Corporate strategy and board optimization

Organizations excel when they connect their business, brand, and marketing strategies. Doing so increases internal efficiency and creates a scalable foundation for future growth.
 

 
I’ve been fleshing out this idea for several years as a series of concepts and practical exercises, starting with my original post “Three kinds of strategy” (2012), up to the most recent one “Brand marketing vs. performance marketing” (2017). I’ve explored each of these three circles from left to right—from business vision to full-funnel marketing analytics.

But this simple picture I’ve been painting is incomplete. Today, I want to complicate it slightly, by adding a new thought, and, for the first time, a fourth circle: corporate strategy.

What is corporate strategy?

Corporate strategy might at first seem like the same thing as business strategy, but they are different. In 2012 Ken Favaro wrote a helpful article in strategy+business that distinguishes clearly between the two. Business strategy deals with external market opportunity, while corporate strategy deals with organizational structure and operations. According to Favaro, the two essential questions of corporate strategy are: (1) What businesses should we be in? and (2) How organizationally do we add value to those businesses?

In other words, business strategy might get you an iPod, but corporate strategy gets you tight supply chain controls, a long-term plan for minimizing taxes, and an R&D engine that can produce regular hit products over time.

At first, corporate strategy is dependent on business strategy. For example, Apple creates a breakthrough product and then perfects an operational model to do so repeatably for years. Or a startup founder with a bright idea seeks VC investment, and those investor expectations thereafter dictate the speed and priorities of the business. Or a nonprofit sets a BHAG and then fleshes out the operational imperatives to achieve that goal.

Over time, however, corporate strategy tends to become its own machine, leading the organization into either complacency or else new territories, new questions, and new visions for the future.

There’s a wealth of publicly available information about corporate strategy, including many business magazines like s+b that target enterprise executives and management consultants, and startup blogs that discuss COO hiring, financing round do’s-and-don’ts, and board composition. I don’t want to repeat what others have said and said well.

I do want to point out that corporate strategy looks and feels different depending on the size and nature of the organization. At enterprise scale, corporate strategy tends to be a front-and-center, well-understood concern. It structures daily conversations, investments, and projects. There’s a system-level methodology that GMs, COOs, and CFOs can use to evolve the corporate strategy, working up, down, and across business units. Anand Sanwal, founder of CB Insights, writes about this in his book Optimizing Corporate Portfolio Management. Favaro notes this too:

“For most large, complex companies, the questions of corporate strategy… are relevant at multiple levels, not just for the company overall. For example, a division with multiple businesses (consider consumer banking at Citi or GE’s industrials group) represents more of a corporate portfolio than a single business unit. In fact, most divisions, segments, groups, and even business units can be thought of as having a portfolio of smaller businesses within them, thus making the questions of both corporate and business strategy relevant to their strategies.”

 
Below enterprise scale, the questions that Favaro associates with corporate strategy are still important, but I find they often get insufficient attention. The phrase “corporate strategy” for obvious reasons can seem abstract or irrelevant to SMBs, nonprofits, and young startups. At these smaller levels of scale, the line between business and corporate strategy can blur, and as a result, core questions about operational models and organizational design might never get asked. Or they might get asked once and then never again.

I’ve found that one trick to make corporate strategy more immediately relevant and intuitive to smaller organizations is to conflate it with “the board” as an entity—i.e., to make corporate strategy and board optimization the same topic. Admittedly, this is simplistic and imprecise: as I’ve already said, it would not be accurate for a multi-national corporation.

But at any organization larger than a sole proprietorship, the board determines, instantiates, or is a highly involved participant in setting the corporate strategy. Smaller organizations might not think about “corporate strategy” day to day, if at all, but they do work with and think a lot about their board.

In any case:

If we want to unlock human energy in pursuit of our defined opportunity—if we want to find the organizational and operational model that best facilitates, supports, and extends our business strategy—we have to think about the board.

Maximizing board health

Art Kleiner has written what to me is the most useful book for understanding board dynamics. His book Who Really Matters: The Core Group Theory of Power, Privilege, and Success punctures the illusion that corporations are customer-centric:

“‘The customer comes first’ is one of the three great lies of the modern corporation. The other two are: ‘We make decisions on behalf of our shareholders’ and ‘Employees are our most important asset.’ Government agencies have their own equivalent lies: ‘We are here to serve the public interest.’ Nonprofits, associations, and labor unions have theirs: ‘Above all else, we represent the needs of our members.’” (Kleiner, Who Really Matters)

 
Who really does come first is what Kleiner calls the Core Group, which can vary by organization and is often hiding in plain sight. Ultimately, it will make its presence known and felt on the board, via who makes decisions and, more importantly, “all the people whom decision makers keep in mind.” These phantom influencers might include the CEO, funders, founders, family members, emeritus executives, personal mentors, or a default culture that’s implicitly biased against anyone with a different background or point of view.

I’ve seen many flavors of board dysfunction, and some prevalent ones are worth listing. (I may do so in a later article.) When I think of board optimization, however, I’m usually not thinking of horror stories, but of the everyday, unavoidable ways that all human groups get bogged down. I agree with Kleiner that there’s always a Core Group, invisibly pulling the organization away from what it says and ostensibly intends. Why is this so?

The short answer: human nature. In his wonderful and occasionally heady book The Ecology of Attention, Yves Citton writes that “we never have the means to pay enough attention” and so we end up paying attention to what preoccupies others. We pay attention to what others in the group pay attention to, reacting to and in the context of other people’s priorities, in an endless feedback loop. Attention, in other words, is “an essentially collective phenomenon: ‘I’ am only attentive to what we pay attention to collectively.”

