 percent believe

Figure 1.5

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Figure 1.6

their boss doesn’t let team issues fester. That means that 73 percent believe their boss lets team issues fester. There is no time like the present to build a stronger, positive leadership legacy. You may as well—you’re going to be there in the foreseeable future anyway, right? This book aims to educate readers that effective leadership involves much more than managing output. With an organizational constitution, the framework for a safe, inspiring, fun, and productive work environment is clear. With an organizational constitution, consistent workplace inspiration is within reach. Ready to learn more? The next chapter will help you get clearer about your purpose, values, and leadership philosophy. Then we’ll dive into defining your team or company’s organizational constitution: purpose, values and behaviors, strategies and goals.

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Contents

Foreword

Dharmesh Shah

Acknowledgments

xi xv

Introduction

xvii SECTION I THE BACKSTORY

Chapter 1

Chapter 2

Mind the Gaps

3

The The The The

3 6 9 14

Marketing Marketing Marketing Marketing

Talent Gap Technology Gap Strategy Gap Performance Gap

Commit to Digital Transformation

17

Adoption and Adaptation Obstacles to Evolution The Exposed Brand

17 18 23

SECTION II MARKETING TALENT Chapter 3

Build a Modern Marketing Team

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A Talent War Has Begun Rise of the Hybrids The Science of Recruiting

31 44 46

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CONTENTS Construct an Internal Marketing Academy

53

Keeping Pace or Falling Behind? The Role of Online Education An Internal Academy Model

53 56 59

Propel Growth through Agency Partners

69

The Marketing Agency Ecosystem Finding Your Match Managing the Outsourced Team

69 70 76

SECTION III MARKETING TECHNOLOGY Chapter 6

Chapter 7

Create a Connected Customer Experience

87

It Is Their Journey, Not Yours The Impact of Automation Algorithms and Artificial Intelligence Origins of the Intelligence Engine Let’s Get Contextual

87 88 92 96 98

Manage the Marketing Technology Matrix

107

Into the Cloud Brinker’s Marketing Technology Landscape Map Your Marketing Technology Strategy Core Technologies Snapshot

107 109 112 116

SECTION IV MARKETING STRATEGY Chapter 8

Chapter 9

Perform a Marketing Assessment

127

Potential for Success The Marketing Score Model Business and Marketing Cores The Strategy Gateway

127 130 135 142

Develop a Marketing Scorecard

147

Metrics That Matter Getting Started with Google Analytics Automate and Visualize Intelligence

147 158 164

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Strategize a Marketing Game Plan

167

e3 Model Snapshot Evaluate Establish Execute

167 168 170 191

Conclusion

195

Resources

207

Notes

209

About the Author

219

Index

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When Brian Halligan and I started HubSpot in June 2006, we wanted to transform how organizations acquired customers. The Internet had altered how people accessed information, connected, shopped, and shared. As a result, marketing as we knew it was broken. Traditional, outbound marketing methods, such as trade shows, advertising, and telemarketing, were becoming less and less effective. Consumers were choosing when and where to interact with brands, turning to search engines and social networks for resources, products, and services. HubSpot became our chance to revolutionize the marketing industry and give businesses the tools needed to better reach and engage buyers online and on their terms. It was around this time that I met Paul at the inaugural INBOUND conference in Boston. He was one of HubSpot’s earliest adopters, and in 2008, his marketing agency, PR 20/20, became our first Agency Partner, helping to pioneer a program that now includes more than 1,500 agencies worldwide. Paul and his team have worked with dozens of clients to build and execute performance-driven inbound marketing campaigns. We share a common belief that businesses need to outthink, rather than outspend, their competition. Playing by everybody else’s rules is a surefire way xi

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to lose, whereas innovation—and thinking differently—is rewarded. Consumers are more informed, in touch, and in charge than ever before. Outdated marketing methods interrupt and annoy, causing customers to move further away from brands. Buyers crave personalized experiences, and brands need to up their game to connect with audiences in meaningful ways. They must transform marketing from something most people hate to something that they love. This requires a shift in marketing strategy. Successful marketing programs focus on the people behind each transaction. They humanize marketing and reimagine the full customer experience, from first interaction to post-sale support. This is how you deliver memorable inbound experiences that turn followers into customers and customers into advocates. This is how you create marketing that people love. But, there is no magic wand to transform obsolete marketing practices, and too many companies remain frozen in time. Marketing departments must evolve their mindsets and put the right technology and culture foundations in place. Technology has dramatically changed how consumers live, connect, and shop, but it has also enabled marketers to execute more intelligent and targeted strategies. With technology in their toolbox, marketers can better meet consumer demands for excellence at every touchpoint, personalize interactions based on context, streamline campaign execution, and accurately measure performance. It is for these reasons that companies like HubSpot exist—to help you market better and smarter, and to help you delight customers. While technology makes lovable marketing a possibility, it is marketers who make it a reality. However, modern marketers are hard to come by—especially those

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with exceptional talent and the hunger to learn and achieve. To attract marketing stars, you must first become the keeper of culture. Define your organization’s set of shared beliefs, values, and practices, and use that as the jumping-off point. Culture is to recruiting as product is to marketing—the better the culture, the easier it is to attract and retain exceptional talent. As HubSpot has grown through the years, to more than 700 employees today, I have spent significant time thinking about culture. So much so that I have joked with my colleagues that the “T” in my CTO title may actually stand more for “talent” than “technology.” I have learned that knowing what your company believes and what makes it tick are paramount to attracting and retaining the right people. And, a talented team, when paired with the right marketing technology and an evolved marketing strategy, completes the marketing-performance trifecta. However, transformation is difficult. The Marketing Performance Blueprint is your guide to help accelerate success through marketing talent, technology, and strategy. Use it to build a performance-driven business and to create marketing that people love. DHARMESH SHAH (@DHARMESH) Cofounder and CTO, HubSpot Coauthor, Inbound Marketing

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■ UNDERPREPARED AND UNDERPERFORMING The marketing industry is advancing at an unprecedented rate, creating seemingly insurmountable gaps in marketing talent, technology, and strategy. At a time when marketers face increasing pressure to measure the return on investment (ROI) of their campaigns and connect every dollar spent to bottom-line results, they are largely underprepared and underperforming. According to Adobe’s 2013 report “Digital Distress: What Keeps Marketers Up at Night?,” 68 percent of marketing professionals feel more pressure to show return on marketing spend, while only 40 percent think their company’s marketing is effective. A mere nine percent strongly agree with the statement, “I know our digital marketing is working.”1 But with obstacles come opportunities. Marketing technology has changed the game. Organizations of all sizes have access to the tools and knowledge needed to grow more efficiently and intelligently, to outthink, rather than outspend, the competition. The marketers who will redefine the industry in the coming months and years and be in high demand take a technical, scientific approach.

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Marketing is now, as it has always been, an art form. But the next generation of marketers understands it can be so much more. These innovators are rewriting what is possible when the art and science of marketing collide.

■ BUILD A PERFORMANCE-DRIVEN ORGANIZATION The Marketing Performance Blueprint presents the processes, technologies, and strategies to fill marketing gaps and build performance-driven organizations. It is a guide for marketers, executives, and entrepreneurs to advance their businesses, exceed ROI expectations, and outperform the competition. Do not waste another minute or dollar with traditional thinking and conventional solutions. Soon, every company, including your competitors, will have the tools, talent, and processes to excel. But it is still early. Your organization has the opportunity now to differentiate and drive growth. As you read, consider the following questions: ➤ Does your organization have the right marketing talent, technologies, and strategies to achieve its performance goals? ➤ Are your expectations for growth aligned with your organization’s potential? ➤ Are there weaknesses in your business and marketing cores? ➤ Are you maximizing the return on your marketing investments? ➤ Do you have the right performance-driven agency partners who are immersed in marketing technology, continually infuse ideas to propel growth, and add critical expertise and skills to your marketing team?

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➤ Are your resources and campaigns aligned with priority marketing goals? ➤ What are the opportunities for underdogs and innovators that lack the resources of their larger competitors? ➤ What can large enterprises do to stay on top as smaller competitors develop more modern marketing teams, more quickly adapt to marketing technology advancements, and build more intelligent and efficient marketing strategies? ■ ACCELERATE SUCCESS This is a book about what is possible. It is about unlocking your potential as a marketer and accelerating success for your organization. The marketing talent, technology, and strategy gaps are very real, and they are impacting your business’ performance. Now is the time to take control. Key findings and insights from dozens of industry reports, articles, books, and interviews are woven into The Marketing Performance Blueprint, along with analysis of in-depth marketing assessments from hundreds of marketers, executives, and entrepreneurs. I draw on my personal experiences consulting for hundreds of organizations, from startups to Fortune 500 companies, and mix in lessons learned as a marketing agency owner. My goal is to give you the resources and tools to advance your marketing career and help move your organization’s marketing forward. Watch for the [+] symbol as you read. This indicates a template spreadsheet is available to download from performance.PR2020.com as part of the Marketing Performance Pack we have created to complement the book. This free resource features a collection of templates, including

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a marketing team skills assessment, scorecard, campaign center, and project center. ➤ ➤ ➤ ➤ ➤

Website: performance.PR2020.com Twitter: @PaulRoetzer Book hashtag: #MKTBlueprint Email: [email protected] LinkedIn: www.linkedin.com/in/paulroetzer/

Let’s begin the journey. Section I: The Backstory ➤ Chapter 1—Mind the Gaps—lays the foundation, presenting insight into how gaps in marketing talent, technology, and strategy are leading to the most significant gap of all: the performance gap. ➤ Chapter 2—Commit to Digital Transformation— discusses the digital transformation imperative and considers ways to overcome obstacles faced by businesses of all sizes. Section II: Marketing Talent ➤ Chapter 3—Build a Modern Marketing Team— explores the rise of hybrid marketers and the impending talent war for tech-savvy marketing professionals. ➤ Chapter 4—Construct an Internal Marketing Academy—dives into an analysis of how universities are struggling to keep pace and how some academic outliers and online institutes are filling the education void. It presents a process for using internal academies to build performance-based cultures and nurture modern marketing teams. ➤ Chapter 5—Propel Growth through Agency Partners—assesses the marketing agency ecosystem

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and shares systems for finding and managing marketing agency partners. Section III: Marketing Technology ➤ Chapter 6—Create a Connected Customer Experience—focuses on processes and technologies, including marketing automation and intelligence engines, to personalize the customer journey. ➤ Chapter 7—Manage the Marketing Technology Matrix—starts with the software as a service (SaaS) revolution and walks through how to navigate the ever-changing landscape of marketing technology solutions. Section IV: Marketing Strategy ➤ Chapter 8—Perform a Marketing Assessment— presents the knowledge and tools to conduct a complete review of your organization’s marketing potential and performance. ➤ Chapter 9—Develop a Marketing Scorecard— demonstrates how to create a customized marketing performance measurement and reporting system for your organization. ➤ Chapter 10—Strategize a Marketing Game Plan— features a deep dive into the principles and processes of building more personalized and agile marketing strategies using the e3 (evaluate, establish, execute) framework.

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There has never been a better time to be a marketer.

■ ADOPTION AND ADAPTATION The future of your business and your marketing career depend on your ability to meet increasing ROI demands and continually adapt to new marketing tools, philosophies, and channels. But the rate of change in the marketing industry is accelerating, and the challenges for marketers seem to be multiplying. The marketing talent pool is underprepared, the marketing mix is evolving, and the matrix of technology providers is exploding. Customers are tuning out traditional marketing methods, while consuming information and making buying decisions on mobile phones, tablets, computers, smart televisions, and wearable devices. Marketers are drowning in data, dealing with the complexities of real-time marketing, and navigating brands through the openness and transparency inherent to social media. Yet, there has never been a better time to be a marketer. Think about the possibilities. 17

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THE MARKETING PERFORMANCE BLUEPRINT

➤ There is no more relying on meaningless metrics, such as impressions, ad equivalency, and PR value. Every action and interaction can be measured and connected to outcomes. ➤ Marketing software can eliminate wasted resources, improve productivity, and enhance performance. ➤ Websites can dynamically alter content at an individual visitor level based on historical behavior. ➤ Email communications can be automated and personalized. ➤ Leads can be scored and nurtured to assist sales and maximize conversion rates. ➤ Brands can gain unparalleled insight into consumer behavior, build publishing platforms to engage audiences, and adapt campaigns and budgets in real time based on performance. In short, marketing can be more intelligent, measurable, and powerful. It can be an asset, not an expense. But change is not easy, and businesses of all sizes face an uphill battle.

■ OBSTACLES TO EVOLUTION Marketing success requires a commitment to consistently create exceptional customer experiences, along with transparency, agility, and accountability at all levels. Unfortunately, many marketing leaders struggle to win and maintain internal support. Let’s take a look at some of the most common obstacles marketers face. All challenges can be overcome, but a starting point for many organizations is to understand the roadblocks that lie ahead and then develop strategies to address them.

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Accountability Marketing technology advances have made everything measurable. This can be intimidating for marketers who have never been held accountable for marketing metrics such as subscribers, leads, conversion rates, and sales. According to the 2014 “CMO Survey,” just 36 percent of CMOs have quantitatively proven the short-term impact of marketing spending, and for demonstrating long-term impact, that figure drops to 29 percent. So, the vast majority of CMOs use qualitative measures or have not been able to show an impact at all.1 Marketers must develop strong analytics knowledge and capabilities to continually prove the value of marketing to CEOs, CFOs, and the rest of the executive team. Complacency MIT Sloan Management Review and Capgemini Consulting teamed up in 2013 to survey 1,559 executives and managers on digital transformation, which they define as “the use of new digital technologies (social media, mobile, analytics, or embedded devices), to enable major business improvements (such as enhancing customer experience, streamlining operations or creating new business models).” In the resulting report, “Embracing Digital Technology,” researchers found that while 78 percent of respondents indicated that digital transformation will be critical to their organizations within the next two years, 63 percent felt the pace of change in their organizations was too slow. The most frequently cited obstacle was “lack of urgency.”2 Ironically, success itself may be one of the largest culprits in creating complacent cultures. Too often, business leaders become comfortable with historical success and lack motivation to change their ways. They assume they

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can maintain market share, revenue growth, and profits by doing what has always been done. But digital transformation has the power to upend industries and render market leaders obsolete. While the effects of staying the course may not be obvious in the short term, eventually complacent companies could pay the ultimate price. As the MIT Sloan Management Review and Capgemini Consulting study states in simple terms: “Adopt new technologies effectively or face competitive obsolescence.” Conservative Culture There is an old axiom in the IT industry: “Nobody ever got fired for buying IBM.” The idea is that IBM is a safe choice because it is a known entity. While newer and sometimes more innovative companies may come along with better features and products, IT departments have been conditioned to avoid risks and go with the status quo. The same thinking can apply to marketing today: “Nobody ever got fired for placing an ad.” Advertising, direct mail, trade shows, telemarketing, and other traditional activities are familiar. The risk is minimal, but so is the potential reward. Differentiation and competitive advantage come from taking chances. Modern marketers are continually testing new technologies and strategies. While the probability of failure rises, so do the number of real-time learning opportunities. Analytics software gives marketers the insight to know what went wrong and the ability to make adjustments that improve performance. As conservative organizations sit on the sidelines, modern marketers are capturing market share by activating marketing automation programs; building loyal subscribers, fans, and followers; developing mobile apps; engaging on social media; publishing blogs; retargeting

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website visitors with digital advertisements; and using branded content to educate leads and customers. Businesses that are too slow to evolve and too afraid to take chances will lose in the long run. Conservative cultures can be corrected, but this change starts at the top. Leaders must provide the resources and runway to realize what is possible. Success does not happen overnight, so patience and persistence are essential. History is full of industry leaders and business pioneers who have become irrelevant because they failed to innovate and evolve. Maybe it is the result of conservative cultures, poor leadership, a lack of will and vision, or the systematic inertia that builds from years of complacency. Or, possibly, they were just afraid. People fear the unknown. They resist taking the bold and decisive actions that are needed to survive because they do not want to fail. However, we learn from failure. It builds character, teaches us humility, shows us how to cope with adversity, and challenges us to continually test, revise, and improve. —Paul Roetzer, The Marketing Agency Blueprint, p. 1853

Lack of Knowledge and Talent As discussed in Chapter 1, the marketing talent gap has a direct effect on your business’s ability to adopt new technologies and strategies and continually adapt to industry changes. To advance, you must attract a new breed of marketers (Chapter 3), build internal academies to evolve your existing marketing team (Chapter 4), and evaluate outsourcing to marketing agencies that bring complementary knowledge and skills to the mix (Chapter 5).

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Power Struggles and Politics Power struggles and politics are two unfortunate realities in business. Egos and self-interests can become challenges. If decision makers controlling the pace of change within the company lack confidence in their abilities to guide digital marketing transformation, then they may, consciously or subconsciously, hinder progress to preserve control and power. Self-preservation is human nature, and it is a variable that must be considered. If you feel there are individuals or departments inhibiting progress, take steps to understand what elements of the process motivate and intimidate them. Use this knowledge to take a more strategic approach to change management that builds buy-in every step of the way. Silos Subscribers, fans, followers, leads, and customers choose when and where to interact with your brand. They do not differentiate between marketing departments and channels. Think about all the possible consumer touchpoints. People may call, complete a web form, initiate an online chat, search a website for resources, download content, attend a webinar, subscribe to a blog, and/or connect on social networks. At each interaction, their needs and intentions are likely different. They are at a unique stage in their own personal journey with your brand, and yet, they expect the experience to be consistent. Now picture how many different departments and individuals within your company affect the customer experience in the above scenarios. With digital transformation and the shift to inbound marketing, the stakes are high. Marketing must break down its own silos (advertising, communications, content, digital, PR, SEO, social, web) and find innovative

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ways to collaborate with customer service, finance, human resources (HR), IT, operations, and sales to drive performance and create consistently remarkable customer experiences. Legacy Systems and Technology Fatigue As we will see in Chapter 7, the marketing technology matrix is vast and expanding at an exponential pace. According to Scott Brinker’s 2014 “Marketing Technology Landscape Supergraphic,” there are 947 different marketing software companies in 43 categories across six major classes.4 Keeping up with the latest and greatest tools is exhausting. While there are likely smarter ways to do pretty much every marketing function, from CRM to website content management, large enterprises have legacy solutions in place, and small and midsize businesses (SMBs) face budgetary and human resource challenges. Change takes time, money, unwavering executive support, and an internal champion willing to wade through the politics and power struggles required to move the business forward. High-performing companies are prepared for perpetual change. They put agile marketing teams and business processes in place that can scale and adapt as new technologies and opportunities emerge.

■ THE EXPOSED BRAND We have entered a 24/7/365 bathing suit season in business. You and your company are always exposed, always vulnerable. Depending on your perspective, this can be intimidating or empowering. Our lives and businesses have become reality shows— open to the world, sometimes by choice, other times

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by association. Customers are talking, competitors are watching, employees are networking, family and friends are sharing, and companies are scrambling to adapt and evolve. We used to be able to avoid the spotlight, covering up our insecurities and masking our flaws. We could more easily control our brands and how we were perceived. But that was before the dawn of the digital age and the explosion of social networking. At some point, we lost control, which is a scary thing for many marketers, executives, and entrepreneurs. We have been placed under the perpetual microscope of our social circles, in which the potential exists for unfiltered commentary and opinions about our every move, even if we choose not to participate. Information is at our fingertips. What we discover online about people and businesses directly affects the decisions we make as professionals and consumers. Job candidates, employees, business partners, academics, board members, executives, industry leaders, and media are all affected. No person or business, regardless of industry, is immune. And yet, there are people who have never Googled themselves (or their brands) to see what others see, and there are companies that continue to ignore social media because they cannot calculate a direct ROI. The Underdog Opportunity What we all must accept is that everything has changed. That is, except for one immutable law: Perception is reality. Whether you and your business are engaged in the online world or not, with every action you take and decision you make, you are either building or weakening your brand. This presents enormous challenges, but even more significant are the opportunities—awareness,

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engagement, goodwill, leads, loyalty, and love—for brands that have the confidence to “bare it all” and connect with audiences in more authentic and personal ways. So, you have a choice. Dive in: Be confident in yourself and take ownership of your brand. Accept that people are watching, talking, and judging, and embrace it to build your career and your business. Cover up: Hide away with your fears, miss out on all the fun, and hope that you do not become irrelevant and obsolete. This is no place for curmudgeons and lumbering organizations. This is the land of underdogs and innovators. Professionals and businesses that are nimble, dynamic, and transparent have the opportunity to disrupt markets, displace leaders, and redefine industries. The next generation of leaders will be those who are ready to leave their comfort zones, let go of their fears and anxieties, take risks, and build remarkable corporate and personal brands. The choice is yours. CHAPTER HIGHLIGHTS

➤ The future of your business and your marketing career depend on your ability to meet increasing ROI demands and continually adapt to new marketing tools, philosophies, and channels. ➤ There has never been a better time to be a marketer. ➤ Inbound marketing success requires a commitment to consistently create exceptional customer experiences, along with transparency, agility, and accountability at all levels. (continued )

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➤ Marketers must develop strong analytics knowledge and capabilities in order to continually prove the value of marketing to CEOs, CFOs, and the rest of the executive team. ➤ Digital transformation has the power to upend industries and render market leaders obsolete. While the effects of staying the course may not be obvious in the short term, eventually, complacent companies could pay the ultimate price. ➤ Differentiation and competitive advantage come from taking chances. Modern marketers are continually testing new marketing technologies and strategies. ➤ Modern marketers are capturing market share by activating marketing automation programs; building loyal subscribers, fans, and followers; developing mobile apps; engaging on social media; publishing blogs; retargeting website visitors with digital advertisements; and using branded content to educate leads and customers. ➤ If decision makers controlling the pace of change within the company lack confidence in their ability to guide digital marketing transformation, then they may, consciously or subconsciously, hinder progress in order to preserve control and power. ➤ Marketing must break down its own silos (advertising, communications, content, digital, PR, SEO, social, web) and find innovative ways to collaborate with sales, finance, IT, customer service, and HR to drive performance and create consistently remarkable customer experiences.

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➤ Change takes time, money, unwavering executive support, and an internal champion willing to wade through the politics and power struggles required to move the business forward. ➤ This is no place for curmudgeons and lumbering organizations. This is the land of underdogs and innovators. Professionals and businesses that are nimble, dynamic, and transparent have the opportunity to disrupt markets, displace leadership, and redefine industries.

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CONTENTS

Foreword

Part

Part

Part

Tony Hsieh

ix

Introduction

1

GETTING STARTED

5

1 Entrepreneurial Mind

7

1

2 Ideas 3 Action

21 31

4 Formation

47

2

PRODUCT

59

5 Product-Market Fit

61

6 Launch 7 Metrics

73 85

3

TEAM AND PEOPLE

8 Team 9 Culture

95 97 109

10 Celebration

123

11 Relationships

135

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Part

Part

Part

CONTENTS

4

SALES AND MARKETING

147

12 Marketing

149

13 Sales

165

5

MONEY

179

14 Bootstrapping

181

15 Funding

193

6

211

GROWTH AND CHANGE

16 Failure 17 Success Conclusion Acknowledgments References Index

213 223 237 239 243 247

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I

’m a big believer in the 10,000 hours of practice theory.

If you want to become an amazing guitar player, you need 10,000 hours of practice. If you want to become a great golfer, you need 10,000 hours of practice. And if you want to become a successful entrepreneur, you need 10,000 hours of practice. However, the other thing you need is to make sure that you’re practicing the right things. If you spend your 10,000 hours doing nothing, except playing the basic chords, you will not magically turn into the amazing guitar player you imagined at the end of that journey. Generally, my advice to entrepreneurs boils down to a few simple things: 1. Make sure that whatever you’re doing, you’re doing it for the passion, and money isn’t your primary motivator. Chase the vision, not the money. If you do so, the chances of making more money are much more likely to happen. 2. Be unapologetically true to yourself, both in business and in life. This principle will help you build a unique brand as well as a strong company culture. 3. Trust your gut. Sometimes your gut will be wrong, but that’s part of what the 10,000 hours of practice of being an entrepreneur is all about. It’s about training your gut.

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In my entrepreneurial experience with LinkExchange, Zappos, Delivering Happiness, and now Downtown Project, I’ve found that there’s a lot you can learn from books as well as other entrepreneurs. I wish that the book that you are now holding in your hands had existed when I was just starting out. It contains a lot of great lessons and stories that would have saved me a lot of trial and error throughout my own entrepreneurial journey. If you’re in the midst of starting your own startup, this book can serve as a great guide and roadmap for things you should be thinking about, and ultimately things that you should be practicing as you form and grow your startup. I’ve known Frank and Jen from Tech Cocktail for several years now. Not only have they been on their own entrepreneurial journey, they are also in the business of being exposed to and learning from literally hundreds and hundreds of startups. You’ll find tons of great advice in this book from lots of different entrepreneurs. My advice to you is to take it all in, and then chart your own path. There will be a lot of ups and downs, but just remember that it’s all part of the journey. —Tony Hsieh CEO, Zappos.com; Author of Delivering Happiness; Appreciator of llamas PS: The time you spend reading this book will count towards your 10,000 hours of practice.

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n 2005, just weeks before Hurricane Katrina hit New Orleans, I found myself attending the WebmasterWorld’s Search Conference in the Big Easy. At a loss for which sessions to attend, I randomly sat in on a session called Blogging for Fun and Profit. I had never really understood blogging. It was an unusual word, it seemed nerdy, and I didn’t get its appeal, but I reluctantly stayed—vowing that I would listen but never blog. What I didn’t know was that this session and what I learned that hour from Yahoo!’s Jeremy Zawodny and PhD Amanda Watlington would be pivotal in my life’s trajectory. An interesting convergence of my skills, interests, and new opportunities arose: my computer technology background from Purdue and Northwestern, my inner passion to be the captain of my own ship, my love of writing, and the knowledge that I could launch something online and grow an audience without the help of a large company. Little did I know at the time that attending this blogging session would be the aha moment I needed to launch Tech Cocktail, a tech startup-focused news and events organization, the following spring. The next few years included jobs for large Fortune 500 companies, as well as numerous projects I “started up” during nights and weekends. From building a spam-blog-fighting tool to building a college-targeted social network that never quite got off the ground to even building a gratitude journal community app before finally creating a media company focused on startups and entrepreneurs, I can’t say I’ve taken the path of least resistance. It’s been long, hard, and frustrating but also exciting, gratifying, and fun. I have new gray hairs (or they could be summer blondes) popping up daily that I now attribute to this journey. And along the way, I’ve taken lots of notes. I’ve observed that there are thousands of people with ideas who want to create something but don’t know where to start. At the same time, I’ve observed massive shifts in technology and business that have reduced the costs and other barriers to starting a new venture.

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I’ve noticed that the media has a love affair with successful startup founders and has glamorized tech startups. I’ve also noticed that many of those who are jumping into the startup game have very high expectations and are ill equipped to handle the realities of the journey, which can have devastating consequences. Although I’m still very much on the journey myself—and probably always will be—I’ve learned a lot from my own experiences and those of others. So my goal is to offer a step-by-step guide, filled with my own stories, lessons, and observations, as well as many insights shared with me by fellow startup founders, partners, and industry leaders I’ve met along the way. Whether you’re just out of school and starting to code a feature you think could catch on or have been around the block and need some inspiration or additional knowledge to fuel your endeavor, this book will help you along your own entrepreneurial adventure. No one can do it alone—we all need help and advice. Consider this book part of your extended network, where you can reach in and find nuggets of information whenever you need. Each chapter starts with essential lessons and advice, followed by a section on the harsh reality of starting up. I want you to be as prepared as possible for the challenges of the journey—and it’s a huge challenge. So I’ll share stories about those worst-case scenarios and what-can-gowrong-will-go-wrong situations. I’ve experienced working all-nighters, taking red-eye flights, running out of money, vacation-skipping, bootstrapping, negotiating, hiring and firing employees, and succumbing to stress-induced illness. Although these are real startup life realities, they are seldom discussed. On the bright side, each chapter also has a section on celebrating and enjoying the journey. We’ll cover how to celebrate the startup life and all of your advantages and successes, big and small. I’m a firm believer that the incredible difficulty of starting up is all the more reason to stop, exhale, share, thank, and appreciate all the positive moments along the way.

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The purpose of this book is to inspire and give you an overview of the journey you’re embarking on. If you have questions along the way, we’ve designed an online companion at http://tech.co/book to help guide you and provide more resources and tools. Maybe you’ll be the next [insert today’s most famous startup founder here] or maybe you’ll turn your idea into a product or service that can become a solid business, earning you steady revenue. We all have different goals. My goal is to help you navigate and enjoy the startup journey, staying healthy and optimistic as you pursue your passion. So let’s get started!

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1 Entrepreneurial Mind

Fortune favors the bold. —Virgil

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M

y 10-year journey from college to starting up taught me how to think like an entrepreneur and embrace the startup life, a life that I am firmly planted in and thankful for every day. My story may be different from yours, but you’ll probably recognize some elements and be able to learn from my mistakes and my observations. After growing up in the cornfields of northern Illinois dreaming of a baseball career, I realized in college that it wasn’t meant to be, so I decided to jump into computer technology. My computer technology degree from Purdue University landed me a summer internship my junior year with a consulting company in what was then the Sears Tower in downtown Chicago. I was getting paid $20 an hour for the summer, which at the time was a lot for a college student who looked more like a 15-year-old. The internship turned into a full-time opportunity and I took it. It wasn’t the Chicago Cubs, but the Internet boom was still young and I was close to home and my favorite sports teams. I learned a number of things working at a fast-paced, scrappy technology consulting business. The first was that you don’t have to actually have a product to sell it. We sold work that was not yet created off the idea that we could create it in just a short time. This was a new concept to me and one that has helped me sell our Tech Cocktail vision not based on where we’ve been but on where we’re going. It wasn’t until the spring after September 11, 2001, that I learned the hardest lesson. The company wasn’t doing as well as it previously had, and there was a cash-flow shortage, so they had to lay off nearly the entire team, including me and many of the colleagues I had helped hire. It was a sad day. I remember walking home in the cold Chicago rain. Getting laid off from my first job out of college taught me a very important lesson: there is no security in working for someone else. I had been raised believing that if you go out and work really hard, you can get a good job, build a career, and everything will fall into place. What they don’t tell you is that some of the companies you work for may also

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need to make changes to survive, at your expense. You might not get a shot at building the career you imagined no matter how hard you work. But I still wasn’t a rebel yet, so I went to work for a larger corporation, the Tribune Company, with the sense that it would be more secure. It had been around almost a hundred years, and I had grown up visiting the iconic Tribune Tower across from the Wrigley Building on Michigan Avenue. It was a Chicago media icon. So when I landed a job with the Tribune, I was sure I had found the place I was going to build a career—not to mention, they owned the Chicago Cubs. This meant I could see more Cubs games than ever before. I loved working at the Tribune and walking into the tower every day. It was a dream come true for me. But even though Tribune Company adapted early to get newspapers online, I started to realize that they were not aggressive enough—startups like Yahoo! and AOL were land-grabbing for niche industry news eyeballs online, and companies such as Craigslist and Google devastated the online classified and display advertising space. While still at Tribune, I started my own personal blog called Somewhat Frank to review startups and better understand blogging, and I started to see things that needed improvement in the fast-paced blogosphere. And I was a developer, so I was in an interesting position. I realized I could literally develop a product to solve a problem, launch it via my blog, and acquire new users instantly. So I did just that. At the time, spam blogs, or splogs, were a problem. I noticed that popular entrepreneur, investor, and blogger Mark Cuban, also the owner of the Dallas Mavericks, had been posting in the blogosphere about it. He was hot on the topic of splogs because he had invested in a blog search engine called IceRocket, which was getting infiltrated by spam blogs. Sploggers were churning out thousands of landing pages filled with ads for popular search terms, polluting the Web. When I realized this, I sprang into action. A friend of mine and I spent our nights after work creating a simple product called Splog Reporter, with the mission of helping clean up the blogosphere one

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GETTING STARTED

splog at a time. The term splog hadn’t existed more than a few days earlier, and we had already built a product to help tackle it. It took off! Within days, I started getting interviews and Splog Reporter was covered by the Wall Street Journal, Wired, and a number of other publications— even the Toronto Star picked up the story. Splog Reporter lasted only about three months before we had to pull the plug. I realized that in order to really help IceRocket and other blog search engines clean up their indexes, while creating a sustainable business, I would have to build a comprehensive search engine, which was a bit out of scope for my first venture. It was a good decision, as Google then added their own blog search engine, crushing the competition, as it would have done to Splog Reporter. Although short-lived, Splog Reporter had two pretty big impacts on me. First, I got to connect with Mark Cuban—that was a pretty memorable experience. Being mentioned in the same Wall Street Journal article as him was amazing. Second, Splog Reporter was my own little startup 101 course. It was a huge aha moment for me. I started to see problems as opportunities to build something. I now knew that with my coding abilities, I could launch a product, get users, and make lots of noise. I had a voice. What did I need my day job for, again? Oh, that’s right: to make money to pay my mortgage, student loans, and car payment. But this was when I realized I could do it—I could startup. All these experiences, and a few others I’ll get to, rewired my brain from believing I needed someone else to give me a stable job to being excited about venturing out on my own. I learned that you don’t have to follow the old ways and rules—rules that were making traditional companies struggle. I was finally ready to start Tech Cocktail, which is how I came to write this book and share my stories with all of you. So what lessons can we learn from my story? Let’s dive in and look at what it means to think like an entrepreneur and how to make sure you have the right mind-set to build a startup. Although not everyone is comfortable with the uncertainty or adventure that comes with entrepreneurship—or has the vision it takes to create something

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from nothing—it’s possible to train your brain to be more alert to opportunities, question rules, and constantly be in learning mode. Just being aware of this mode of thinking should help you better understand your own thought patterns and slowly and gradually shift them to the creative but focused, risk-taking but prudent, optimistic but failure-embracing attitude of the entrepreneur.

See Problems as Opportunities Thinking entrepreneurially starts with thinking a little differently. Most people get caught up with self-imposed barriers that blind them to what’s possible. This type of thought might start out with, “I’d like to, but I can’t because … ” Entrepreneurs don’t allow their minds to be shut off by these types of “I’d like to but … ” statements. They understand there may be potential barriers, but they’re able to look past them. They see barriers as adventures, as the beginning of something big, and as the means to make something amazing happen.

Vision I’ve witnessed two types of entrepreneurs: those who love the process of entrepreneurship, no matter the product or service (they just love the challenge), and those with a strong background in a particular field who see a way to improve it. The former is a creator, someone who probably couldn’t fathom the idea of working for someone else and may be a lifelong serial entrepreneur. The latter often has a stronger vision, as this person knows the field better than anyone else and sees something that no one else can. Do you have a strong vision for a better world? The vision that has propelled Tech Cocktail is to help entrepreneurs gain visibility locally and nationally and enjoy their startup life journey. To do that, we provide them with connections, community, and resources (news, reports, events, and more).

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Think Less; Act More The idea of going out and getting started is encapsulated in slogans such as “Just do it,” made popular by Nike. Sayings such as “Get shit done” or “Ready, fire, aim” (also the name of a book by Michael Masterson) have helped make these ideas more mainstream in the startup world. I always like to use “just start” as a battle cry for anyone sitting on the fence about the best time to unleash his or her idea into the world. Saras Sarasvathy, an associate professor at the University of Virginia’s Darden School of Business, has done extensive research into how entrepreneurs’ brains work. She studied 27 entrepreneurs who had companies that had revenues ranging from $200 million to $6.5 billion and had started multiple companies with both successes and failures. She gave them case studies of problems faced by startups and asked them to talk through the problems while being recorded. And she found a major difference in the way entrepreneurs and nonentrepreneurs think. What Sarasvathy observed is that entrepreneurs use effectual reasoning. Entrepreneurs assess the tools that they have, come up with goals on the fly, and keep adapting to new circumstances and new information. In other words, thinking and action happen at the same time. Nonentrepreneurs tend to prefer causal reasoning, kind of a cause-andeffect way of thinking, where they start off with a long-term goal and plot out the best means to achieve it. In essence, nonentrepreneurs think before they act. Although this continues to be the model many parents and educational settings thrust on young minds, entrepreneurs are less likely to follow it.