In a similar, if geekier, vein he writes:

“The intra-cerebral attention nanoeconomy, modelled in terms of zones, synapses, nerve impulses and neurotransmitters, only makes any sense if it is re-situated within the microeconomy of small groups in which we develop on a daily basis (family, office, business) and the macroeconomy of great media flows which take up and captivate our consciousness.”

 
We are always in groups, but in groups, we can neither see straight or think straight: group reality starts to supplant and obscure other realities. We may consciously be aware of this (or not), but either way, the intra-organizational conflicts that lead to gridlock and inefficiency, once established, tend to be undiscussable and their undiscussability is undiscussable. This dynamic will be all-too-familiar to anyone who has grown up in an alcoholic household, where gaslighting, codependence, and denial are the norm. The Core Group that pulls the strings often functions within an organization like an addiction.

Often, boards and executive teams will bring in a consultant to surface or root out these dysfunctions. Unsurprisingly, I believe this is a sound approach. Objectivity, baseline intelligence, and what Venkat Rao calls “a missing or dismantled sacredness module” are required to shed light on and expand what the organization can pay attention to.

Granted, being a consultant who shines a light on the undiscussable is a tricky role. Each current team member wants to keep her or his job, prestige, or in-group status. An outsider is threatening. Any consultant who comes on too strong runs the risk of being demonized, like the Witch in Into the Woods who sings “I’m not good, I’m not nice, I’m just right” before leaving the tribe in despair. You can be right, or you can be in a relationship, as they say.

By highlighting issues related to group dynamics, a consultant also risks coming across like the older fish in the following parable told by David Foster Wallace:

“There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, ‘Morning, boys. How’s the water?’ And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, ‘What the hell is water?'”

Thinking outside-in

When I work with boards, my objective as a consultant is usually to get the team working on the task of aligning corporate and business strategy, rather than serving the interests of the Core Group. This work can involve ego confrontation, humility, and tough conversations, and sometimes but not always, it takes time.

One helpful fact is that when I work with an organization, it by definition already exists. Unlike a startup founder, I’m not trying to make something—I’m trying to make something better. So my first step is always evaluation.

One way to evaluate what the corporate strategy should be is to look at it through the lens of the business strategy—in other words, to start with the vision. All human organizations are moving consciously or subconsciously towards their goals. Making those goals concrete, visual, and measurable can unlock appropriate thinking, and new thinking, about how best to achieve them.

Another approach is to look at the organization from the outside-in. If we wanted to extend our four-circles diagram a bit further, we might show corporate strategy taking place in the context of dynamic external trends:


 
Some of these trends are industry-specific. Board members and senior staff are often recruited for their expertise within said industries, which can be invaluable. The legal, technical, and operational quirks of healthcare, manufacturing, and fintech (for example) are complicated and not learned overnight. Know-who in most industries trumps know-how, and it can take an entire career to build the right connections.

That said, organizations can easily over-value expertise within their own industry, at the expense of understanding cross-industry and cross-sector trends. A dangerous yet inevitable problem as organizations disrupt themselves and challenge new categories is that the team can get attached to outdated ways of looking at things, not noticing that the corporate strategy needs to evolve. For example:

  • We used to be a school, but now we’re in the education business.
  • We used to sell hardware, but now we’re in the software business.
  • We used to run a TV network, but now we’re in the media business.
  • We used to be a bricks-and-mortar retailer, but now we’re an omnichannel retailer.
  • Etc.


 
Successful organizations find that thinking horizontally (across industries and sectors) as well as vertically (within industries) is practically useful, and increasingly so. Benedict Evans noted in passing in one of his recent newsletters that B2B and B2C business models have hybridized in recent years:

“L’Oréal bought Modiface, an AR beauty app. Lots of consumer brands that don’t actually have a consumer relationship (effectively, they’re B2B companies selling only at wholesale) thinking about how they can talk directly to their customers.”

 
Likewise, the so-called FAGA monopolies of Facebook, Amazon, Google and Apple are all B2B2C businesses, spanning multiple industries. Much of my own experience involves working with companies that are inherently B2B2C, so I tend to notice commonalities and overlaps more than differences.

Here are some current mega-trends that, depending on your situation, may directly inform corporate strategy:

All topics for future posts.

Notes:

[1] At a few points in his book, Kleiner recommends visualizing how fiefdoms and individuals on the board can form alliances with each other, or with departments and individuals on the staff, or with external stakeholders, leading to a set of inter-locking cliques that makes efficient progress against the vision impossible. This kind of visualization exercise is very useful: I recommend it.

[2] The ordering of corporate and business strategy in my diagram is debatable because as I’ve noted, it’s contextual: at different phases of growth, one kind of strategy might lead the other, and then switch. I err towards putting it at the front of the queue because it illustrates how corporate strategy can either influence or constrain vision—literally what we pay attention to. Also, asking the question “what kind of business should we be in?” often precedes identifying our unique opportunity within that competitive space. If my abstraction is admittedly crude or a bit flawed, it nevertheless can provoke effective and important conversations, which ultimately, with all frameworks and metaphors, is as good as it gets.


One Hundred Years

One of my favorite books about history is Jacques Barzun’s From Dawn to Decadence: From 1500 to the Present: Five Hundred Years of Western Culture Life. It’s an impressive career summation, published in 2001 when Barzun was in his nineties. I love how he looks telescopically at broad historical trends, while also zooming into the messy details of specific times and places along the way.