Always Learning Remaining curious has helped me tremendously throughout the years. If I hadn’t sat in on that important blogging session in New Orleans,

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explored the various blog platforms on my own, and learned about RSS and what it was doing to deliver content to people, it would have been harder for me to understand what this little but disruptive RSS-enabling startup named FeedBurner was doing in Chicago. I never would have met Dick Costolo, Matt Shobe, Steve Olechowski, Rick Klau, Don Loeb, or my Tech Cocktail cofounder Eric Olson. I never would have been introduced to Jen Consalvo, who was at AOL building products that leveraged RSS and working with FeedBurner at the time. She would never have joined me to take on Tech Cocktail full-time. I didn’t know where all these things would lead me. But I let curiosity and serendipity be my guide. Looking back everything looks so logical—like I planned it out that way—but I didn’t. In life and in business, I am a firm believer in lifelong learning and keeping an open mind. In business, you need to take in and learn as much as possible from customers, competitors, and even other industries. At the same time, you need to constantly add on new skills such as leadership, marketing, funding, accounting—everything in this book.

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Dick Costolo In 2003, Dick Costolo cofounded the RSS tool FeedBurner with Eric Lunt, Steve Olechowski, and Matt Shobe. FeedBurner was acquired by Google in 2007, and Costolo went on to spend time there working on ads. He left to become chief operating officer (COO) of Twitter in 2009 and replaced Evan Williams as chief executive officer (CEO) in 2010. Costolo is based in San Francisco.

Jen Consalvo Jen Consalvo is the cofounder and COO of Tech Cocktail. She has worked in product development for more than a decade, leading large and small teams in a range of areas such as digital imaging, community and social platforms, syndication, and personalization. The majority of her career was at AOL, planning and building products used by millions of people globally. Jen also cofounded Shiny Heart Ventures, which developed Thankfulfor, a gratitude journaling community. Jen is an angel investor in the DC group NextGen Angels and author of Love Your Photos: A Simple Guide to Photographic Happiness.

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Risk To startup, you need to be at one with risk. That doesn’t mean being a risk lover. I’m certainly not—but I do have a high tolerance for risk. You have to be okay with being tight on money, time, and resources. There are a few things you can do to minimize risk. Being passionate about the idea actually lowers the risk, because you get more intrinsic value and happiness from working on it. For some people, the real risk is staying in a dead-end job and regretting it later in life. There will always be another great-paying, comfy, 9-to-5 desk job waiting for you if you ever want to quit the startup life. On the business side, entrepreneurs actually minimize risk as much as possible by testing hypotheses and talking to customers. In fact, Sarasvathy identified something she calls the affordable loss principle: entrepreneurs choose courses of action where they can afford to fail, limiting risk. Like the poker player who leaves most of his bankroll at home, they don’t bet the farm on any one uncertain decision.

Rule Breaker I loved coloring books as a kid. However, I didn’t like staying in the lines, preferring to add personal flair to the images and make them my own. In some ways, those were my early rule-breaker startup genes oozing out. Startup founders are rule breakers; they don’t stay in the lines. Look at the commercials for iconic companies, such as Apple, which says, “Think different” and “Here’s to the crazy ones.” These are geared at people who reject rules and the status quo in an effort to change the world—people who won’t be ignored. Entrepreneurs often have trouble working a regular job, and don’t want to take directions from bosses they disagree with. They’re generally stubborn in the sense that they believe their ideas and creations are better than the current options. It takes a little bit of an ego to think this way.

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Entrepreneurs reject the rules about what can and can’t be done; they reject the corporate standards of marketing, public relations (PR), design, work hours, and dress codes. They prefer to be fun, funny, or original; they work whenever they want, wearing whatever they want.

Optimism Optimism is another characteristic trait of entrepreneurs. According to a survey done by Deloitte in October 2013, 82 percent of entrepreneurs thought their business would grow by at least 10 percent in the following year. This is some optimism, given that so many businesses fail. Along those lines, research by Harvard Business School senior lecturer Shikhar Ghosh suggests that 75 percent of venture-funded startups don’t return investors’ money and 30 to 40 percent completely go out of business. With such high failure rates, entrepreneurs have to be optimistic. Although entrepreneurs don’t believe in predicting the future, their optimism tells them that they can create it. This stems from seeing failures as learning experiences: even if they have a failure, they can still keep going. They’re unstoppable because there is always another option. LivingSocial cofounder (and CEO until January 2014) Tim O’Shaughnessy says, “Until you don’t have any more money as a company, there’s always a play … One of the best characteristics of a CEO is [knowing] there’s always a play—people may not see it, but you have the ability to.” How can you cultivate optimism? Michael Buckbee of Optimization Robot

LivingSocial LivingSocial is a daily deals website that offers discounts to consumers based on a group buying model. The DC-based company grew out of a studio called Hungry Machine (launched in 2007), which built apps for Facebook. When they saw that deals could be a huge opportunity, they set aside their other efforts to focus solely on LivingSocial. Today, LivingSocial has raised hundreds of millions of dollars in funding and has more than 60 million members.

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One suggests a trick from Conan O’Brien and improv comedy. He says to act as if what you’re doing is completely normal: meeting big-name investors, huge corporate partners, or high-profile journalists. Just tell yourself it’s normal, like it’s a comedy act. Pretend the obstacles aren’t a big deal—mind over matter. Whenever my COO starts to worry or get consumed by the challenges ahead, she stops and writes down as many positives about the company she can think of. She says it stops the fear in its tracks. You need this optimistic outlook to make it through the ups and downs of the startup journey.

The Harsh Reality Even if you think like an entrepreneur, it doesn’t mean you’re not afraid. Fear can be a great motivator. Chris Sonjeow, cofounder and chief marketing officer (CMO) at LoveBook, calls entrepreneurs confident worriers. NewFoundry CEO Richard Chang says, “Does it scare you? Sarah Evans Good. If you aren’t afraid, then it isn’t Sarah Evans is a “social media challenging enough.” freak,” consulting on social media and media training through her company, Sevans Strategy. She was the creator of #journchat, a weekly, live Twitter chat for public relations professionals, journalists, and bloggers. Evans runs and writes for FAVES + CO., a blog about social and tech news, and is the author of the book [RE]FRAME: Little Inspirations for a Larger Purpose. She also spent a year as chief evangelist at Las Vegas startup Tracky.

Sarah Evans takes this attitude. A PR and social media expert, she decided to create a life mission statement: “I run unabashedly free through this one life without fear. I believe in the unexpected, I believe in abundance.” But that doesn’t mean she doesn’t fear anything. Instead, she uses fear as a compass—telling her to head in that direction, because it will make her a better person. “Fear is also something that can motivate me. As soon as I feel afraid about something, I know

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that I have to do it,” she says, whether that’s move across the country to Vegas, do public speaking, or take on more responsibility. Dina Kaplan, a cofounder of Blip, struggled with crippling fears early on but didn’t realize it. Overwhelmed and overloaded by work, she was afraid to hire employees because she feared she didn’t deserve them and would be a bad manager. Kaplan never invited her entrepreneur friends to hang out, because she feared they didn’t really like her. When Facebook COO Sheryl Sandberg e-mailed her asking to meet up, Kaplan didn’t reply because she worried about wasting Sandberg’s time. This all led to panic attacks, and Kaplan becoming afraid of simply walking down the street.

Dina Kaplan With a background in TV reporting and production, Dina Kaplan cofounded Blip in 2005. As it grew, Blip transformed from a video platform and distributor to a video destination, showcasing the best Web series. Based in New York and Los Angeles, Blip now attracts more than 30 million viewers per month. It was acquired by Maker Studios in 2013. When we last heard from Kaplan, she had gone on a life-changing trip around the world and was contemplating her next move.

But like a true entrepreneur, she learned to conquer her fears. She took time off to travel and forced herself to go scuba diving, zip-lining, and bungee jumping, all activities she was deathly afraid of. And it changed her life. Now, she asks for what she wants. Instead of saying what people want to hear, she is authentic and honest—even with venture capitalists. Every day, Kaplan now asks herself: “What would my life look like if I lived without fear? What would I do if I lived without fear?” In school we are generally taught to be causal thinkers, in Sarasvathy’s words. An MBA program teaches you to have a predetermined goal and figure out the best means to achieve it—for example, deciding on a target market for an advertising campaign. We grow up learning to think like good employees, which includes following the vision of

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others, following rules set by others, repeating the same tasks over and over, and doing more planning to avoid risks. It’s hard to rewire our brains and change the way we think. It took me a decade, so don’t be hard on yourself if you don’t jump off the entrepreneurial diving board upon reading this book. It might take some time to get your wires reset.

Celebrate: Enjoy the Journey As an entrepreneur, I am grateful for every day I have the freedom to create and share ideas that could have a positive effect on the world. I think gratitude is an important part of being a happy entrepreneur. A few years ago, I felt Gary Vaynerchuk so strongly about it that I developed a gratBorn in Belarus, Gary Vayneritude community and application called chuk grew up in Edison, New Thankfulfor (http://thankfulfor.com) with Jersey, and eventually started helping out with his father’s Jen Consalvo, my partner and the COO liquor store. That led to his of Tech Cocktail. The idea was to create creation of WineLibrary.com a simple place to capture and share your and the popular video series gratitude—and in doing so, celebrate the Wine Library TV. In 2009, things you have. It’s a passion-fueled side Vaynerchuk and his brother AJ founded the social media project that helps remind us that no one agency VaynerMedia. The comcan do anything alone. pany has since grown to a team of more than 250 and worked with brands such as GE, Pepsi, and the New York Jets. Based in New York City, Vaynerchuk is an angel investor in startups such as Tumblr, Path, and Uber, and he’s the author of Crush It!, The Thank You Economy, and (most recently) Jab, Jab, Jab, Right Hook.

Entrepreneur Gary Vaynerchuk—CEO of VaynerMedia and author of The Thank You Economy—knows that better than anyone. His life is infused with gratitude for his parents, who brought him from the former Soviet Union to the United States. And his attitude is an inspiration to any of us who forget to be grateful. “People have this entitlement thing—what are

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you going to do for me and then I’ll give you something. I hate that!” he says. “Being an immigrant, you’re not entitled. I didn’t expect anything. We had to claw and scrap for everything, and that’s how I roll now. And even as I’ve become a bigger presence in this space … I’m still so grateful.” The principles of gratitude can apply to your everyday life as well as your entrepreneurial life. One of the ways to enjoy the startup life—despite the roller coaster of challenges and stress—is to remain grateful for its enormous benefits. For example, you don’t have to deal with a bad boss or worry about losing your vacation days. You are in charge of your destiny; you get to experience that feeling of ownership, pride, and potential for growth and huge success. Bo Fishback, the CEO of Zaarly, says, “I can’t even imagine working in a big, slow company right now. Whenever I get too stressed out, I think, ‘What else on earth would I rather be doing?’”

Final Thoughts Whether you’re creating a teleportation device, building an app, or running a new media company—no matter how small or big your project—realize that you’re changing the world. “You become a true architect of life. You get to create ideas, create jobs, find better ways of doing things, so it’s really an enjoyable experience,” says Uassist.ME founder Alfredo Atanacio. And I couldn’t agree with him more.

CONTENTS Acknowledgments

vii

About the Authors

viii

PART ONE

1

Great Storytelling Alone Won’t Save Your Business

00

INTRODUCTION

01

FROM THE CAMPFIRE

3 17

Making Sense of the World through Story

02

YOUR FIRST KISS

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Harnessing the Power of Experience

03

BRAVE NEW WORLDS

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Moving from Storytelling to Storyscaping

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Storyscaping Immersive Experiences for Powerful Brand and Consumer Connections

04

THE STORYSCAPING MODEL

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79

Deciphering the Code to Creating Worlds

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POWER OF WHY

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Unlocking Your Organization’s Purpose for Increased Brand Value

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WALK THE WALK

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Driving the Authentic Brand Behaviors That Fuel Business Growth

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INSIGHT TO DESIRE

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Understanding the Values and Aspirations of the Consumer

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IN THEIR SHOES

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Using Ethnography to Understand Consumer Engagement and Buying Insights

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THE ORGANIZING IDEA

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Inspiring Experiences That Change Behavior and Drive Transactions

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MEET YOUR STORYSCAPE

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When Your Organizing Idea and the Experience Space Soulfully Meet

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WORLDS THAT SELL

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Constructing a Storyscape That Is Sensing and Adaptive

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SHOCK YOUR CULTURE

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Creating an Environment That Is Conducive to Great Storyscaping

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References

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Index

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FROM THE CAMPFIRE Making Sense of the World through Story

Humans have an innate ability to take disparate events and connect them together to create meaning. This is how we understand the workings and threads of the world. A quick peek into prehistoric archaeology reveals that this is how we’ve pretty much always done it. In 2012, a team of archaeologists from the University of Bristol studied 11 subterranean caves located along Spain’s Cantabrian Coast. In one of those caves, El Castillo,1 they discovered the remains of the earliestknown cave paintings.2 They are a million years old. An unrelated archaeological discovery, this one in Wonderwerk Cave in South Africa, has recently unearthed findings of the earliest solid evidence that our ancient human forebears were using fire. That’s right, the first known campfire, which also dates back to a million years ago. From these discoveries, it is surmised that cavemen and cavewomen gathered together seeking to share experiences and to narrate and record their stories as much as they gathered for the physical warmth of the campfire. Today, the early origins of those campfire scenes are often used as the obvious illustration of the history and communal value of storytelling. Although that illustration may be helpful, we believe the caveman himself and the origin of language is the more appropriate example to illustrate the value we humans get from stories. Envision a world before structured language, where grunts, frowns, 19

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PART ONE: Great Storytelling Alone Won’t Save Your Business

and actions that included a hell of a lot of pointing and hand gestures did all the communicating. We can make the guess that back then literally showing someone something was the very best way of explaining it. Please park that concept in your head for now, and we will show you how actions and experiences are also important elements of communication. Before structured language, it was very difficult to express complex thoughts. Even today, it is challenging to string together multiple ideas or even simple concepts without a system or pattern. We use stories as a figurative glue that solidifies a pattern and hardwires it into our brain. Stories are our way of making sense of the world. We relate to places, events, people, objects, and ideas through stories. Religions are powered by stories, wars break out because of stories, and your children are shaped through stories. Just try to make sense of a series of events, or describe something monumental that happened in history, or simply tell us about yourself without leveraging a story. It’s difficult. Stories help us understand and organize just about everything. Why is your favorite place your favorite place? Chances are because there’s a story there. Or what about how your favorite room in an old family house makes you feel transported. Why does that happen? It’s probably because of the pictures in your mind, some might say, the storybook memories you created in that space. How do we choose our friends? Who attracts us? What connection do we make when something makes us feel good? The answer is story. Story is how we connect to place, to space, to people—always serving to help us make sense of the world. From million-year-old campfires to cave paintings to epic Greek odes, we’ve used story for a long time to make sense and sort through this existential miasma of meaning and survival. The Box with 8 Crayons. Back to the basics to formulate a structured

foundation. When creating anything, obviously, step 1 is to start somewhere. If 20

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you’re a business owner just starting out and resources are minimal, stick with the basics and start by building a super-strong foundation from which you can grow and embellish. If you’re a well-oiled marketing machine, it might still be a fun exercise to revisit the basics—for story, “the basics” = structure. Fortunately, all kinds of information on the structure of story has been researched and shared, and it’s just a matter of getting familiar with what already exists and works for plotting a brand’s story. We will briefly review some foundational aspects as seed for when you ramp up for Storyscaping. This is where strategy and Systems Thinking first come into play when creating an engaging story. Let’s review this valuable groundwork. We all know stories are structured. Stories have a plot, settings, characters, and narrative point of view. We often see these patterns even when they are not there. Have you ever intuitively predicted what would happen next in a book or a movie? In storytelling, structure is either something you deliberately design or something that unfolds organically, but it’s always in there. Think of music with a verse, a chorus, and a bridge. Structure in this context does not mean creativity plays a backseat or that your work is formulaic. Think about these structures as building blocks for creativity. You design a structure to highlight the type of story you’re telling. You have choices and creative license with your story and also with the determination of its structure. Structure is where you marry your craft with your art. Think of it as properly laying out the pieces of your model airplane before you glue it, paint it, and send it for flight. British journalist and author Christopher Booker analyzed myths, folktales, literature, films, and a few soap operas for good measure. Seven hundred pages of his thorough study revealed some repeating patterns, patterns

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that distinguished seven basic plots,3 which have been remastered over and over for all of story eternity. Do any of these sound familiar: overcoming the monster, rags to riches, the quest, voyage and return, rebirth, comedy, tragedy? Which plot is structuring your marketing today? Are you selling by way of Beowulf, King Kong, or Aliens, where you have a clearly identifiable evil, or “monster” who poses a threat to a group of people? Is your hero battling the monster, experiencing some losses over the course of action and then ultimately conquering and returning peace to the land? The fact is that some story structures, lend themselves more effectively for connecting brands and consumers and evoking real participation and social currency, similar to some musical structures, which lend themselves more to enticing people to dance. Some stories are more likely to get passed on from person to person and generation to generation. Joseph Campbell, the American mythologist, uncovered that very structure known as the hero’s journey in his work.4 Campbell suggests that, in this structure the audience connects to the hero through values such as community, justice, truth, and self-expression. We actually see ourselves as the hero in these stories. This formula is perfect for creating brand-consumer connections. Two contemporary examples of the hero’s journey formula can be observed and explored in The Wizard of Oz and Star Wars. Both start with an unlikely hero, one who is ordinary and perhaps even helpless. Both Dorothy and Luke want to live out their higher values (they want justice in the world) but feel powerless to do anything about it. Then, through an interesting twist of events, they meet a mentor who gets them to realize that so much more is possible. The mentor gives them a magical gift—a pair of ruby red slippers or a lightsaber—and sends them off on a dangerous quest of self-discovery. During their adventures, which are filled with trials and tribulations, they both meet the

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source of brokenness in their world and they both seize a treasure or knowledge that they come back and utilize to heal society. Through this process, they ultimately learn much about themselves and the world in general. Now, imagine Dorothy or Luke as your customer and the mentor is your brand. Can you see how that could create bonds? The biggest mistake brands make in storytelling is to believe they must play the role of hero. This is just plain arrogant. Your product or service should play the role of those magical ruby slippers. TOMS Shoes is a great real-world brand example. TOMS is a company with a higher Purpose of “helping others in need.”5 Its business is simple; for every product you purchase, TOMS will help a person in need by donating a pair of shoes—you buy one; TOMS give one. The company started with shoes and quickly used this successful hero model to expand. TOMS is now also helping to restore sight by selling eyeglasses. The customer (the hero) and TOMS (the mentor) share a set of values, and the magic lies in the product (gift), which empowers customers to live their values by participating. Does your brand behave like a mentor? Does your company make or offer to give a gift? Whether it’s Neanderthal elbow rubbing or social media socializing, story is central to what it means to be human, and the best stories, the stories with mythic potential, all include a hero within their structure. Even the hero herself is structured: She needs to leave her normal life, face insurmountable obstacles, fall into the abyss of despair, receive supernatural intervention, and eventually return with some transformed aspect or trophy as proof of results of her transformative journey. Finding a way to make your customer the hero can be a scary place for many marketing professionals who were taught to make the brand the hero and the customer the target or “audience.” You can empower your customers by

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making them the hero of your brand’s narrative landscape. This is how you become part of their story—make your customer the hero and frankly, who better to tell your brand story than the hero herself? Step Up to the Big Box of 24 Crayons. Beyond the basic structures,

what’s the next evolutionary leap for story? Well, there are certainly some exciting advances we can use to help bring story to the next level! Following the evolution of J. K. Rowling, the author of the Harry Potter series, from storyteller to Storyscaper serves as a supportive illustration. Although Rowling initially imagined the world of Harry Potter through a series of books (words and pictures), she has successfully taken Harry from the imaginary space to the physical and virtual space. In the world’s eyes she is a great storyteller—in our eyes, she is also a great Storyscaper. To make the transformation, she didn’t have to forget what she knew. Rather J. K. Rowling evolved by partnering with Thierry Coup, Sr. VP of Universal Creative to create the park experience, thereby expanding her palate to include space and environmental design, game design principles, application of sounds, smells, and a ton of creative technology.6 She now colors with many more crayons, the way we all need to. Our desires haven’t changed much from universal story themes. But our methods of expressing a story have far advanced handprints, books, and movies for that matter. So why haven’t all marketers or agencies kept up? Technology has made it possible for us to stretch the tool of “writing a story” into an ability to create immersive experiences and emotional engagements that are unprecedented. It’s not hard. It just takes the right approach, the right model, and the right foundation. Nothing supersedes the human desire for meaningful experience. Our need to express our experience to

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others has simply migrated from cave drawings to tweets and posts. And they are still about the same experience of marking an existence, of expressing a human desire to connect with others via the camaraderie of experience. Taking a photo with your favorite pair of kicks is the most modern version of a cave painting from tens of thousands of years ago. It is the modern method of connecting with global citizens who also know what it is to love that same pair of sneakers. Keep in mind; most narrative is now interactive. Your customers have come a long way since scratching charcoal buffalos on cave walls as a way of expressing themselves. Marketers must refresh their approach; it’s time to move from just creating universal stories to delivering ever-innovative ways of placing consumers at the center of these stories. The most successful marketing groups are reassigning consumers from the role of audience to the role of protagonist. It’s their journey that matters. Let’s face it, everyone connects to story because in essence, we are story—we exist to see and to do and to be known. A story says simply, “I am here. See me.” That’s what is depicted and mythologized in the earliest forms of visual expression—campfire stories offered as cave paintings—the caveman’s way of begging to not be forgotten. You could say, when it comes to stories, there’s just no telling. Oh, we still stand by the inherent value of a thousand-plus years of storytelling as one of the most important and impressionistic tools that we use as marketers to change perceptions and drive behaviors—that has not changed. Take what you’ve learned about story and move forward with it. Advertising needs to advance from just telling a story to affecting the experience or product. When you merely tell a story, you are not making a full connection. Evolve, engage the power of story, and now

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focus it around creating immersive experiences that you share with your consumers and that they’ll want to share with their social circles. Enlist story as your currency for connection, and take it to a much more encompassing dimension: Elevate it using the power of experience. Remember, people are much more likely to remember and share their personal stories than they are to remember or spread yours. Story Is Our Currency. We interviewed some brilliant people for this

book to learn how other successful companies use story as currency. Coca-Cola’s perspective proved particularly enlightening because of how steeped in story it has been for more than 125 years. Coca-Cola is story.7 It is a brand more widely recognized and more widely distributed across the globe than any other. And story is as important to its business today as it has ever been. Some companies have storytelling as a fundamental part of their heritage, and of course, some don’t. Brands need a real Purpose and we often find that Purpose is connected to the great stories of the company. But today, the challenge extends through to how you leverage the power of stories and storytelling to propel your company. At Coca-Cola, you can find one of the world’s most valuable and most extensive branded archives. And for a deeper experience, there is the World of Coca-Cola in Atlanta. New employees start their careers at Coca-Cola by spending time immersed in the stories from the archives. Story, after story, after story reveals how the company was founded, how the company was built in America, how the company was built overseas, and how the company then started to build different brands. Storytelling is a genetic part of the company’s DNA.

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Not all companies stand for a set of “company” stories. Instead, the brands of the parent company have stories. When structured this way, it’s a different challenge because the creative agenda resides in the brands, not the parent. Understanding the relationship between core company stories and core brand stories has had a really dramatic effect on my belief on the power of storytelling. A powerful metaphor I often use when workshopping new ideas is one of the spider plant. If you can fill the central pot, i.e., the company, with great stories, then that will act as a fantastic fertilizer for all the baby plantlets, i.e., the brand stories that the mother plant will birth. —Jonathan Mildenhall, Vice President of Global Advertising Strategy and Creative Excellence, The Coca-Cola Company Within many stories, the Coca-Cola Company has a Purpose or ethos, or a defining story; a powerful platform that translates and filters down into the individual brands. The company’s overarching story and Purpose are very simple. “Coca-Cola is committed to refreshing the world through moments of optimism and happiness, while creating value and making a difference wherever it goes.” Coca-Cola’s is a story of refreshment, happiness, optimism, and value. It’s a strong and focused story, one that then flows into all of the brands. The folks who work with the brands ask questions such as, “Is this brand leaning into happiness? Is this brand leaning into optimism? Is this brand leaning into value? Is this brand leaning into refreshment? Or is this brand leaning into a cultural difference?” Asking these

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questions ensures that there isn’t anything in the Coca-Cola Company that doesn’t start from the company premise. In other words, the company won’t do anything that doesn’t refresh—no snack foods, no chips. Chips aren’t refreshing, but juice and iced tea are. This is how the brand story follows the organizing discipline set by the parent company and then flows across the entire company. If it doesn’t refresh by creating value through optimism and happiness, it’s not being made by the Coca-Cola Company. Today’s consumer looks at a company’s ethos and holds it and its brands to that ethos. This is especially the case now with the expectation and reality of transparency—we have to face facts; people know us beyond what we are saying in our marketing. They know exactly what we’re all doing, how we treat employees, where we get our supplies, along with everything else. So it’s more important to make sure you’re focused not solely on how you communicate the story but also on the way that you behave. Take a moment and assess how well you and your company are addressing the challenge of behaving true to your Purpose. As an example, look at the now long-standing cultural trend that is leaning toward a theme of environmental care. People want to be greener—or be seen as being greener—and they want to leave the world better than how they found it. Have you noticed the many companies that now position their products or services around that idea? Have you questioned whether or not they’re actually behaving that way? Some of them don’t align their behavior. And people notice and then vote with their wallets. Your stories and behaviors need to be aligned and aligned not just with each other but with consumer perception and expectations. Don’t be like an oil company that talks about

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what it’s doing to save the rain forest; it’s hypocritical. Work toward gaining a common connection in business behavior, consumer expectation, and Brand Purpose. Double This and Half That. When a big company plans to double the size

of production, the shareholders are feeling great and seeing dollar signs while the environmentalists get that sinking feeling in their stomachs. Unilever recognized this imbalance. So when Unilever came out with a stated ambition to double the size of its business over the next 10 years, it coupled that with the ambition to also reduce its carbon footprint by 50 percent. One of the ways it’s going to do that is by using biodegradable packaging for all of its products. Consider how much packaging and waste Unilever will eliminate across its entire supply chain—this is a significant effort that will make a positive difference, a real impact. The fact that Unilever immediately put measures in place to ensure a significant reduction of its carbon footprint can be viewed as a system-wide story and system-wide agendasetting plan that satisfies all of its stakeholders.8 And, it all starts with the power of a story on improved business. We believe that really audacious leaders of companies should tell these bold stories to challenge our way of working, whether every chapter has been written yet or not. Such opportunities present possibility when you partner with the right people to fill in the pages. We learned from James Cameron that sometimes you have to tell a story from the technology point forward, versus creating the story and waiting for technology to catch up. He thinks in both directions. Google is a bit like that. Google’s Purpose is to organize the world’s information.9 Is

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there another company that can have as big of an ambition as what Google expresses? It truly takes a great story and technology. Google aims to achieve this worldwide organization by figuring out new ways to code things—how it works will potentially become a great story. And we say “potentially” because sometimes the technology exists but the wrong story is told about it. Presenting the story in a new way is sometimes how it catches on. Perhaps that was the case with Google+. The technology hasn’t really shifted, but the first time Google told the story, it didn’t catch on. But now, after revising the story, Google+ is enjoying solid growth. What is evident here is that you have to artfully connect both the story and the experience—that’s key. We all believe in and live out the power of story each day. That power is turbocharged when infused with the power of experience. And, they go hand in hand—the only way to share a personal experience that you’ve had in your life is to share it through a story. The dictionary definitions of story and storytelling describe a portrayal of a series of events and include experience as an element. Part of our thesis is that this experience element is incredibly powerful and often underleveraged. People are much more likely to remember stories that happened in their own lives than the ones that happen to others (or to brands). The more compelling a story is, the more likely people will connect with it or remember it. We encourage you to ask yourself some pointed questions: How do I, as a marketer, think about the experience element? Is my brand forming an emotional connection? Does my brand, product, or service become part of my consumer’s story? Talk About Ripple Effect. Rarely does a marketing effort start with

an experience. Most often, the expectation is to communicate a message.

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The way most agencies work is from a storytelling perspective versus a storyexperiencing perspective. When you aim for experiential storytelling, it’s easier to turn that into exponential storytelling. The creation of an experience for 100 people and then the subsequent online viewing of that experience by a million people is a highly accessible possibility to just about anyone. This is an increasing trend known as splashes and ripples, and it should be leveraged more. But when you’re looking at your media plan, it’s not from this perspective. Today it could be the splash of an event and the ripple of the response, the content, the reviews, and so on. Looking at the metrics of experiential event marketing doesn’t give us the return or impact of the ripples. Therefore, when trying to optimize your marketing investments, remember that there’s a shifting of value across those things; don’t think solely about what it costs to generate that splash without accounting for the value of those ripples. We challenge you to look to create a splash for great content and then amplify that content around the world. Some splashes live in real-time dialogue for years after the event is over. Nike created a 3-minute production for $20 million to generate splash on YouTube and its Facebook for two days. By all media measures it was not just a splash; it was an atomic bomb that immediately stirred up world sentiment about the World Cup—and Nike wasn’t even an official sponsor. Then there was ongoing dialogue that rippled everywhere because Nike inspired you to be part of it.10 It extended the conversation and ripples right through the tournament. There is more power in starting your story from a little concept that we call the Organizing Idea, an idea that is an active expression meant to inspire experiences, not a brand statement.

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01


A great example is Coca-Cola’s “Open Happiness.” This is an active expression that can drive participation and experience. It connects with people, and these people become part of the story or contribute to it. Let’s do a simple brand marketing comparison to get you thinking about the point we are making here. Take Pepsi’s “Taste of a New Generation” and Coke’s “Open Happiness.” Think about each expression. Where could you take the marketing for each? Does one seem more actionable than the other? Is one easier to relate to, connect to, and engage with? Coca-Cola’s “Open Happiness” marketing platform is more than storytelling; it is storydoing. This is because if you’re going to “open” happiness, you have to actually do something. “Increasingly, consumers expect brands to do more than what is just suggested by the category they’re in. They certainly expect Coca-Cola to do more than just refresh them from an intrinsic point of view. Our commitment to local community programs reflects this. We are champions of female equality and run extensive female entrepreneur initiatives. We proudly distribute HIV and AIDS medicine across Africa. We invest in creating fresh drinking water for kids in the different jungles of Brazil. Teens and mums alike are like, “Yes, we’re going to buy your beverages, but you better be doing lots of things in my local community to make my local community better!”

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01

“I think that’s a mandate for a lot of brands to move from storytelling, however rigorous or inspirational that storytelling is, to actual storydoing, as there is a growing need for brands to occupy positive spaces in different communities around the world.” —Jonathan Mildenhall, Vice President of Global Advertising Strategy and Creative Excellence, The Coca-Cola Company

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Contents

1

2

3

The Evolution of Social Business

1

Creating a Coherent Social Business Strategy Introducing the Seven Success Factors of Social Business Strategy How to Use This Book

3

Laying Foundations: Goals, Vision, and Executive Support

5 7

9

Success Factor #1: Define the Overall Business Goals Identifying Which Goals Matter Exercise: Connect Social Goals to Organizational Goals Tying Social Strategy to Business Goals: The Metric Holy Grail What Happens When Business Goals Aren’t Clear? Success Factor #2: Establish the Long-Term Vision Creating a Vision Statement Exercise: Writing a Vision Statement Success Factor #3: Ensure Executive Support Garnering Executive Engagement Best Practices: Getting Executives Onboard

9 10 12 12 15 16 18 19 21 22 23

Setting the Strategy Roadmap: Identify and Prioritize Initiatives

27

Success Factor #4: Define the Strategy Roadmap Identify Initiatives

27 29 v

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vi | Contents

4

5

Learn: Glean insights from social engagement Dialog: Deepen relationships with conversations Support: Assist people and create a great experience in the process Advocate: Enable the best fans to speak on behalf of the organization Innovate: Tap the energy and ideas of others Prioritize Initiatives Against Capabilities and Value Create a Long-Term Roadmap

38 39 41 43

Aligning the Organization: Establishing Governance

47

Success Factor #5: Establish Governance and Guidelines Defining the CoE Forming a Steering Committee Evolving the CoE into Multiple Hub and Spoke Defining Guidelines and Process Beware the Center of Excellence Pitfalls

47 49 52 53 53 57

Aligning Resources and Technology

59

Success Factor #6: Secure Staff, Resources, and Funding Staffing Education and Best Practice Sharing Funding and the Use of Pilot Programs Success Factor #7: Invest in Technology Platforms That Map to Strategy Plan to Evolve Your Monitoring Platform To Scale, Invest in a Social Media Management System

59 60 61 63

Conclusion Notes Acknowledgments About the Authors

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30 33 36

64 65 66

69 71 73 75

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1

The Evolution of Social Business

I

t’s about time that social media and social business grew up. When we ask people what their social business strategy

looks like, we usually get the following response: “Oh yeah, we’re on Facebook.” The conversation continues apace: • Twitter account: check. • YouTube videos: yup. • Strategic plan: Sure, we’ve got a content calendar for the next six months. • Metrics: Engagement of course, likes, retweets, views. We’re all set. But that isn’t a strategy—it’s a series of tactics masquerading as a master plan. Having a Facebook page or Twitter account is like having a telephone or a printer—they’re tools that need a purpose. What you do within these social channels counts for everything. Not only will they help you meet customer expectations and achieve business goals, but thinking 1

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2 | The Seven Success Factors of Social Business Strategy

about the bigger picture and the overall purpose helps establish a competitive product or service. It is, after all, customer relationships that lie at the center of a coherent business strategy. The same is true for a social business strategy; however, it is not so true with most social media initiatives out there today. To prove it, we studied how businesses were developing social media strategies and whether or not strategists aligned strategies with business goals. The results were a mix of the expected and the surprising. Based on interviews with organizations that are investing in social media at varying levels, we learned that there are notable differences that exist between companies implementing a social media strategy and those that are building a social business. A social media strategy lays out the channels, platforms, and tactics to support publishing, listening, and engagement. We define a social business strategy as: The deep integration of social media and social methodologies into the organization to drive business impact. A successful social business strategy requires alignment with the strategic business goals of an organization and organizational alignment and support that enables execution of that strategy. However, in a survey of social strategists and executives conducted by Altimeter, we found that only 34 percent felt that their social strategy was connected to business outcomes.1 Only 28 percent felt that they had a holistic approach to social media wherein lines of business and business functions work together around common goals. A mere 12 percent were confident they had a plan that looked beyond the next year. And

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The Evolution of Social Business | 3

perhaps most astonishing was the fact that only one half of companies surveyed said that top executives were “informed, engaged and aligned with their companies’ social strategy.” So while the company grows in its social media efforts, strategic focus with a clear goal in mind often falls by the wayside. There’s light at the end of the tunnel, though. We also discovered that the more sophisticated companies possess two important criteria for a successful social business strategy: (1) social media initiatives are clearly aligned with the strategic business goals of the organization, and (2) these companies invested in the organizational alignment and support that enables execution of that strategy.