In the past two years, the long decline that Barzun observed has accelerated into a great unraveling of Western institutions—a breakdown marked by destructive monetary policy, increasing class conflict and geopolitical tension, rapid technological change, and ecological collapse.

It’s a time filled with grief and fear. My personal attitude towards the future, however, is cautiously if willfully optimistic. Here are some works I’ve read or seen recently that inspire me, by clarifying the journey of Western culture over the last century, and suggesting new possibilities for where we might go next. Like Barzun, these works are all studious and curious: together and separately, they tell a textured and useful story.

A comment about structure

In Literary Criticism: A Concise Political History, Joseph North writes:

[T]he term “postmodernism” no longer answers clearly to present concerns, and the 1960s, for all that they have continued to attract the enthusiasms of a generation, have come to seem merely the prelude to a much more significant crisis, best symbolized by the terminal crisis of Keynesianism in the 1970s and the subsequent turn to global neoliberalism in the 1980s. Thus nowadays thinkers addressing the history of the twentieth century more often tend to break it into three periods: a first period stretching from somewhere around 1914 or 1917 through to the Great Depression of the 1930s—a period continually haunted by the specter of an end to liberalism, riven and confused by the Revolution in Russian, the stock market crash of 1929, and the two world wars; a second, more stable period most easily discernible from 1945 to the early 1970s, but with clear roots stretching back to the New Deal and politics of the 1930s—a period in which forces of labor and those of capital reached a Keynesian or welfare-statist compromise not unrelated to the ideological pressure of the Cold War; then a decade of crisis in the 1970s leading into a third or neoliberal era, clearest in its outlines from the late 1970s/early 1980s through to somewhere in or around 2008—after which, a further crisis, still to be resolved. Naturally there is much disagreement about the details.”

 
I agree with and adopt North’s three-part periodization below, slowing down to spend extra time on the most recent years of 2016 and 2017.

Part 1: Prelude to WWII (1917 – 1945)

In his new historical novel October: The Story of the Russian Revolution, China Miéville drops us into the visceral and bewildering present of 1917 Russia, covering the whiplash changes, vigorous protests, and strange-bedfellow alliances as they played out day by day, committee meeting by committee meeting. These political and social convulsions strongly resemble what we see happening right now in the US Congress, in the UK, and across the EU.

Looking ahead a few years, in his simply-titled Modernism, Michael Levenson charts the rise of the modernist movement from the early- to mid- 20th century, connecting the dots between artistic experimentation, class conflict, and the rise of fascism.

Another recent Miéville novel dramatizes this modernist movement right as it ends. The Last Days of New Paris takes place in a counter-factual, Nazi-occupied Paris of 1950, where the detonation of a surrealist bomb has brought to life the major works of surrealist art and also opened the gates to hell. Here’s a sample passage that I find deliciously vulgar and strange:

“In the shadows and the mud of the Île aux Cygnes, human hands crawl under spider shells. A congregation of Seine sharks thrash up dirty froth below the Pont de Grenelle. Rolling and rising, they eye him as he approaches and bite at the bobbing corpse of a horse. In front of each dorsal fin, each shark is hollow-backed, with a canoe seat.”

 
If Last Days of New Paris doesn’t succeed as brilliantly as Miéville’s very best work—a high standard—it does succeed in restoring the context and concerns that made surrealism seem a worthwhile aesthetic project, even a necessary one.

The Michael Haneke film The White Ribbon, set in rural Germany in the 1910s, also implicates the viewer in the mess of history, reminding us that the bombs, real and figurative, that explode and break historical continuity are often manufactured and lit many years in advance.

Part 2: WWII and its aftermath (1945 – 1980)

A second timely and disturbing work that looks awry at the Holocaust is the short, oblique novel Badenheim 1939 by Aharon Appelfeld. This year, I finally read Appelfeld’s engaging memoir A Story of a Life, which describes his experiences as an orphan during the war and his later emigration to Israel, where he slowly recovered from trauma and became a writer.

The pre- and post- war years in general are times of great migration. Works that reflect on this diaspora, and its unexpected consequences, include Steve Silberman’s NeuroTribes: The Legacy of Autism and the Future of Neurodiversity, which follows psychologists and researchers like Bruno Bettelheim who fled the Third Reich, and Alex Ross’s The Rest is Noise: Listening to the 20th Century, which includes juicy anecdotes like the following:

“One day in 1948 or 1949, the Brentwood Country Mart, a shopping complex in an upscale neighborhood of Los Angeles, California, was the scene of a slight disturbance that carried overtones of the most spectacular upheaval in twentieth-century music. Marta Feuchtwanger, wife of the émigré novelist Lion Feuchtwanger, was examining grapefruit in the produce section when she heard a voice shouting in German from the far end of the aisle. She looked up to see Arnold Schoenberg, the pioneer of atonal music and the codifier of twelve-tone composition, bearing down on her, with his bald pate and burning eyes. Decades later, in conversation with the writer Lawrence Weschler, Feuchtwanger could recall every detail of the encounter, including the weight of the grapefruit in her hand. “Lies, Frau Marta, lies!” Schoenberg was yelling. “You have to know, I never had syphilis!”