Creating a Coherent Social Business Strategy This book focuses on how to develop a successful social business strategy that’s both useful and continuous. A fully formed, coherent, and integrated social business strategy doesn’t appear overnight—it develops and evolves over time.2 As with any strategy, your goals will change, the vision will evolve, and the roadmap and detailed execution plans will adjust accordingly. A good place to start is with this question: where are you in this journey and where do you need to go? As you create your social business strategy, put it into the context of where you are on your journey, and make the most of the opportunities to maximize value. Here’s an example. Royal Dutch Shell concentrates its social presence efforts across Facebook, LinkedIn, and Twitter. Its Facebook presence, launched in February 2012, is a core primary channel. Their goal: To showcase the personality

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of Shell in operations, drilling, retail, and careers. The key metric they use is reputation, asking a random population on Facebook—as well as across traditional media channels—two questions: (1) On a scale of 1 to 5, To what extent do you think Shell is actively addressing future energy needs? And (2) To what extent do you think Shell meets its customers’ energy needs in socially and environmentally responsible ways? The company rarely replies or engages with people who post on their page. On the surface, you might dismiss this company as not “getting” social media, because they don’t actively engage in a two-way dialog. But in so many ways, their strategy is far more coherent than that of companies that blindly engage for the sake of engagement. Read that again. Engaging isn’t always a staple in strategies or metrics. It comes down to aligning social media strategies with business objectives and desired activities and outcomes. Shell measures Facebook on a daily basis to see how reputation is trending in its Facebook community, versus other channels, and thus is able to correlate how Facebook content impacts perception of reputation. In this way, Shell is able to connect a measurable key performance indicator (KPI) to a business goal. They can then also determine which channels are more effective at driving their goal of improving reputation and then invest accordingly. Sometimes the best strategy is to look inward rather than outward. Instead of comparing where you are to others, look at the success factors of social business strategy to uniquely focus on your organization’s priorities and aspirations. To describe the essence of the journey, Ford CMO Jim Farley used an analogy: “We’re in the awkward teenage years where we have a strategy but it’s not executed the same way in all parts of the company.”

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Introducing the Seven Success Factors of Social Business Strategy So how can you tell if your social business strategy is successful or failing? It takes more than everyday metrics to show that you’re on the right path. To develop a successful social business roadmap takes benchmarking as well. In addition to the stages a business goes through, we found seven success factors that were common in companies that are seeing business impact from their social strategies. Benchmarking against the following success factors will help you invest in the efforts necessary to evolve social media strategies into meaningful social business transformation. The Seven Success Factors of Social Business Strategy 1. Define the overall business goals. You can’t align your social strategy with your business objectives if you don’t even know what your objectives are. Define and refine. 2. Establish the long-term vision. If you’re not striving toward the end goal, you’re likely to veer off the path. If you want your team to fully invest in your social strategy— and you need the support of your entire team—you’ll need to communicate your vision with clarity and passion. 3. Ensure executive support. In the early days you may be able to fly under the radar, but at some point, if you want to truly have an impact on the business, you’ll need the backing and support of key executives. 4. Define the strategy roadmap. You already know your business objectives and have a clear vision. But how are you going to get there? Plan out your route, what roads you’ll travel, and what roads you’ll avoid.

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5. Establish governance and guidelines. Who is responsible for executing the social strategy? What’s your process for listening and responding to your customers? If you clearly define this process and then stick to it, you’ll spend less time floating along throughout the social sphere and more time strategizing your social growth. 6. Secure staff, resources, and funding. In the early stages of social growth, you might outsource your social media campaign to an agency, and that’s fine. But you should also be looking down the road and planning to develop internal resources to take your company to the next level as your social prowess—and your business—grows. 7. Invest in technology platforms that evolve. Resist the temptation to jump on the latest technology bandwagon before you have a long-term strategic plan in place. Hold off on making significant technology investments until you’re equipped with a sound vision and strategic plan. The organizations we studied didn’t necessarily have each of these success factors fully developed; rather, we found that it was much more important that each factor was aligned with immediate and long-term business goals. We also learned that these success factors aren’t followed in a linear manner; rather, they each coalesce with each other to form a coherent strategy for where that organization is in its social business journey. They are interdependent and often overlap, and they carry different levels of importance depending on the strategy. Essentially, the appropriate design of any of these success factors depends on the others. As you go through this book, review the elements of your social strategy and compare them to the Seven Success

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Factors. Assess alignment and any gaps. Then review business objectives and priorities at the brand or business level as well as within your function. Are your capabilities in line with what you are trying to achieve, or have you bitten off too much and are not realizing the full potential of your efforts? Do you have the organizational governance in place to allow disparate business units to align their social efforts against a common enterprise goal, or is each line of business pulling in separate directions? Moving forward, you will define clear business goals and use them as the foundation for horizontal and vertical social media programs that all point to one common vision.

How to Use This Book This book breaks these seven factors into three phases: The first three factors (Goals, Vision, and Executive Support) are discussed in Chapter Two, as they represent the foundational layer of the social business strategy. In that chapter you will learn how to lay the foundation of your strategy to withstand the buffeting winds of technological change. Chapter Three looks at the crucial strategy roadmap, which lays out what you will do—and just as important, what you won’t do—with your social business strategy. We provide several frameworks to help you identify, prioritize, and lay out a threeyear roadmap. Yes, you read that correctly: a three-year strategy! Chapter Four examines the governance of the social business strategy, which involves aligning the organization and processes around the execution of the strategy roadmap. Chapter Five examines the last two success factors around resources and technology. We provide several data points that

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will allow you to benchmark where you stand vis-à-vis similar organizations. So let’s dig into the details, starting with laying the foundations of your social business strategy with a clear idea of what business goals you want to address.

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[

CONTENTS

]

BUSINESS . . . MEET DESIGN

0

1

3

CONTENTS

4

5

THE DIM LIGHT AT THE END OF THE FUNNEL

2

Funnel Vision: Without Awareness There Can Be No Consideration

The Voice of the Empowered Customer

6

The Cluster Funnel

Are You Experienced?

8

TOTAL RECALL

SORRY, WE’RE CLOSED: HOW TO SURVIVE DIGITAL DARWINISM Disruptive Technology Is a Catalyst for Change, Not the Reason

2

vi

15

There’s a Hero in Every One of Us

23

The Great Myth of Technology

24

55

6

THE ZERO MOMENT OF TRUTH

58

7

THE ULTIMATE MOMENT OF TRUTH

66

8

MEET THE NEW GENERATION OF CUSTOMERS . . . GENERATION C 26 Widening the View from Generation Y to Generation C

31

Different Times Call for Different Measures

33

9

36

10

A New Era of Social Service: Promoting the Experiences of Customers

40

The Broken Link of Social Media Customer Service

44

Connecting the Dots in Social Media to Improve Experiences

54

10

THE JOURNEY OF BUSINESS TRANSFORMATION 18

THE NEW CUSTOMER HIERARCHY

50

47

The Ultimate Moment of Truth

74

OPENING A WINDOW INTO NEW CONSUMERISM

78

Discovery Disrupted

82

Opening the Door to a New Generation of Connected Consumerism

83

Opening the Windows to Digital Influence

85

THE DYNAMIC CUSTOMER JOURNEY

INSIDE THE ELLIPSE: EMBARKING ON THE DYNAMIC CUSTOMER JOURNEY

89

98

Formulation (Stimulus)

104

Precommerce (Zero Moment of Truth)

106

Commerce (First Moment of Truth)

109

Postcommerce (Ultimate Moment of Truth)

112

IV

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11 12

13

IMPROVING THE UMOT TO OPTIMIZE THE ZMOT

THE SIX PILLARS OF SOCIAL COMMERCE: UNDERSTANDING THE PSYCHOLOGY OF ENGAGEMENT

118

15

INNOVATE OR DIE CMOs Are at the Crossroads of Customer Transactions and Engagement

124

161

162 167

Through a Telescope, We Bring the World Closer—Through a Microscope, We See What Was Previously Invisible to the Naked Eye 168

Hear No Evil. See No Evil. Speak No Evil.

128

The A.R.T. of Engagement

129

The Psychology of Social Commerce

130

Heuristic Number 1: Social Proof— Follow the Crowd

Customer Engagement Is Not the Same as Conversations

172

131

Heuristic Number 2: Authority— The Guiding Light

Ten Priorities for Meaningful Business Transformation

176

132

Heuristic Number 3: Scarcity—Less Is More

133

Disruptive Technology and How to Compete for the Future

180

Heuristic Number 4: Liking—Builds Bonds and Trust

134

Heuristic Number 5: Consistency

135

Heuristic Number 6: Reciprocity—Pay It Forward

136

THE IMPORTANCE OF BRAND IN AN ERA OF DIGITAL DARWINISM Branding Is More Important Than Ever Before Brand Empathy: Always Improve Experiences

14

The JUXtaposition of Empathy and Experience

WHY USER EXPERIENCE IS CRITICAL TO CUSTOMER RELATIONSHIPS

16

THE DILEMMA’S INNOVATOR

184

Innovation Is Blindness: Why Innovation Is Fundamental to the Survival of Tomorrow’s Business . . . Today

188

In the Battle against Relevance versus Irrelevance: It’s Survival of the Fitting

191

138 144 146

148

17

THE HERO’S JOURNEY

196

The Task Force, AKA Steering Committee

202

The Stages of Change

208

The Hero’s Journey

209

Stage 1: Inception

210

Stage 2: Tribulation

211

Stage 3: Transformation

212

153

Stage 4: Realization

213

The Experience RedUX

156

Thank You

214

User Experience Becomes the Customer Experience: Principles and Pillars of UX

158

Medium-alism Equals FaUX Engagement

159

NOTES

215

CONTENTS

The CrUX of Engagement Is Intention and Purpose

V

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1

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TOTAL RECALL SORRY, WE’RE CLOSED THE JOURNEY OF BUSINESS TRANSFORMATION MEET THE NEW GENERATION OF CUSTOMERS . . . GENERATION C THE NEW CUSTOMER HIERARCHY THE DIM LIGHT AT THE END OF THE FUNNEL

ER

PT A H C

THE ZERO MOMENT OF TRUTH THE ULTIMATE MOMENT OF TRUTH OPENING A WINDOW INTO NEW CONSUMERISM THE DYNAMIC CUSTOMER JOURNEY INSIDE THE ELLIPSE: EMBARKING ON THE DCJ IMPROVING THE UMOT TO OPTIMIZE THE ZMOT THE SIX PILLARS OF SOCIAL COMMERCE THE IMPORTANCE OF BRAND IN AN ERA OF DIGITAL DARWINISM WHY USER EXPERIENCE IS CRITICAL TO CUSTOMER RELATIONSHIPS INNOVATE OR DIE THE DILEMMA’S INNOVATOR THE HERO’S JOURNEY

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TOTAL RECALL

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Happ i n some ess is n o t h i expe ng yo t r u i e n some ce, it reme thing yo ’s mbe u r. —Os

car L

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evan

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How do we ensure that our customers have an amazing customer experience? An intriguing question. In the 1990 movie Total Recall, Douglas Quaid’s character visits “Rekall,” a company that helps people have experiences they wish they could have by implanting memories. For his vacation Quaid selects his dream experience, a trip to Mars with an added espionage package. During his experience, Quaid is jolted awake carrying the experience back into the real world. It is later discovered that he really is the character he was hoping to become temporarily. Like Quaid, every customer desires a remarkable experience. Why make customers cope with the ordinary? Total Recall echoes the focus of this book and my day-to-day work. While implanting desirable experiences is not necessarily a metaphor for this book, creating real-world “customer experiences” is a critical role businesses must create in a new era of consumerism. The Total Recall moment is waking consumers up to expect more from the businesses they support and the products they purchase. They not only expect better experiences, they believe they are entitled to them. This is an opportunity for your business to create positive experiences. For it is the experience that will become that measure of satisfaction and success.

TOTAL RECALL 5

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[

THE VOICE OF THE EMPOWERED CUSTOMER

]

Through technology, consumers are experiencing a validating and influential form of empowerment. Businesses must recognize that the voice of the customer is now more powerful than ever before. Whether Facebook, Twitter, YouTube, Yelp, review sites, product forums, blogs, or Pinterest, your customers are sharing their experiences on platforms where audiences can find what others are saying about you.

So what? Your customers and prospects will inevitably find the negative experiences others have had. Customers will uncover the one horrendous review rather than the incredible experiences that others have had.

CHAPTER 0

As customers tweet negative experiences, businesses try to respond or address the complaint. The more a company engages, and the more people gain access to social and mobile platforms, interactions accelerate and amplify. Knowing this, companies are spending more money and resources managing their online reputations. Increasingly, businesses are shifting resources until the traditional call center is replicated at social scale. Although that’s inherently a good thing, the downside is that the call center becomes a notable cost center. Perhaps this is just the new cost of doing business. In an era of connected consumerism, to earn customer attention, trust, and loyalty is a cost and an investment in relevance and relationships.

6

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Yet even with the pervasiveness of technology, and increased customer expectations, businesses are making the same mistakes. We are not designing and implementing incredible experiences; rather, we’re marketing, selling, and serving customers.

What are customers to align with if we don’t first define it? What do we want them to be a part of? Now’s the time for an investment in something more than price, performance, or value. The future of business is about creating experiences, products, programs, and processes that evoke splendor and rekindle meaningful and sincere interaction and growth. At the center of this evolution—or (r)evolution—is the experience. And, the experience is everything now.

TOTAL RECALL 7

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[

ARE YOU EXPERIENCED?

]

Yes, it’s time to invest in proactive experiences. If we do not, we will be forever tethered to the unproductive dance that is reacting, responding to, and solving negative experiences in real time, over time. What if I told you that the cost of reacting to experiences is far greater than the cost of proactively defining experiences from the onset? Indeed, companies are investing in reactive engagement. And, for the most part, they can succeed in shifting negative experiences toward positive territory. However, any favorable outcome is weighed against the cost of the initial negative experience—or more importantly, the cost of how that negative experience was shared and how it ultimately impacted others. What’s most startling is that businesses do not measure these numbers today. But that’s about to change. Businesses must invest in defining not only a positive experience, but also a wonderfully shareable experience. Doing so influences others to join the fray while offsetting negative inquiries and the damaging viral effects of shared negative experiences. This is the time to reframe those negative experiences. Pushing a change from responding to negative experiences to proactively creating positive ones is everything. Why? The cost of reacting to negative experiences is completely eclipsed by the upside of creating and nurturing positive experiences at the inception.

CHAPTER 0

To better understand the importance of experience requires that you first acknowledge that you are the very consumer you’re trying to reach. You’re not looking for just any experience, you’re

8

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looking for the experience. Businesses that recognize and adapt to you and people like you will quickly learn how to entice you through shared values and meaningful affinity hooks . . . while never stopping to compete for relevance. Experience is everything. And, businesses must create experiences that mean something. If necessity is the mother of invention, then vision is the father of innovation.

#InnovateorDie

TOTAL RECALL 9

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TOTAL RECALL SORRY, WE’RE CLOSED THE JOURNEY OF BUSINESS TRANSFORMATION MEET THE NEW GENERATION OF CUSTOMERS . . . GENERATION C THE NEW CUSTOMER HIERARCHY THE DIM LIGHT AT THE END OF THE FUNNEL

ER

PT A H C

THE ZERO MOMENT OF TRUTH THE ULTIMATE MOMENT OF TRUTH OPENING A WINDOW INTO NEW CONSUMERISM THE DYNAMIC CUSTOMER JOURNEY INSIDE THE ELLIPSE: EMBARKING ON THE DCJ IMPROVING THE UMOT TO OPTIMIZE THE ZMOT THE SIX PILLARS OF SOCIAL COMMERCE THE IMPORTANCE OF BRAND IN AN ERA OF DIGITAL DARWINISM WHY USER EXPERIENCE IS CRITICAL TO CUSTOMER RELATIONSHIPS INNOVATE OR DIE THE DILEMMA’S INNOVATOR THE HERO’S JOURNEY

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SORRY, WE’RE CLOSED How to Survive Digital Darwinism

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Peop le ne ver l anyt earn hing told, by b e t i h e y hav ng find out f e to them or selve s. —Pa ika D ulo Coe ecide lh s to o, Die

Vero n

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The customer journey is still evolving. How businesses react and ultimately lead the enhancement of relationships is not solely determined by technology.1 To truly get closer to customers takes a culture of customer-centricity, empowerment, and innovation. Saying that we need to get closer to the customer is hardly enough to convince business leaders that the customer revolution they hear about is literally steps away from their office door. I know I’m not saying anything here you don’t already know. The difference is, however, that what started as a groundswell for business transformation from the bottom up has hit a ceiling. To break through it requires that someone (read: you) has to make the case to bring change from the top down. Most executives don’t use social networks or smart phones. Many don’t even read their own email. Many won’t ever read this book. So, trying to convince decision makers that this is a war fought on the battleground of technology is in and of itself fighting a losing battle.

SORRY, WE’RE CLOSED 13

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The future of business isn’t tied to the permeation of Facebook, Twitter, iPhones, and Droids, pins on Pinterest, tablets, or real-time geolocation check-ins. The future of business comes down to relevance and the ability to understand how technology affects decision making and behavior to the point where the recognition of new opportunities and the ability to strategically adapt to them becomes a competitive advantage. But make no mistake: This is as much a technology revolution as it is a series of real-world revolutions that will eventually seize organizations, governments, and businesses.

Change boils down to three things: Listening

2.

Learning

3.

Adapting

CHAPTER 1

1.

14

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[

DISRUPTIVE TECHNOLOGY IS A CATALYST FOR CHANGE, NOT THE REASON

]

Look, I get it. Change is all anyone talks about today and we all know that talk is cheap. We also know that change is inevitable and that it is rarely easy. Among the greatest difficulties associated with change is the ability to recognize that change is needed at a time when we can actually do something about it. All too often, by the time we realize that change is needed and that we must shift to a new way of thinking, it is already too late. Or worse, competitors recognize the need for change before us, and we are by default pushed into a position where our next steps are impulsive or reactive rather than strategic. The volume of emerging technology is both awe-inspiring and overwhelming. As new technology makes its way into everyday life and work flow, devices, applications, and networks, it disrupts the norm and begins to impact behavior. It is this disruptive technology that over time influences how people work, communicate, share, and make decisions.

The question is at what point does emerging technology or new behavior become disruptive?

The time to answer these questions is now.

SORRY, WE’RE CLOSED

And, more importantly, what systems, processes, and protocols are in place that recognize disruption, assess opportunity, and facilitate the testing of new ideas?

15

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In my last book, The End of Business as Usual,2 I introduced the notion of Digital Darwinism, the evolution of consumer behavior when society and technology evolve faster than our ability to adapt. And the reality is that because of the role technology now plays in our lives, we forever compete for survival to effectively fight off Digital Darwinism. Humility is a gift and it’s needed in business now more than ever. Disruption not only faces every business, its effects are already spreading through customer markets and the channels that influence decisions and behavior. A recent advertisement produced by Babson College cited a rather humbling statistic:

“

Over 40 percent of the companies that were at the top of the Fortune 500 in 2000 were no longer there in 2010.

”

As we’re often painfully reminded, history has a way of repeating itself. Forbes published an article in early 2011 that served as a harbinger for the turbulent and transformative times that lie ahead.3 The opening line read,

“

The End is Near: Why 70% of the Fortune 1000 Will Be Replaced in a Few Years.

”

CHAPTER 1

The author cited a study published in the book Built to Change by Edward E. Lawler and Christopher G. Worley. The study found that between 1973 and 1983, 35 percent of the top companies in the Fortune 1000 companies were new to the list. Over the next decade from 1983 to 1993, churn jumped to 45 percent, and then soared again to an astounding 60 percent between 1993 and 2003. If the current trend continues, more than 70 percent of Fortune 1000 companies will turn over from 2003 to 2013. As the author observes, “In other words, over three-fourths of the existing captains of industry will fall from their throne.”

16

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They include: Blockbuster

Hostess

Mervyns

Borders

KB Toys

Pontiac

Compaq

Kodak

Tower Records

CompUSA

LIFE

Woolworths

E.F. Hutton

Merry-Go-Round

This is about the survival of both the fittest and the fitting. It takes more than a presence in new channels to improve customer experiences and relationships. It takes courage. It takes persistence to break through resistance. But, in the end, it’s how you work with your leaders, or how you lead, to move toward an empowered and customer-centric culture that sets in motion real transformation. You have a special path you must follow to set in motion the change that opens the door to improve experiences inside and outside the organization.

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Contents

1 Prepare for the Unpreparable

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2 Skill: Motion—Breaking Out

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3 Skill: Preparation—Anatomy of a Geek Brain

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4 Skill: Divergence—The Garden of Forking Paths

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5 Skill: Commitment—Burning the Ships

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6 Skill: Activation—Church vs. Stadium

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7 Skill: Connection—Needle in a Haystack

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8 Skill: Permeability—Storming the Castle

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9 Skill: Attraction—Magnetic Fields

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10 Unraveling the Double Bind

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Serendipiography

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Acknowledgments

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About the Authors

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Index

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1 Prepare for the Unpreparable ‘‘Luck is merely an illusion, trusted by the ignorant and chased by the foolish.’’ — Timothy Zahn ‘‘I’m a great believer in luck, and I find the harder I work, the more I have of it.’’ — Thomas Jefferson

The audience greeted the young entrepreneur with a hero’s welcome. He walked out onto the stage of the conference hall and looked out into the audience. The applause was deafening. It was the fall of 2005, the last day of the Web 2.0 Summit in San Francisco. Sergey Brin, the 32-year-old cofounder of Google, was making a surprise on-stage appearance with John Battelle, the conference host. Though it’s hard to believe now, in this era of a new wave of Internet success stories such as Facebook, Twitter, Zynga, and Pandora, back in 2005 most of the world still thought of the Internet as a

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financial sinkhole whose moment had permanently passed after the technology stock bubble burst in 2000. The several hundred people at this conference, true believers in the business potential of the Web, knew otherwise. All the proof they needed was standing right there in front of them. Brin, along with his cofounder Larry Page, had started, built, and taken public a company that had managed in just five years to become the greatest engine of wealth creation the world had ever seen. At a time when people were still scoffing at the idea of building a real business on the Internet, Brin and Page had not only done that, but had done it in a way that had made both of them, and several others, billionaires in the process. The audience quickly fell silent as Brin sat down. What would he say? What secrets would he reveal? What would he explain to the audience that would help them emulate or understand his unbelievable achievement? Battelle’s first question cut straight to the heart of the matter: ‘‘What,’’ he asked Brin, ‘‘do you attribute Google’s incredible success to?’’ Brin responded confidently, as if this was just a run-of-the-mill engineering question. ‘‘The number one factor that contributed to our success was luck.’’ Silence from the audience. Was that really his answer? Could that possibly be true? He and Page had just blindly stumbled into their fortune? That didn’t make any sense. Surely it must have been their superior intellect, their foresight, their dedication and perseverance that led to their success. Realizing that his answer begged for an explanation, Brin continued: ‘‘We followed our hearts in terms of research areas, and eventually found we had something pretty useful, and wanted to make an impact with it.’’ This was a strange kind of luck. He wasn’t talking about random interventions or being at the right place at the right time. No, he was talking about motivation, instinct, accidental discoveries, and passion. How was this luck?

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If anybody in the audience was disappointed by that answer, they shouldn’t have been. Brin was not just being humble. He was sharing a crucial insight: that for something to succeed with the kind of scale and speed that Google did, it requires more to happen than any one person, or even a team of people, can ever fully take responsibility for. This insight was central to how Google’s founding team built the company. By crediting his fortunes (and his fortune) to good luck, Brin wasn’t abdicating responsibility for his success. He was acknowledging the creative tension between his personal goals and a world utterly out of his control. Miraculously, Google seemed to have turned this tension into an actual business practice. A practice that changed the world.

Luck Is a Four-Letter Word It’s easy for us to dismiss ‘‘luck’’ as mere superstition. When we hear the word, we’re likely to picture a gambler on a winning streak, sitting on a stool at a Vegas blackjack table, taking another swig from a glass of whiskey. He has an impressive stack of chips on the table in front of him. At his elbows are the envious faces of his fellow players, and in front of him, the impassive face of a dealer preparing to deal the next hand. Our gambler knows in his bones that he is on a lucky streak. His confidence has swelled, it seems as if nothing can stand in his way, and his next move is clear: he’ll double down at his first opportunity. We pity the poor gambler, for we know what he seems to have forgotten: that this is a carefully calibrated game designed to deliver just enough of this intoxicating feeling to keep him playing. And play on he does. By the time the dealer is finished with him, he’ll give up not just his winnings, but dig himself a hole trying to recover his streak. The gambler will continue on, sure that his luck will return, and may end up pawning his wedding ring a few hours later once he hits his credit limit. Looked at through this lens, there is no luck, only probability and human frailty. In fact, the reliability of the casino coming out on top is so complete that it stands as a counter-argument to the existence of luck

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at all. Luck, like the cocktails that lubricate its appearance, is a cleverly crafted mirage, in the form of lotteries, slot machines, and reality TV shows, fodder for the desperate and undereducated. Or we hurl the word ‘‘lucky’’ as a kind of insult at people we look down on. How many of us, upon seeing someone achieve notable success, haven’t said to the person next to us, ‘‘Well, she certainly got lucky.’’ The intimation is that when luck does strike, it is random, without rhyme or reason. What better way to imply that someone didn’t actually deserve their success? But these views of luck detract from just how audacious the idea of luck really is. When we look at luck closely, it is a direct challenge to the logic of modern society. For hundreds of years we have built institutions based on reason and the inexorable advance of our machines. We’ve engineered career paths, industries, schools, markets, and political systems in ways that banish the role of chance brick by brick, rule by rule. The benefits of progress, we’ve been told, are available to everyone with machine-like regularity by dint of hard work and applied learning. Our schools recoil at the suggestion that a student was a success, or that a professor gained tenure, because of luck. Executive boards would never admit that its officers held position by chance. Athletic teams and their fans rarely suggest that their winning records can be boiled down to happy accidents. Each of these, we’re told, is a formal system that produces results, based on individual hard work and well designed processes. Any suggestion otherwise would be heresy. And yet . . .

Stickier Than It Looks There are many popular stories in which luck plays a central role, like the tale of Isaac Newton discovering gravity after being hit by an apple falling from a tree, or Ben Franklin encountering electricity while flying his kite. But most of these are dumbed down, just-so tales. The truth behind most creation myths is almost always more complicated—and more interesting. What follows is one of the most commonly cited examples of luck leading to massive business success: the story of the


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invention of the Post-it note. And yet, even though many know the basic details of how Post-it notes were born, few draw the right conclusions from this luck-drenched story. For those of us looking to get as lucky with our next creation as 3M did, it’s worth re-examining the story in full detail. It was 1968, and a young chemist named Dr. Spence Silver had taken his first job at the Minnesota Mining & Manufacturing Company. He was working as part of a five-person research team trying to develop stronger adhesives for use in aircraft manufacturing. ‘‘Adhesives are not to be confused with your everyday glue,’’ Dr. Silver says. To make glue, you just ‘‘boil animal bones down and make sure it’s something that sticks when it dries.’’ Adhesives, by contrast, require real chemical engineering. They are delicate constructions built on complex molecules called polymers. By changing the structure of a polymer, chemists can affect an adhesive’s qualities like stickiness, elasticity, and durability. Working on his own one afternoon, Dr. Silver experimented with adding more chemical reactant to his polymer recipe than was considered safe. The results were astonishing: his mixture produced tiny bubbles that kept the adhesive from bonding firmly. This was not what he had expected. Before long his experiments led to something very unusual but considered useless by most others. Rather than make a stronger adhesive, as was the goal, he had created one that had ‘‘high tack’’ but ‘‘low peel’’ adhesion, the latter being the measure of how easily it can be removed from items it is stuck to. Put simply, it was a magical adhesive that could be endlessly reused. Silver was proud of his invention and began evangelizing its qualities. His colleagues didn’t care. The adhesive was not relevant to the tasks they were working on. Eventually, Silver managed to convince the New Products lab manager, Dr. Geoff Nicholson, to make a prototype of a permanently sticky bulletin board that would allow papers to be attached and detached easily. But the product concept floundered. No one was interested.

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Silver was frustrated. ‘‘I felt my adhesive was so obviously unique that I began to give seminars throughout the company in the hope I would spark an idea among its product developers,’’ he said. Four long years later, an inventor named Art Fry from the Tape Division Lab attended one of the seminars Silver was still tirelessly delivering. Fry’s job was to propose new product ideas for the Tape Division and build them into businesses—for instance, tape for skis or for sticking books to shelves. But Fry didn’t have an immediate use for Silver’s unique adhesive, so he filed the information away in his brain. Even more months passed. And then one day, while sitting in church choir practice, Fry became frustrated with his hymnal bookmark. It kept falling out, and he would lose his place. At that moment the memory of Silver’s novel adhesive flashed into his mind. The next morning he tracked down Silver to get a sample of the adhesive and used it to make a prototype of a sticky bookmark. After several trials and errors, Fry successfully created a sticky bookmark that could be removed from a page without leaving adhesive behind. It was just what he needed to solve his choir practice problem, but the test users he gave them to just weren’t using them up very fast. It turned out people didn’t need that many bookmarks. As clever as his invention was, Fry needed people to use more of them on a regular basis to justify producing it commercially. The product didn’t appear viable after all. Sometime later, while writing a report, Fry had a question he wanted to set aside for later investigation. Seeing one of his leftover sticky bookmarks on his desk, he cut off a piece, wrote his question on it, and attached it to the front of the report, which he then passed on to his supervisor. ‘‘My supervisor wrote his answer on the same paper, re-stuck it to the front, and returned it to me,’’ Art explains. ‘‘It was a eureka, headflapping moment—I can still feel the excitement. I had my product: a sticky note.’’ He called in his boss, Nicholson, whose backing he would need to turn his idea into a product. The two immediately began to work


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on a prototype together. They needed paper, and the lab next door happened to have yellow scrap paper. They used it to make their first sticky notepads. Early test users were ecstatic. Executives would march through kneedeep snow in the dead of winter to get replacement notepads. The yellow color of the pads, in particular, was a hit. People assumed the color had been selected after much research and retrospectively attached significance to the choice. ‘‘The yellow was chosen to evoke a strong emotional response,’’ they would say, or ‘‘they’re designed to match yellow legal pads.’’ ‘‘To me it was another one of those incredible accidents,’’ says Nicholson. ‘‘It was not thought out; nobody said they’d better be yellow rather than white because they would blend in—it was a pure accident.’’ Accident after accident, through an accumulation of chance and circumstance spanning many people and multiple years, the Post-it Note was born. This $100 million-a-year product line now includes pads in dozens of colors, sizes, and as of 2007, a super-sticky version for more demanding surfaces. Yet there was nothing accidental about the way 3M, as the company is known today, created the conditions for the Post-it Notes—and over 55,000 other products across a range of categories—to emerge and make it to market successfully. Quite the contrary. Dozens of things had to go right inside the organization for the accidents to morph into creative inspiration and from there into business opportunities. 3M has found ways to harness chance occurrences over and over again. The company has, in a very real sense, discovered how to create its own luck.

Good Luck Is Hard Work Google and 3M are by no means the only companies that have figured out that luck is a crucial factor of their mojo, and that they can design their businesses to harness it. Your organization can plan to get lucky just as much as they have. What you’re holding is a manual to help you do just that, a manual for luck: what it is, how it works, and how to put it to work for you.

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Let’s be honest, though: for most of us harnessing luck sounds as bizarre as strategy planning with Tarot cards and palm reading. Yet what we’ve found is that the ability to harness unexpected discoveries is not just an actual practice; it is rather the essential practice for building a business in a time of accelerating, vertigo-inducing change. Making ventures work in a world as interconnected, complex, and unpredictable as ours requires engaging with the full scope of that complexity even though we can’t see, model, or even imagine all that much of it. No matter how smart we are, or how big our idea, the world is always bigger. No matter how many of the possibilities we can see, there will always be factors outside our sight and beyond our control. Many of us live with a daily background terror. We see industries failing, jobs disappearing, populations shifting, governments falling, currencies collapsing. This can’t help but sow confusion and self-doubt, and the idea of putting our fate in the hands of chance may seem like the worst idea for calming jittery nerves and setting ourselves up for success. The good news is that what worked for the characters we’ve met so far—that combination of hard work, personal vision, and unplanned good fortune—can work for you, too. Luck, it turns out, doesn’t just happen by chance. Rather, the best kind of luck—that creative force known as serendipity —is the luck that we attract to ourselves. Because even if we can’t predict it, we can court it and prepare for it, so that we know what to do with it when it shows up. And when it does, thanks to this book, you will know what to do. OK, but wait a minute: who are we, exactly, and what do we know about luck in business? For the past decade we have been in a remarkable position to witness the kinds of practices that power the most innovative companies in the world. We’ve worked with big companies as diverse as Google, Procter & Gamble, Zynga, Facebook, and Walmart, as well as countless startups and mom-and-pop operations. These companies couldn’t be more different in terms of their purposes and their products, but over the years we began to see unmistakable patterns in the companies that


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have successfully adapted to the breakneck pace of change our modern world demands. Much of our insight came to us courtesy of the online service we founded with two other partners in 2007, Get Satisfaction, which has helped almost a hundred thousand organizations increase the role of happy accidents and unplanned information in their everyday operations. It’s a community platform that lets companies of every size engage in open conversations with their customers—something like a Web forum, but one that plugs into all those life-or-death internal business processes that companies depend on. From a simple idea—getting people inside and outside of an organization to talk to each other like human beings—we’ve seen all kinds of age-old assumptions get turned on their heads: customer service has become a new kind of marketing instead of just an after-thesale cost center, organizations now materially benefit from responding and adapting to the needs of individual customers, and openness has become a virtue even in companies that previously thrived on secrecy. Here are some of the amazing things we’ve seen through the eyes of Get Satisfaction customers: •

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Timbuk2, a fashionable messenger bag company, discovered that its customers wanted a diaper bag, and that they could offer one simply by adding a set of accessories from other manufacturers. Tide, the detergent brand, found that the free samples they were giving out at events were often thrown away by people who didn’t want to carry them around. A side-comment from a consumer was overheard by a product manager, giving rise to a redemption code innovation that both saved the company money and spared the landfill. TechSmith, a software maker, collected input about what customers wanted from a new version of their product. One suggestion about the user interface seemed straightforward until other customers responded, exposing surprising counterpoints that caused the company to rethink their entire approach to the product.