 
As a somewhat-sequel to Ross’s book, I recommend the documentary Broadway Musicals: A Jewish Legacy, exploring how famous émigrés like Irving Berlin and Kurt Weil settled in the US and had a major influence on American popular culture during and after the war. Continuing the story even further, Hava Nagila (The Movie) travels to unexpected places—including Midwest synagogues and Israeli kibbutzim—and recovers unexpected moments, like Connie Francis recording the top-selling version of “Hava Nagila” and Harry Belafonte singing the Jewish anthem on-stage in post-war Berlin.

In a century of outsiders, Art Kleiner’s The Age of Heretics, which I’ve written about previously, charts how figures outside the mainstream shaped American business and the field of management consulting in the decades after the war. Fred Turner picks up some of these same threads, and continues to make new sense of the post-War years, first with his From Counterculture to Cyberculture, and recently with the heady The Democratic Surround: Multimedia and American Liberalism from World War II to the Psychedelic Sixties.

The Warmth of Other Suns by Isabel Wilkerson portrays African-American migration during this period against a backdrop of stark institutional racism, as does the widely-circulated Ta-Nehisi Coates essay The Case for Reparations. James Baldwin, in his classic The Fire Next Time, his later writings, and the recent Raoul Peck documentary I Am Not Your Negro, also raises questions about slavery and racism that fifty years later have not been answered.

Part 3: Neoliberalism (1980 – 2016)

To see the neoliberal period with fresh eyes, I found Joseph North’s previously-mentioned Literary Criticism: A Concise Political History particularly useful. Like the filmmaker Adam Curtis in HyperNormalisation 2016 (another excellent work), North sees the rise of progressive “identity politics” in the late 20th and early 21st century as floundering before, and in some ways contributing to, an ascendant conservative ideology. Additional works about this era that I have read recently and found valuable include the Alan Hollinghurst novel The Line of Beauty, set in Thatcher’s Britain, and Wayne Koestenbaum’s collection of essays My 1980s, both of which deal with the gay urban male culture of the time, before and during the initial AIDS crisis.

The Price of Privilege by Madeline Levine, When Society Becomes an Addict by Anne Wilson Schaef, and Our Kids by Robert Putnam expose the costs to those on either side of a growing divide in socio-economic status during these decades—what Ta-Nehesi Coates with different emphasis in Between the World and Me depicts as the gulf between the white American “Dream” and the reality of black bodies. The documentaries 13th and OJ: Made in America portray the still-present, and in some ways intensifying, racism in the US during the period, while Requiem for the American Dream describes an accelerating plutocratic, conservative take-over of American institutions.

Which brings us almost all the way to the present.

Today: The Great Unraveling (2016)

The year 2016 felt for many liberal, white collar workers like The End of the World, if not the cosmic event, then at least like the Archibald MacLeish poem of that title:

Quite unexpectedly as Vasserot
The armless ambidextrian was lighting
A match between his great and second toe
And Ralph the Lion was engaged in biting
The neck of Madame Sossman while the drum
Pointed, and Teeny was about to cough
In waltz-time swinging Jocko by the thumb —
Quite unexpectedly the top blew off.

And there, there overhead, there, there, hung over
Those thousands of white faces, those dazed eyes,
There in the starless dark, the poise, the hover,
There with vast wings across the cancelled skies,
There in the sudden blackness, the black pall
Of nothing, nothing, nothing — nothing at all.

 

The time before the US election in retrospect feels like MacLeish’s circus before the tent blew off. Popular culture both reflected and missed what was to come. The unexpectedly-brilliant, and now instantly-dated, season 19 of South Park displayed the deep contradictions, moral corruption, and superficiality within the liberal left. The justly-praised musical Hamilton kept a flame alive for a progressive, inclusive, endlessly-mutating American experiment, while subsumed in the non-trivial irony that to some extent, only robots and economic elites could afford the tickets see it.

In the business world, Anil Dash railed against the fake markets of so-called disruptors like Uber, who rode decades of politically leftist tech optimism… into business models that decimate local government taxes and working class job security. In “The Rise of the Thought Leader,” David Sessions railed against the country’s collective willingness to follow bilionaire gurus into subservience and solipsism. These two essays came out in 2017 but reflect the groupthink and reality-distorting illusions of the years immediately prior.

I think the two big news stories of 2016, Brexit and the election of Donald Trump, are both terrible outcomes. At the same time, I accept that a renewed focus on the nation-state and perhaps the city-state is a helpful and necessary corrective to the decimating effects of hyperglobalization in the neoliberal era. Dani Rodrik makes the point in The Globalization Paradox: Democracy and the Future of the World Economy that we can successfully combine the nation-state, democracy, and tightly integrated international economies—but only ever two of the three. The utopian solution of a democratic world government with one shared economy is likely unrealistic, and probably not even desirable, given that in a global democracy, minority countries and groups would continue to be victims of larger players. Continuing this argument, the concise and astute analysis Thomas Piketty’s Capital in the Twenty-First Century: An Introduction by Stephan Kaufmann and Ingo Stutzle incisively looks at this famous book’s thesis, its initial reception in 2016, and the various dismissable and substantive arguments made against it.

History takes unexpected twists and turns. Fred Turner, in his two books and in a recent interview, describes how fears about totalitarianism after WWII led intellectuals, artists, and politicians to create a diverse, “democratic” media environment… that was embraced by the youth of the 1960s… who fueled the personal computing and later Web revolution… which in turn gave rise to today’s juggernaut online platforms… which ironically contributed to the rise of an authoritarian candidate and later president.