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This new openness between companies and customers is a big change. Pundits are talking about how we’re witnessing the rise of something new: the social business. Management consultants are getting paid truckloads of money to present graphs and buzzwords depicting ‘‘radical operational efficiencies,’’ ‘‘friction-free communication,’’ and ‘‘low-cost marketing’’ made possible by these new social tools. But what gets us excited isn’t repackaging tired old business clichés in a fancy new wrapper. Instead, what’s amazing is that truly social businesses are inviting the unexpected to intervene in their everyday functions. These businesses are letting go of much of the control they have traditionally hoarded in order to gain the huge benefits that can arise through chance interactions with their customers. Our goal in founding Get Satisfaction was precisely to help organizations make the transition into a new business environment filled with less certainty but more opportunity. That same year we started Get Satisfaction, we also came across a blog post called ‘‘Luck and the Entrepreneur,’’ by Netscape founder turned rock star venture capitalist Marc Andreessen, a Silicon Valley legend. His post described the work of American neurologist Dr. James H. Austin, who dissects the ins-and-outs of serendipity in his book, Chase, Chance, and Creativity. In the book, Austin recounts his early days as a medical resident accidentally stumbling into the clinical cases that would define his research, through the long and winding path of experimentation in the lab, to India where he forms some of his most important collaborations. Looking back on his career, Austin marvels at the consistent role chance has played throughout his career and proposes a formal model for understanding how luck works. We were deeply impressed with the idea that luck is something that can be broken apart, studied, and perhaps even directed. Andreessen noticed this as well, and he ended his post with a bold statement that has rattled around in our heads ever since: ‘‘I think there is a roadmap to getting luck on our side.’’ This started us down our own path to understanding how these fortuitous accidents come about. What are people doing when they


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make these discoveries that change their lives? Where does the surprise come from, and how does one recognize it when it arrives? Why are some environments more conducive to serendipitous discoveries? In other words, what makes some organizations luckier than others? Our goal was to create a toolkit that would allow any organization to do what 3M or Google does so well—foster the conditions for serendipity to work its magic. We found that by breaking luck down into its component parts, by building on the research and insights of scientists as well as the behaviors of the smartest entrepreneurs we knew, we were able to demystify it. We surprised even ourselves when we uncovered a framework that makes sense of it all. But hold on. Even in explaining our story we’re making it sound like our path to writing this book was linear and intentional. This is the trap we humans often fall into—we all love a good story, after all, even when it isn’t entirely true. (Just ask Ben Franklin.) The reality is that our path from Andreessen’s post to observing the behaviors of so many companies to a coherent insight to an actual framework makes sense only in reverse. In fact, most of this happened as a subconscious background process while we started companies, raised families, and hosted cocktail parties. In retrospect—for instance, when we revisit presentations we made at conferences five years ago—we knew we were on the trail of a big idea, but at the time it looked like something else entirely. We could never have predicted all the unexpected encounters and surprising connections that finally brought us to this place where we now find ourselves sharing our ideas with you. This book is itself, then, a product of serendipity.

Science Gets Lucky As it turns out, we’re in excellent company. Luck isn’t just for search engines and paper products—many if not most of the giant leaps forward in science are rooted in accident and only seem obvious after the fact. You might think that science would be hostile to anything as seemingly impenetrable as luck. ‘‘It is never entirely in fashion to

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mention luck in the same breath as science,’’ as Dr. Austin wrote in his book on the subject. If we can’t measure it or even agree on basic definitions, how can it possibly be science? It may be surprising, then, that luck, this most slippery of ideas, has been treated with great interest and even academic rigor, not just by Dr. Austin but by many of the world’s brightest scientific minds. A 1996 academic survey showed that almost 10 percent of the most cited scholarly articles include serendipity as a factor in discovery. Turns out luck is more measurable and definable than it appears at first. The scientific community’s interest in luck is by no means a new phenomenon. The mother of all ‘‘a-ha!’’ stories is the tale of Archimedes, the Greek physicist who lived three centuries before Christ. His story begins with King Hiero hiring a goldsmith to manufacture a gold crown. The King was pleased with the beautiful crown until his advisors suggested to him that the gold might be impure because it had been diluted with silver. Still, nobody was able to provide proof of the crime. Incensed, the King pleaded with his most trusted sage, Archimedes, to figure out a way to determine whether he had been swindled. Archimedes was in a tough spot. He had to solve the problem definitively or he’d be shamed in the eyes of the court. He spent many hours in contemplation but was simply unable to come up with a workable solution. Eventually he decided to give up the chase for the evening and take a bath. He cleared his head and immersed himself in the tub. As he did so the water began spilling over the edge. This unrelated event spurred his mind to make the critical leap. He jumped out of the tub and began running through his home shouting the phrase that would be forever linked with serendipitous discovery, ‘‘Eureka! Eureka!’’ Thanks to the overflowing tub, Archimedes’s mind was drawn to understand the relationship between relative displacement and specific gravity. He knew at that moment that by measuring the water displaced by equal weights of gold and silver he’d be able to prove whether or not the crown displaced too much water to be pure gold. He brought


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his experiment to the court, where he demonstrated the crime to the approval of all—except, of course, the lying goldsmith. Fast forward a few centuries and we find Joseph Priestley, the discoverer of oxygen, waxing eloquent on the theme: ‘‘More is owing to what we call chance . . . than to any proper design, or preconceived theory in this business.’’ Priestley very well may have had in mind the accidental path that led him to soda water, which he invented in 1767. After moving to Leeds, England, to take a position with the clergy, he noticed the haze rising from the vats of beer at the brewery next to his temporary housing. This was a curious situation, so Priestley devised an experiment: he suspended bowls of water above the vats. When he tasted the water days later he found that it had a delightful effervescence. Indeed, the carbon dioxide released in the fermentation process had infused the water, a process we today call ‘‘carbonation’’ (though it took the business-minded J. J. Schweppe to turn Priestley’s Eureka moment into the business that continues to this day). Chance has always played a significant role in science, but scholarly interest in it exploded in the last hundred years. Its star has risen in tandem with two of the biggest scientific ideas of the twentieth century: quantum physics and modern evolutionary theory. In just the last hundred years we’ve seen the foundations of science upended: since the seventeenth century Newton’s ‘‘celestial clockwork’’ had dominated the imagination of investigators with the idea that they were studying a structured universe that was fundamentally deterministic. It was believed that the entire character of the world could be inferred from Natural Law; truths such as ‘‘an object in motion stays in motion’’ and ‘‘what goes up must come down’’ describe a machine-like universe, a well-oiled contraption of valves, levers, and ball bearings. Quantum physics didn’t exactly contradict this idea, but it added a massive twist. Starting in the 1920s, physicists including Niels Bohr and Werner Heisenberg began to tell us that reality at the smallest level of matter—particles like atoms, electrons, gluons, and neutrinos— operates very differently indeed. They taught us that rather than thinking

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of sub-atomic particles such as electrons as behaving like billiard balls moving from one position to another, we need to think of them as behaving ‘‘probabilistically.’’ An electron is only more or less likely to move from one position to another based on its position and velocity in space. It could, if the mood struck, jump suddenly to another part of the universe. Or it could spawn a doppelganger version of itself and exist in multiple places at once. Probabilities! Uncertainty! It turned out the physical world was not as consistent as we had once thought, and in fact our heretofore reliable Laws of Nature were actually built on a platform of chance. But, in science as well as business, it’s not always easy to buy into the idea of such grand uncertainty as a key component of the way the world functions. Even Albert Einstein, who had contributed to the field of quantum physics, did not like its implications—that the world was not as deterministic as he personally believed it was. ‘‘I, at any rate, am convinced that He [God] does not throw dice,’’ he famously wrote in a letter to a colleague. But the math behind the science worked, and decade after decade the experimental results confirmed the new model, much to Einstein’s chagrin. Meanwhile, a revolution of equal scale was occurring in biology as well. Charles Darwin had already transformed the field with the introduction of natural selection: the idea of ‘‘descent with modifications,’’ the straightforward concept that only those species that survive get the chance to pass down their traits to their offspring. Darwin, though, was haunted until the day he died by a question he could never answer: where did these ‘‘modifications’’ come from? Though evolution became widely accepted by the early twentieth century, biologists still squabbled over how evolution happens. The answers came during the first half of the twentieth century, when Francis Crick and James D. Watson, building on a century’s worth of work regarding the nature of genetic inheritance, cracked the code that was the human genome. It was the discovery of DNA—the means of coding and replicating inherited traits—that brought the answer to light: random mutations in DNA and genetic recombination accounted


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for all the necessary variation in the gene pool. The big surprise of what became known as the ‘‘neo-darwinian synthesis’’ was this: the only known source of biological innovation in life on our planet is chance. Combining the random input of genetic mutation with the sorting process enabled by natural selection creates evolution. You could say, stretching the definition just a bit, that this is serendipity by another name. It appears as if luck is embedded deep, both within our genes and in the fabric of the universe.

Spinning a Rattleback in Rotterdam Until now we’ve used the words luck and serendipity almost interchangeably, but not just anything can be called serendipity. It’s this peculiar sub-species of luck that we’re really interested in. Serendipity is a coined word, made up out of whole cloth in 1754 by the English wit Horace Walpole. The word has exploded in popularity only in the last fifty years or so, and still has no translation in many other languages. Its sudden ubiquity is stunning; there were a mere 135 mentions in print before 1958, but by 2000 the word had appeared in the titles of fifty-seven books, was the name of a 2001 major motion picture starring John Cusack, appeared in 13,000 news articles, and produced 23 million Google search results. Facebook’s CEO Mark Zuckerberg announced in 2011 that his social network was being designed to enable ‘‘real-time serendipity.’’ Still, most people are confused about what the word actually means. It has been used to describe everything from ‘‘a witty writing style’’ to ‘‘destiny with a sense of humor,’’ and the word famously appeared, without explanation, on the cover of a women’s underwear catalog in 1992. In fact, the definition of ‘‘serendipity’’ has been consuming scholars ever since the word was invented. This presents a challenge for those of us looking to better plan our own serendipity, as it’s only with a sturdy and concise definition of this concept that we can hope to understand what makes it work. That’s where Pek van Andel comes in. Van Andel is a medical researcher at the University of Groningen, two hours outside of Amsterdam, but the title he prefers these days is

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‘‘serendipitologist.’’ He’s also completely, madly, in love with the word serendipity. He’s become famous for his epic collection of thousands of examples of the phenomenon, and his personal history is a living example of the word. In 1992 Van Andel and his colleague Jan Worst won a Dutch Innovation Prize for the invention of a low-cost artificial cornea, making eyesight a possibility for millions of low-income cornea-blind people throughout the world. A few years later he made headlines for his groundbreaking research on sexuality, having visualized human intercourse through live MRI scans. The idea for the project came about by chance after he stumbled upon MRI scans of a singing human larynx. Afterwards, the YouTube video of the not-safe-to-watch-at-work MRI scan was seen by over a million people, and received an international award (the Ig Nobel Prize) for ‘‘research that makes people laugh and then think.’’ With a disarming smile, bushy mad scientist eyebrows, and lengthy hair suggesting an artist’s temperament, he is just what you would imagine a serendipitologist to look like, wry humor etched deeply into his face. Listening to Van Andel talk about his work suggests there may be another reason why scientists are so willing to embrace the role of chance. Science is a madcap endeavor, littered with wacky personalities whose obsessions and unconventional paths are the stuff of legend: Tycho Brahe’s gold prosthetic nose and pet moose, Gregor Mendel’s obsession with peas, Richard Feynman’s safe-cracking, Stephen Hawking’s scientific wagers. The best scientists treasure the unexpected because it’s a natural extension of their idiosyncrasies. Van Andel is no exception. Thor got a chance to experience Van Andel’s passion for the subject of serendipity in person while visiting Rotterdam, The Netherlands, for a conference, where Van Andel shared with him the story of how Horace Walpole originally coined the term. Walpole based the word on a Persian fairy tale, The Three Princes of Serendip, referencing it in one of his eighteen hundred letters to his friend, the diplomat Horace Mann. Mann had given Walpole a portrait of a duchess, and Walpole


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had stumbled upon her family’s coat of arms in a book. In describing his delight at his finding, Walpole wrote: This discovery indeed is almost of that kind which I call serendipity, a very expressive word . . . I once read a silly fairy tale, called The Three Princes of Serendip: as their highness travelled, they were always making discoveries, by accidents & sagacity, of things which they were not in quest of [emphasis ours] . . . No discovery of a thing you are looking for comes under this description. Walpole’s new word captured the spirit of the phenomenon brilliantly. Pek van Andel suggests the succinct modern definition is ‘‘the art of making an unsought finding.’’ Or as the old saw goes, ‘‘looking for a needle in a haystack and coming out with the farmer’s daughter.’’ What becomes clear when you spend some time with Pek van Andel is the depth of thinking on the phenomenon of serendipity that has occurred over the last hundred years—it’s verging on a proper discipline. It’s been exhaustively picked apart and analyzed by sociologists, mathematicians, inventors, creativity gurus, and everyone in between. Van Andel believes fervently in the importance of understanding the role serendipity plays in the world, and when he travels across Europe to give master classes on the subject he often carries with him a suitcase full of books as physical proof of the righteousness of his cause. During Thor’s visit, Van Andel opened his case up for Thor to see, pulling out book after book, each one a treatise on the role of accident in the creative process: French philosophers, German epistemologists, mathematicians and linguists, among others (a full list of his suitcase books is listed in the notes). Several times Van Andel paused to crack one of these well-worn books and point out an underlined quote, usually in a language Thor couldn’t read. He was like a wizard in a sacred order with his magical scrolls, the dog-eared secrets of serendipity ready at his fingertips. With his prized books stacked in small towers scattered across the table, Van Andel announced he would now share the physical

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embodiment of serendipity: the ancient ‘‘Rattleback’’ Celtic Stone. ‘‘I can explain serendipity to a person without saying a single word by showing them this stone,’’ he said, removing a small wooden box from his bag. Nestled inside was a surfboard-shaped plastic form, flat on one side, curved on the other. With a mischievous grin he placed the Rattleback on the table, curved side down and flicked it into a spin with his index finger. Around and around it glided, eventually slowing towards a stop, when it suddenly reversed itself, accelerating its spin in the opposite direction! ‘‘It’s much like a boomerang, you see. But it must have been discovered by accident. It had to—nobody would have spun the stone expecting this to occur. Someone thousands of years ago discovered what seemed like a magic stone, and then they turned it into this toy. We’re still playing with it thousands of years later. You can buy them on eBay.’’

Serendipity at Work In all those books Van Andel carries with him, however, there are few that tackle the thorny subject of the role of serendipity in organizations. The scholarly literature on serendipity is overwhelmingly focused on the experience of the individual creative mind. While it’s true that businesses are made up of many different individual minds, anyone who has been employed in one can tell you the sum total of all those people working in concert is an entirely different beast—one that doesn’t often place much value on making room for chance. It’s the rare organization that goes out of its way to open up space for serendipity, and yet, in business as in science, the big breakthroughs and mammoth successes always contain a significant element of luck. Consider our Post-it creation story. So many things had to go right for 3M to bring Post-it Notes to market, over the course of many, many years. How many companies would have tolerated that level of uncertainty for that long? Not only that, 3M had to create an environment that allowed researchers to follow their instincts, even when they led away from corporate expectations. It had to abide intellectual wild


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goose chases, even when they seemed distracting or pointless. It had to encourage unplanned interactions between employees from different areas of the organization, often with varying goals and without knowing where, exactly, those encounters would lead. Management had to provide air cover when someone thought they’d discovered the ‘‘next big thing,’’ so that their invention wouldn’t get prematurely snuffed out before its value was fully understood, and the company needed a highly improvisational relationship with potential users in order to eventually discover the best possible use for the product. One place in the business landscape we can look to in order to better understand how to embrace the kind of uncertainty that 3M embedded into its organization is the world of technology startups. At companies like our own Get Satisfaction and many other startups, the important leaps of discovery, though unplanned and surprising, are anything but random—they are the result of consistent focus, a sense of purpose, and just enough of the right kind of structure to fertilize the appearance of chance. Founders of early stage startups tend to be naturals at many of these practices. It’s the price of admission in an environment where, with a little luck, you might get the opportunity to invent an entirely new market. Speaking from our own experience, we know that startup founders begin with only an idea (or ten) and then use their raw instincts as a guide, relying on imagination and agility to tease a new business into its earliest shape. Startup founders don’t know exactly how their product will work, or where (or even if) it will find a huge market. Their companies don’t start out with formal sales and HR processes. Instead, they work tirelessly to attract initial customers and skilled employees by shamelessly networking and by talking the ears off anybody who will listen. They build business habits that not only accept the unknowns surrounding their business but learn to use them to their advantage. The uncertain environment becomes a spur to work harder and keep going. But even with a startup, this often changes as the business grows up. Success means scale, and scale means adding layers of business processes that allow us to expand the number of employees and

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customers. We strategize with twelve-month plans and start reading books about ‘‘managing innovation.’’ Hierarchy and process replace agility and intuition. All of these things are designed to help grow a sustainable business—and they may work. But they alienate us from the skills that got us into the game in the first place.

Bringing Lucky Back It’s a classic conundrum: the things that make us successful are the things that get stripped away once we’ve made it. It’s the rare company that manages to maintain these habits of luck as the organization scales. And yet as we’ve seen with 3M and Google (and will see many more times throughout this book), it’s exactly this embrace of chance, especially as a business grows, that creates the conditions for companies to maximize their opportunities for success. This is where Get Lucky comes to the rescue. We’re bringing lucky back. Small company or large, it doesn’t matter: we will show you discrete skills you can develop to re-introduce serendipity into your work life. We call our approach ‘‘planned serendipity.’’ It’s a set of concrete, attainable business skills that cultivate the conditions for chance encounters to generate new opportunities. Planned serendipity also provides you with the ability to recognize and put these opportunities to good use by showing you how to create and maintain the kinds of work environments, cultural attitudes, and business relationships that value and reward serendipitous occurrences. To explain how planned serendipity works, we need to start with our own simple definition of serendipity, which we’ll use from this point forward: serendipity is chance interacting with creativity. Here’s what it means: although we all recognize that chance is, by definition, inherently unpredictable, our actions—which embody our creativity, our ability to create something new and valuable that didn’t exist before—can have a massive impact on what’s possible. Spence Silver’s adhesive never would have become Post-it Notes had he not spent years scattering his discovery across the company. The actions


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he took, and his willingness to explore creative possibilities and make connections beyond those that were obvious to everyone else around him, increased the likelihood that he would serendipitously stumble onto something that worked—and he did. Chance is highly sensitive to the actions we take. Spence Silver was a natural practitioner of planned serendipity. So was Sergey Brin, the cofounder of Google. So was Archimedes. And so are many others about whom you’ve ever thought ‘‘Wow, that person sure is lucky.’’ Each of these individuals practiced a specific set of skills that maximized the likelihood that good things would happen to them (and, by extension, to their businesses). We have identified eight such skills, each of which represents a different facet of how luck works. Each skill will contribute to making your life luckier, and taken together they bring new meaning to the phrase ‘‘You lucky bastard.’’ Every skill gets its own chapter in this book, but first let’s take a brief tour of all of them.