Tomorrow: What’s gonna happen? (2017)

And now, we arrive at the slow-motion present, where like Russia in October 1917, the changes come daily, the priorities shift on a dime, and the future is uncertain. Should we be fighting for universal basic income, worrying about the North Korean nuclear threat, saving Planned Parenthood, throwing all energy into the 2018 elections, arguing on or detaching from Facebook?

Today’s moment will make sense anew in the future, but the future we view it from depends on the actions we individually and collectively take today.

Here are some of the diverse sources I’ve been looking to so far for answers and inspiration:

  • Taylor Mac in his peerless 24-Decade History of Popular Music (covering the years 1776 to 2016) makes it clear that America has always been a community both coming together and falling apart.
  • Dmitri Orlov has been saying for years that the conditions in the US are echoing those in Russia under Putin. His perspective has quickly moved from fringe to mainstream. In many ways, we are all Russians now.
  • The trial brought by Ellen Pao was a precursor to the virulent sexism of the 2016 Presidential campaign and the rebuke the following year to cultural and institutional sexism—a rebuke which I hope to see sustained and focused over time, leading to enduring change.
  • Venkat Rao in his essay “Malware is choking the world” connects social, technological, and political themes in a Barzun-like way, labeling our current world order a “Ransomocracy.” This is one of my favorite pieces of 2017.
  • Articles on unbundling, dead ocean strategy, over-served and debt-leveraged industries like retail and media are many, but worth tracking.
  • The Ta-Nehisi Coates essay “The First White President” provokes vital discussion.
  • The movie Get Out deservedly lit the flame for conversations about race in 2017; the commentary about it, and popular culture generally, on the podcast Still Processing has been excellent.
  • The popular Hulu adaptation of The Handmaid’s Tale, if imperfect, is grounded and prescient.
  • In high art, Mark Bradford’s exhibit at the Venice Biennale used scale to communicate angrily, warmly, and powerfully. Damien Hirst used scale as well in his Venice show, to lesser effect, commenting on vapidity by being vapid.

Joseph North notes at the end of his book that the future of his discipline depends on nothing less “than the question of the character of the coming social order.” He then paints three scenarios, including (1) an intensification of neoliberalism, (2) a breakdown of neoliberalism, and (3) a breakdown of capitalism. He mines each of these scenarios for broad and deep implications. Rather than repeat his analysis, I’ll simply again recommend his book.


Brand marketing vs. performance marketing

There’s a simple procedure I use for creating or evaluating an organization’s marketing strategy. It starts with:

  1. Clarifying the opportunity we’re going after
  2. Articulating and segmenting the specific stakeholder relationships we must foster to capture that opportunity
  3. Designing and managing clear, custom funnels for each of those relationships

These last two steps lend themselves to an easy-to-remember progression of images, where we could first depict an organization’s relationships with the outside world using a Venn diagram:
 
Brand diagram #2
 
And then pour each of those external circles into the top of a traditional marketing funnel, as if they were gumballs:
 

 
And then, over time, we can check to see if the top of the funnel (TOFU) audience targets match the bottom of the funnel (BOFU) highly engaged brand evangelists:
 
Top-down and bottom-up segmentation
 

Using this model, we can assess if we are actually managing the relationships we intend to, or if we are discovering or drifting into new audience targets.

We can also compare—in aggregate and by audience, channel, tactic, cohort, or experiment—the top-of-the-funnel customer acquisition cost (CAC) with the bottom-of-the-funnel lifetime value (LTV).

In other words, at each step of the funnel, we can assess both the strength of the relationships we’re fostering and our efficiency in monetizing those relationships. This echoes Avinash Kaushik’s recommendation that every critical funnel metric should have a complementary “BFF metric.”

This overall approach has many benefits.

First, it prevents some major marketing errors:

  • doing marketing without a clear business strategy
  • using marketing to compensate for a lack of business strategy
  • doing marketing without knowing or segmenting the audience
  • using a channel-centric approach instead of an audience-centric approach
  • driving top-of-the-funnel traffic that doesn’t convert or stick around

Second, it’s flexible and adaptive:

  • It provides a scalable template to take key audiences from unaware to deeply engaged, while maximizing cost efficiency.
  • It works for organizations of many different kinds and sizes.
  • It works for all important external stakeholder groups and not just customers.
  • It mirrors the structure of sales pipelines and digital product clickstreams, thereby facilitating collaboration between Marketing, Product, Operations, and Sales. (Funnels, pipelines, nurture trails, and clickstreams are all different metaphors for essentially the same thing.)

Two kinds of marketing

I’ve shared this flow of logic over the course of several previous posts, all hyperlinked above.

There is one last graphic I now want to add to this sequence. It involves choosing the optimal balance across the funnel between brand marketing and performance marketing.

To clarify, by “brand marketing,” I mean any kind of marketing that has a high CAC and high LTV, and by “performance marketing” I mean any kind of marketing with a low CAC and low LTV.

Here are some alternative nomenclature pairs that make a similar distinction, with different emphases:

And here is how some common marketing techniques and channels fall across this divide:

Stereotypically, brand marketing tends to make customers happy and performance marketing tends to be annoying. But performance marketing also clearly works, or else our inboxes and social media platforms wouldn’t be filled with ads, and opera companies wouldn’t be calling us each night to remind us to renew our membership.

And now an important, and possibly contentious, point:

At every step of the marketing funnel, brand marketing and performance marketing are in dynamic tension with each other.

Meaning: whatever we do to make one better will make the other worse.

Let me illustrate what I mean, using several levels of zoom:

Organization
Within any organization, assuming a finite marketing budget, any money spent on brand marketing will deplete the available resources to spend on performance marketing, and vice versa.

Audience
If our marketing approach strongly favors either brand or performance marketing—say, with frequent promotions—we will train the audience to always expect that one thing. They will wait for the sale before they purchase.

If we change gears at a later date—say, with luxurious brand advertising and higher prices—we will confuse, if not lose, the audience, since our new marketing methods will conflict with the established value proposition.

Communication piece
For every communication piece—say, a radio ad, SEM ad, or landing page—we must consider the relative proportion of brand elements and performance-related calls to action. They fight each other for priority and relevance. An equal emphasis between them would often be incoherent.

For example, look at the following imaginary ads:

And the following real ads from the famous Smokey Bear campaign:

This slideshow requires JavaScript.

Which ads will optimally make a deep impression? Which ones will optimally drive measurable web traffic? Which ones will maximize reach?

Because this dynamic tension between brand and performance marketing plays out across the entire marketing funnel, I often have clients draw visually where they think the balance should fall for their organization:


 
There is no universal right answer, but I think it’s helpful to be deliberate here and to choose the balance that is in-line with the business strategy and prioritized audience segmentation. Are we trying to pick up all the money on the table, or build an enduring brand? Are we trying to maximize existing contracts or land new ones? How are we intentionally balancing lead quality with lead volume?

Counterarguments

I find that savvy executives understand the tradeoffs here intuitively. For example, Marc Benioff in his book Behind the Cloud talks about how Salesforce evolved from a free product trial to a paid trial to capture enterprise customers, an instance where a tried-and-true performance marketing strategy (the free trial) was demonstrably hurting long-term relationship-building with a new audience target.

I sometimes get pushback to my general statement that brand and performance marketing are in dynamic tension with each other. I acknowledge that there are some situations where this tension will not be apparent.

Examples:

  • The organization’s marketing strategy is channel-focused, not audience-focused. Data to inform the conversation will not be available, because the processes to capture it will not exist.
  • The organization is almost-exclusively focused on either brand or performance marketing, and that balance is rational for their current circumstances. Apple and Cartier, for example, are focused almost-exclusively on brand. Some arbitrage-based businesses can succeed for a while focused solely on lead gen. These situations are rare, but they happen. When the marketing strategy is this polar, there is no tension between the two approaches.
  • The marketing organization is highly sophisticated, drenched in data, with cross-channel, full-funnel visibility. Deep in the tweaky nuances, some performance marketing techniques seem to not just complement, but measurably improve brand marketing efforts, and vice versa.

This last, and obviously desirable, situation merits a comment. I tried to make my original statement digestibly simple and universal, but to make it more accurate and nuanced, I would amend it as follows:

Brand and performance marketing are in dynamic tension with each other when an organization is setting top-down strategy, though in execution, they can sometimes be synergistic.

For example, content marketing on Facebook can augment ad success and vice versa. SEM ads can drive clickthrough while positively (if nominally) boosting aided/unaided brand awareness.

Once a marketing machine is up and running, with clear scaffolding and full-funnel visibility, a team can use data to test hypotheses and run experiments about how High CAC/LTV techniques can be embroidered into Low CAC/LTV techniques and vice versa. This advanced stage is for some people, self included, where marketing gets really fun.

Summary

This blogpost is part of a continuing series on marketing strategy. The recommended steps I’ve shared so far are as follows:

  1. Start with a clear business strategy, brand strategy, and audience segmentation.
  2. Design clear, custom, cross-channel funnels for every audience. Start with the bottom (BOFU) and go to the top (TOFU).
  3. Ensure a full-funnel line of sight for all audiences, with clear, paired KPIs at each step of the funnel.
  4. Choose a balance between brand and performance marketing that delivers on business priorities.
  5. Optimize brand and performance marketing techniques within and across channels.
  6. Run experiments to test hypotheses regarding synergies across the funnel.
  7. Scale successful experiments.
  8. Revise as business priorities evolve and new audience targets emerge.

Additional resources

For further reading, I heartily recommend the following:

You can also sign up to receive regular updates about business and personal transformation from The Next Us newsletter.


What is positioning?

Positioning is important for every organization. Yet there is no consensus on what the term means.

Among positioning experts, Michael Porter talks about strategic advantage, Seth Godin talks about purple cows, and Clotaire Rapaille talks about tapping into enduring cultural archetypes. Are we really all discussing the same thing?

Here is a simple description that I use to align teams and viewpoints:

Positioning defines how external audiences see a company or product relative to its competitors.

In practice, positioning answers three questions:

  1. Where are we in the competitive landscape?
  2. What is the nature of our offering?
  3. How are we situated in stakeholders’ minds?

Let’s look at each of these questions one by one.

1. Where are we in the competitive landscape?

This is a pure business strategy question.

Answering it involves:

  • Quantifying the Total Addressable Market (TAM) and each pertinent category and customer segment
  • Assessing the company’s absolute and relative presence within those categories and segments
  • Acknowledging disruptive trends that could change the boundaries or dynamics of the relevant categories
  • Assessing the strengths and potential trajectories of known competitors in the market
  • Defining a strategy for maintaining and expanding our beachhead
  • Ensuring we’ve segmented the market in a way that’s rational and aligned with investor and analyst perspectives and our own business goals

There are many potential formats for drawing competitive maps, including spider and bubble diagrams, 2×2 grids, and more nuanced, data-rich analyses. The primary audience for these maps is internal, since organizations typically don’t want to share their game plan with the outside world, except in closed-door meetings with trusted partners such as analysts, key clients, board members, and large investors. Once finalized, these maps of where-we-are and where-we’re-going directly inform the strategic plan, product roadmap, and any M&A strategy.