Skill 1: Motion Motion is the most basic element of planned serendipity. To move is to shake things up, to break out of your routine, to find ways to consistently meet new people and run into new ideas. Motion does not discriminate based on experience, IQ, or educational background—it simply rewards energetic, spontaneous action. But it’s not always so simple: we organize our lives and businesses to be orderly, measured, and respectful of others’ spaces to a fault. We encourage immobility in our environments, making free movement far too rare.

Skill 2: Preparation Preparation is the ability to link together seemingly unconnected events, information, and people. Each of us is naturally capable of doing this to a greater or lesser degree, but the structures and roles we’ve grown up with—from the requirement to declare a major in college to the ubiquitous organizational chart that governs the daily interactions in most companies—have encouraged us to compartmentalize

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everything. Understanding preparation can have a massive impact on how organizations model, hire, and develop roles, employees, and teams.

Skill 3: Divergence Divergence is the ability to recognize and explore alternative paths spurred by chance encounters, some of which may challenge our current thinking. It is the natural domain of scenario planners and futurists, and for people and organizations that have mastered divergence it is a means of sustained innovation. As a certain poet once pointed out, taking the road less traveled often makes all the difference.

Skill 4: Commitment Commitment is the ability to choose, from among the ever-widening set of options in front of us, the right ones to focus on. When we commit, we reveal ourselves publicly in the pursuit of our goals, and by exposing a strong point of view we transform the environment around us. We create awareness of our intentions in others, which often stirs up latent desires in them as well. By connecting our inner world to everything happening outside of it, we explode the likelihood of new and unexpected combinations of events and opportunities.

Skill 5: Activation To managers it seems obvious that high performance comes from keeping the team ‘‘on task,’’ and while this approach enforces focus, it also results in a loss of spontaneity. The way to balance these competing priorities is, somewhat paradoxically, to develop new constraints that release people from their rote behaviors. Activation is about designing experiences that foster serendipity—friendly impulses in our day-today lives and work situations. The best organizations are able to develop an institutional ‘‘muscle memory’’ that makes it more likely they’ll notice and act on the unexpected.


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Skill 6: Connection The network age presents us with limitless opportunities to connect with the world at large in entirely unplanned, unexpected ways. The ability to optimize the number and quality of connections with others is one of the strongest factors in amplifying the opportunities for serendipity to happen early and often.

Skill 7: Permeability The best way to adapt to a world of accelerating change is to replace the rigid walls most organizations put up to keep themselves separate from the outside world with something more like a semi-permeable membrane. To do so, we need to develop techniques and tools that allow for the free exchange of information as well as the development of meaningful relationships between employees inside and customers and partners outside of the company. It’s not just designated representatives who should be part of this exchange. For serendipity to happen frequently, everyone inside the organization should be part of this open, ongoing conversation.

Skill 8: Attraction Some people have the ability to attract serendipity to themselves. Unexpectedly, good things erupt around them at an uncommon rate. These are individuals who have mastered attraction, bringing to bear the full set of skills described above to project their purpose out into the world in a way guaranteed to draw the best and most valuable events, people, ideas, and opportunities towards them.

Understanding these eight skills will help us to think differently about many assumptions we take for granted in business. There’s often a giant gap between the free spirits that thrive in the absence of

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structure and the planners who crave it. These eight skills offer a way to bridge this gap.

Caught in a Double Bind A word of caution before we dive in. If it’s true that through the practice of planned serendipity we can directly increase the role of serendipity in our endeavors, then the opposite is equally true. We can develop attitudes and behaviors that smother it—and smother it we often do, with fervor. As we’ve already begun to demonstrate, the normal function of most businesses is designed to squelch serendipity, not to encourage it. There’s a simple reason: companies are structured to deliver predictability and reduce risk. It’s an almost pathological compulsion of businesses to excise the role of chance from their routine operations, whether through quarterly revenue commitments, management by objectives, value chain engineering, or a thousand other things. We simply do not want to be surprised. It threatens our jobs and our market position, and what’s worse, it upsets our comforting (and often delusional) sense of control. When we add into this mix a mandate to foster serendipity, to be creative in ways that expose control as a myth, we find ourselves ensnared in a trap. It’s called ‘‘the double bind’’ and it hovers over every one of these skills as you seek to develop them. It’s a trap we saw unfold on a grand scale just a few years ago, on the occasion of the fortieth anniversary celebration of the Republic of Singapore. Singapore is the tiny city-state that floats, like the dot on an exclamation point, off the southern tip of Malaysia. The ruling political party, the People’s Action Party, had led its country to hyper-efficiency and growth, and had governed unchallenged since the country’s founding in 1965. For its fortieth anniversary, the party now rallied its five million citizens with a wide-ranging new ad campaign to promote the country’s achievements: ‘‘The future is ours to make.’’ There was a great deal to celebrate—in the previous four decades they had created one of the indisputable economic miracles of Southeast Asia, with the nation’s gross domestic product (GDP) growing an average of over 7.5 percent


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every year. The young city-state was admired around the world not just for its commercial gains, but for its low crime, clean streets, and high-tech infrastructure. Singapore was equally well-known for its draconian rule, with strict speech policies on what its citizens could or could not do and say and severe punishment for disobedience. The author William Gibson once described the country as ‘‘Disneyland with the Death Penalty’’ in a 1993 article for WIRED. ‘‘You come to suspect that the reason you see so few actual police,’’ he wrote, ‘‘is that people here all have ‘the policeman inside.’ Conformity here is the prime directive, and the fuzzier brands of creativity are in extremely short supply.’’ It was therefore widely noted when Singapore launched a campaign that included a message, which was, essentially, ‘‘Be Spontaneous!’’ Indeed, by 2004 the government had recognized the limits that such strict social controls were placing on the nation’s potential and was making changes to encourage a cultural vibrancy to match its famed efficiency. The prime minister announced without irony, ‘‘If we are to encourage a derring-do society, we must allow some risk-taking and a little excitement,’’ adding, somewhat amusingly, ‘‘So changed is our mind-set that we will even allow reverse bungee jumping.’’ The New York Times duly noted that the country’s infamous ban on chewing gum would be ‘‘relaxed for people with medical prescriptions.’’ However, forty years of authoritarian rule leaves a deep mark on a society. The embedded response of Singapore’s citizens was, as always, to obey. Except that in this case the imperative, to follow their impulses, ran directly against the grain of every other constraint imposed by their obsessively ordered culture. The two messages—be spontaneous, but make sure you don’t do anything unexpected or out of line—couldn’t be more contradictory. This is a classic double bind. The double bind is a term often used by psychologists and systems thinkers to describe this particular kind of crazy-making scenario. An authority makes two demands, one of which contradicts the other, on two different logical levels. Whichever instruction the victim follows, the other instruction becomes impossible. Making matters worse, the

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victim is usually unable to communicate the dilemma. They often aren’t aware that it exists at all, just that they are overtaken by a profound uneasiness. We see echoes of this dysfunction in many of the companies we’ve worked within. As employees we are expected to be candid but then are chastised for being impolitic. We’re told to be authentic but are chided for being frivolous. We’re encouraged to ‘‘think outside the box’’ but are held to aggressive schedules and narrow business requirements. Singapore may yet escape its double bind. Six years after the ‘‘be spontaneous’’ campaign, a new Singapore—one with more personality, verve, and, yes, even a bit of spontaneity—is emerging. The prime minister’s progressive policies have helped, but what is really making it a reality is a new generation that thinks differently about their choices and the range of what’s available to them. No longer constrained by the need to conform completely, the younger generation of Singaporeans looks into the world and sees a broader set of opportunities than their parents’ generation was able to imagine. A decade ago prospects were poor for an eclectic fashion designer in Singapore, but today that’s changed. Jo Soh, 35, started a label called Hansel that has not only thrived but gone international. ‘‘When I’m 60 and look back on this time, I will see that I was part of a pioneering group that helped to change society,’’ he says. Evidence of this cultural thaw is appearing all over the city. Psychologists believe this is the way to untie a double bind: we have to change the basic rules under which we function and replace the logic that created the dilemma in the first place. First, by acknowledging it, putting names to the contradictory messages that form the straitjacket and creating conscious awareness of it, then by embracing a new way of thinking that resolves the conflict. Planned serendipity serves just this purpose for us. Taken literally, it is a contradiction, of course. It is impossible to plan something that, by definition, is unplannable. Yet organizations are planning machines. The only way for them to embrace the unexpected is to find a space for it within these plans. In the chapters that follow we’ll see how this seeming paradox opens up a middle path, so that we no longer have to choose between lame predictability and chaos. Planned serendipity


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gives you and your business a way to actively, methodically engage the unknown. Loving the unknown is the key, because if we want to succeed in today’s frantically paced business environment, none of us has any choice but to face up to the uncertainties that lurk around every corner. And while we stand on the shoulders of giants in our endeavor to unlock the mechanics of chance—renowned businessmen, philosophers, scientists, inventors, and artists all make appearances on the pages of this book—it is more than anything a product of the hyper-accelerated Internet-era marketplace that surrounds us. In a world that changes as quickly as ours now does, where the pace of this change only seems to increase and where so much of what we need is as unpredictable as it is critical to our success, luck is the best ally we have.

Foreword by Jeff Dachis

SOCIAL BUSINESS BY DESIGN transformative social media strategies for the connected company

DION HINCHCLIFFE PETER KIM DACHIS GROUP

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Foreword by Jeff Dachis Introduction PART ONE

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Adapting Organizations to the Twenty-First Century

Social Media: Drivers of Global Business Opportunity

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Social Media: A Way of Life, a Way of Business

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Who’s Winning in Social Business, and Why

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The Global Business Transition to Social Media

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How Business Will Make the Transition

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The Techniques of Social Business

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Crowdsourcing: Community-Powered Workforces

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Social Customer Relationship Management and Customer Communities: Social Customer Care

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10 Social Business Ecosystems: Engaging with Business Partners

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11 Workforce Engagement: Creating a Connected Company Using Social Business 127 12 Social Business Supporting Capabilities PART THREE

Social Business Design and Strategy

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13 Identifying Priorities and Planning

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14 Building Blocks: The Elements of Social Business

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15 Business Cases, Pilots, Return on Investment, and Value: Tying Them Together 185 16 Building a Social Business Strategy: The Outputs

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17 Getting Started with Social Business

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18 Maturity: The Social Business Unit

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Epilogue Appendix: The Ten Tenets of Social Business Notes Acknowledgments About the Authors Index

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Everything that can be social will be. I firmly believe that’s the mantra of twenty-first-century business and the key concept that we must all internalize to achieve our best possible futures. Operating our businesses through a social lens presents a profound new way of thinking. Some of you will know that this trend is something now called social business. Most companies are taking steps toward social business, some slowly and some more rapidly. Yet virtually all organizations today need a way to make the changes on their own terms, in a way that gives them a safe path forward that ensures success. Social Business by Design offers you that guided route forward, step by step. When I cofounded Razorfish as the first major digital agency back in the 1990s, it quickly became clear to me that dramatic change was difficult for large companies; it’s never easy taking the first move toward a fundamentally new, better way of working, thinking, and living. Fortunately, the case for why and how to effectively adopt social business is definitively and compellingly explored in these pages by my industry colleagues, as well as friends and coworkers, Dion Hinchcliffe and Peter Kim. I’ve seen both of them grapple with the enormity of the task that lies ahead of virtually all organizations

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today: to connect business clients with the whole of the developed world using social media, engage deeply with customers and partners in potent new—yet unfamiliar—ways, and innovate and cocreate a more effective way of working that’s not just novel but more satisfying, richer, and, yes, profitable for all concerned. Uncertain economic times can have a chilling effect on innovation and the readiness for the bold moves required to lead an industry in this century. Many companies also have a hard time making the leap to new digital business models. For every SAP, IBM, or Amazon, a hundred companies are struggling in the shadows. But the writing is on the wall. I can read it clearly as a CEO, as can most of my peers in organizations large and small around the world: as you read this, the way we run our organizations is in the midst of changing dramatically. The implications for social business transformation are writ large. Customer engagement is moving from relatively isolated market transactions to deeply connected and sustained social relationships. This basic change in how we do business will make an impact on just about everything we do. It affects where sustainable creativity and ingenuity are sourced. It defines how productive and rewarding results are created in the form of break-out new products, services, and operational constructs. And for the CxO in all of us, it also means that we now possess major new ways of driving growth, revenue, and margin. Distributed technologies operating in an open ecosystem and placed in the hands of constituents can be leveraged to create and capitalize on emergent outcomes. It’s clear to me that social media have moved far beyond a means of staying in touch with old friends and colleagues. They have become how business gets done. They have also created a highly competitive weapon in the arsenal of those who want to achieve dramatically better marketing, sales, customer service, product development, and worker productivity. The comprehensive vision that Dion and Pete lay out in this book explains exactly why organizations need to

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commit to the path of social business in order to survive and thrive in the very different conditions of this new millennium. In these pages, you’ll see how successful companies go outside their comfort zones to embrace new consumer methods of social media and social networking, enabling them to accomplish business objectives in revolutionary new ways that are much more scalable, efficient, and robust than in the past. Some of these featured companies are the most respected names in their industry, and others are disrupting industries and starting their own rise. Yet these stories will also be your stories, and it’s how you’ll get there too: by a process of deliberate, intentional transformation. For our part, Dachis Group believes strongly in the full-strength vision of social business as the way that organizations will work now and in the future. I invite you, after reading Social Business by Design, to continue your explorations of this topic in our Social Business Council and track your organization’s progress as it makes the transformation to the twenty-first century using our Social Business Index, our strategic online service that helps companies measure how effective their business is at being social. It can be found at http://socialbusinessindex.com. These are very exciting times indeed, for organizations that are prepared to build the road ahead.

Jeff Dachis Austin, Texas February 2012

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sk just about anyone today about social media, and they will probably acknowledge using Facebook, knowing something about Twitter, and admit that social media are a widespread, perhaps even global, trend. Push them a bit further, and they will affirm that social media are genuinely significant somehow, but they might have a hard time pinning down exactly how or why. If you probe deeper yet and ask them if or how social media will transform the way businesses work, most people won’t have a clear answer at all. This is entirely understandable, given that the digital world has virtually remade the means and tools of digital communication in just a few years. Keeping track of changes and catching up to the pace of change has been hard for even the most dogged marketing manager, product engineer, customer care lead, information technology manager, or C-level executive. As a recipe for making operations rather difficult for businesses to effectively engage their customers, workers, and the broader market in the new digital landscape, it’s almost perfect. Fortunately, it no longer has to be this way. As the understanding of the changes in our pervasively networked, digital world grows, we believe that organizations can, by design, make their way into the

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future by incorporating the powerful new ways of working that social media represent deeply into the primary functions of their business. The shift to social media is happening all around us every day. A broad demographic change in the way that people connect and communicate, as well as work and live together, began in the mid-2000s. The change has been labeled with many names: social networking, Enterprise 2.0, crowdsourcing, customer community, social marketing, and any of the other catchphrases that we explore in this book. Because of social media’s different way of getting results, the exact nature of changes that they cause in businesses, organizations, government, and even our personal lives has sometimes been hard to pin down. However, they can be much more precisely and elegantly defined than even a couple of years ago. What’s more, the key operating principles of social media can be synthesized into simple, easy-to-understand tenets to apply to work. These tenets are presented here for the first time. In this book, we show exactly why and how organizations must change to survive. Among the many reasons are better financial performance, improved competitive positioning, and long-term sustainability. But accepting the importance of social media is no longer an act of faith: we lay out clear evidence in the chapters that follow that social media are not only transformational to most aspects of enterprises, but also truly better, higher-performing new ways of doing business. In Parts One and Two, we present cutting-edge data matched with eye-opening examples that show how social media, when applied to the way we work, are becoming something known as ‘‘social business.’’ There is occasionally concern in some quarters that social media are technology-driven phenomena and that primarily technologyoriented companies are best at adopting the new digital ways of working. The evidence here shows that this worry is overblown: virtually all organizations can access the benefits of social business, and although some of the early examples we present here are from technology companies that blazed trails, many of the best examples come from those that are as far from the technology industry as can

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be imagined such as consumer packaged goods company Procter & Gamble and MillerCoors, the well-known beverage conglomerate. What then do organizations need to understand in order to begin the process of becoming a social business by design? We think it’s a clear understanding of the basic ideas, distilled in a way that’s eminently understandable. Distributed across the first ten chapters are the clearest declaration yet of what social business fundamentally consists of, collected and organized here as ten core tenets of social business. Studying, understanding, and absorbing these ideas, designed to be approachable by anyone in the business world, free from tools, technologies, or situation, must be the objective of anyone who intends to deeply understand the subject and drive social business transformation in their organization.

GETTING TO SOCIAL BUSINESS We have been fortunate enough to have seen and helped many organizations start down the road of social business, and the journey certainly can be long and arduous. Yet it’s also often highly rewarding. The biggest obstacle is the encouragement and realization of real change. The hard-won lesson is that becoming a social business requires cultural, operational, and technology changes. Of the three, the first two are by far the most time-consuming and challenging to realize, although all three require sustained, conscientious effort. Yet the examples in this book make clear that the same set of strategic changes needs to be made by all companies, even as organizations often discover they already have dozens—and sometimes hundreds—of individual social media efforts, large and small, each trying to drive the same type of transformation. Many organizations have begun centralizing their efforts, organizing at a high level around many of the thorniest and most difficult aspects, while allowing everyone in the organization to become a social businessperson. Parts One and Two of this book lay out the strongest possible case that organizations must begin the process of

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moving to social business; Part Three then explores how to make it happen functionally and throughout the enterprise. Getting to social business is a deliberate, conscious process—at least for now. It’s also the core idea behind this book. More and more businesses want to get there, but encouraging and enabling is really all they can do. The rest is up to the universe of participants, and that’s where the story gets most interesting. Organizations that want to take the shortest route to becoming social businesses can arm themselves with the data, examples, and approaches we present in this book, which are distilled in an actionable way as never before. We hope that your social business will become a highly successful organization that you codesign with the world.

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