Competitive maps can either expose or obscure important business risks. These risks tend to occur in predictable patterns. Here are some specific risks that I look for:

  • We don’t know what category we’re in.
  • We understand product categories but not customer categories.
  • Our category is dominated by larger players with whom we can’t compete.
  • Our category is shrinking.
  • There is no real category—we’re a feature or fad.
  • We don’t have a clear distribution strategy to maintain our position.
  • We are optimizing for distribution partners who will eventually squeeze us out.
  • Our market segmentation doesn’t acknowledge critical risks, disruptive trends, or indirect competitors.
  • We lack internal alignment to maximize our preferred position.
  • We lack full understanding of regional barriers to entry and critical success factors.

One facilitation tool I use to surface and resolve gotchas like these is the Eat Big Fish framework that I shared in an earlier post. This is an admittedly crude tool, but it quickly forces companies to articulate the specific categories they are leading. Baked into the tool is the idea that every company must eventually become the leader of its core category.

At the end of this exercise, an organization will have:

  • a bespoke, comprehensive view of the competitive landscape
  • a defensible point of view regarding its placement and relative size within that space
  • the existing or emergent category (or niche) it wants to lead
  • the investment strategy to protect the current position and expand to its desired future position
  • the measurable share of market it wants to own over a specified time period

This is the best possible foundation for a solid and scalable marketing plan.

But a visual depiction of our place in the market doesn’t by itself answer how an organization should tell its story to the outside world. For that we need to turn to the next question…

2. What is the nature of our offering?

This is a pure a marketing strategy question.

The answer typically comes in the form of a “positioning statement.” There is a template for creating these that’s widely known and often taught, and it reads something like a Mad Lib:

For [insert Target Market], the [insert Brand] is the [insert Point of Differentiation] among all [insert Frame of Reference] because [insert Reason to Believe].

 
I’m going to break ranks with some fellow marketers and say that I hate this template. I have two problems with it. First, many companies try to use it as a starting point to excite and engage customers, and at that it fails miserably. Second, I have never seen a company actually use this template to write their external copy.

Notice that organizations often do use something along these lines in their PR boilerplate, as Nike does here:

NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities.

 
But that lick of copy is about a zillionth as exciting and memorable as a typical Nike ad:

Also note that the Nike positioning statement omits both the Reason to Believe and the Target Market. That’s fairly standard, in part because most companies have multiple Target Markets and Reasons to Believe.

My own, more open-ended formula for creating an external positioning statement is as follows:

Describe the company/product in a way that’s clear, relevant, different, and better for a broad range of likely audiences.

 
That’s it. Good positioning statements that meet these criteria, like the Nike one above, help companies describe themselves in an intentional, ownable way. They are invaluable in aligning internal teams, investors, partners, and press. For consumers, customers, and populations served, they are also useful, albeit just one tool in the toolbox.

Crafting a good positioning statement is often hard work. A writing challenge that comes up frequently is what I call “the noun problem.” It’s usually a bit of a stumper to pick the single word to best describe the nature of an organization or product, and the category we perceive ourselves to be in, to the degree we currently want to share that information with the outside world. For example:

  • Is Nike a sportswear company?
  • Is Apple a consumer electronics company?
  • Is Facebook a digital lifestyles company?
  • Is the nonprofit you work for a catalyst, a service provider, an incubator, or something else?

Each word could send an audience down a very different path.

Many companies try at some point to duck this challenge by writing a positioning statement that avoids referring to themselves as a noun. This usually ends up sounding evasive, like an unplanned birds-and-the-bees conversation with a young child: “Well, it’s what happens when…”

At the end of this exercise, a company will have a thoughtful, effective way to describe itself to a general or unknown external audience.

But that one sentence doesn’t give us everything we need to capture the hearts and minds of our target customers. For that, we must turn to our third question…

3. How are we situated in stakeholders’ minds?

This is a pure brand strategy question.

In order to position ourselves effectively in our customers’ minds, we can’t just chant the words we want them to remember… we must design our experiences carefully across our entire marketing mix, and ensure that all the interactions our employees have with the outside world reinforce a singular and positive impression.

Credit: Neutron, LLC

A good tagline helps, but words simply reinforce or influence the overall customer impression—they don’t create it on their own. Notice that most taglines make no sense out of context: imagine “Think Different” on a Lenovo computer or “Just Do It” on a can of spaghetti sauce. Brand strategy is about creating the right context, not just finding the right words.

I’ve described the craft of brand building in a separate post. One new point I want to make is that brand positioning tends to require a different procedure as companies grow and evolve.

All rights reserved (c) 2017 The Next Us

There are three major stages to consider:

New market entrant
If you are a niche player or new market entrant, just lead with your primary user value proposition—the specific emotional or functional benefit you provide. If you’re small or new, you want people to understand your unique value quickly, without too much poetry or a time-consuming set-up.

Some well-funded, category-creating companies skip this stage.

Category challenger
As you move into a “challenger brand” position, taking on your local market leader, you must amplify your distinctive difference. Here’s when it makes sense to lead with a Big Idea, one that’s a bit provocative, maybe even a slow-get.

Salesforce did this well with their famous no-software icon. Snap is doing this now when they call themselves a “camera company.”

Category leader
Once you’re the market leader, you will want to trumpet the fact that you’re king of the mountain, perhaps while beginning to assert an even broader aspiration—i.e., becoming a challenger once again.
 
 
That’s my short and sweet introduction to positioning. If you’re interested in further reading, I recommend Venkatesh Rao’s 2010 blogpost, the works of Michael Porter, Clayton Christensen, Steve Blank, and strategy+business magazine (for market positioning) and Al Ries, Jack Trout, Seth Godin, George Lakoff, and Clotaire Rapaille (for brand positioning).

You can also sign up for The Next Us newsletter, where I regularly share ideas related to business and personal transformation.

In the meantime, I’d love to hear from you. Which of the three positioning questions above is your organization struggling with? What specific challenges are you facing?


Becoming #1, part two

I asserted in my last post that every organization, in every space, is forced to describe itself as the best at what it does.

Something about this is clearly bananas.

First of all, the notion that everyone is the best defies basic logic. It’s as delusional as saying that in Lake Wobegone, all the students are above-average.

If every company is #1, then none has any meaningful competition. Yet venture capitalists, who tend to know a thing or two, advise entrepreneurs all the time to acknowledge their broader competitive environment:

“[E]verybody has competition. There’s never been a company with no competition, even if the competition is the old way of doing something. I want to know exactly what your competition is, and that will help me judge how you fit into the whole operation.” (David Rose, How to Pitch to a VC)

If smart people behind closed doors acknowledge their competition all the time, why should it be any different in the magical world of marketing?

Or is modern marketing in fact just a propaganda machine of “it’s toasted” alternative facts, the kind should make any concerned global citizen or clear-headed businessperson run screaming from the room?

To some extent, clearly yes. Something is very wrong, even broken, in how organizations communicate and the economic, social, political, and technological contexts in which they do so.

Diving into the wreck

I recently experienced a version of this decadence, this brokenness, in Venice when I visited the tedious yet captivating Damien Hirst exhibit Treasures from the Wreck of the Unbelievable. The campy, overwrought premise of this exhibit is that Hirst has recovered ancient artifacts from the bottom of the sea… all of which turn out to be anachronistic totems of contemporary consumer culture. Each image has been exaggerated with allusions to ancient mythology and the imminent effects of climate change.

This slideshow requires JavaScript.

It’s impossible not to look, be overwhelmed, want to vomit, and take a selfie all at once. I commend Hirst for a bit of truth-telling and buzz generation, and at the same time, I personally felt ill after having spent twenty-something euros to see this. That’s the unbelievable wreck of modern consumerism for you.

But hating on consumerism, or marketing, or capitalism is easy. It doesn’t change the fact that major segments of our economy run, for better or for worse, on capturing attention. We all work for organizations that either we believe in or at least pay our bills. We want them to market themselves well.

So, if we suspend our horror for a moment and pretend that what we care about is not changing the world order, but making sure our own amazing, well-intentioned, bill-paying organization succeeds, then it would be good to start by looking at how successful organizations actually do market themselves. And if we do, we’ll notice that what I asserted previously is correct: successful companies always position themselves as superior to their competition.

This is almost banal if you stop to think about it, but if you need proof, look around at the products you use every day, and see how they market themselves. Or imagine as a thought experiment what it would be like if companies did acknowledge, directly or indirectly, an inferior market position:

  • Diptyque: When you can’t find the candle you really want, there’s Diptyque.
  • Devialet: Bigger, better, and pricier than Bose!
  • Wal-mart: We love you more than Amazon!
  • Starbucks: Not the coffee you want, but the coffee you deserve.

Even with a different list of companies, and more realistic taglines, this would never happen. We’ve long outgrown a time when Avis, or any company, could say “We try harder because we’re #2.” Instead we’ve shifted into what Milan Kundera might call a “kitsch” universe, where #2 simply does not exist.

The map is not the terrain

Any competitive “space” or map thereof is an abstraction, a metaphor. We could make our maps better and better, or have a suite to pick from, but they would still be metaphors because human thought is inherently metaphoric. It’s metaphors all the way down.

I note in passing that aquatic metaphors are particularly powerful. Our bodies are mostly liquid, and we’re programmed biologically to relax at the sound of the tide. We use watery imagery all the time to represent birth and death, baptism and violence, womb and dissolution. Hirst chose his symbols deliberately and wisely.

But metaphors by definition do not make logical sense. If you digging into the logic behind the Eat Big Fish metaphor, it quickly collapses: it’s fishy in more ways than one. Are freshwater piranha eating saltwater sharks? Or if sharks are eating whales, won’t those sharks then go extinct through lack of a food source? The similar Blue Ocean Strategy metaphor falls apart just as quickly if you start to analyze it (though it did inspire an awesomely catchy song).

A framework is never true, only useful in a specific context. Some things we can agree on: Business metaphors tend to obscure social consequences, unchecked assumptions, and alternative points of view. Marketing involves enabling fictions, alternative facts that never quite jibe. Capitalism is grotesquely and insistently kitschy. Any of us can love and hate the Hirsch exhibit at the same time. There may be a better world, a bigger reality, but we just can’t quite see it.

“I don’t know what I may seem to the world, but as to myself, I seem to have been only like a boy playing on the sea-shore and diverting myself in now and then finding a smoother pebble or a prettier shell than ordinary, whilst the great ocean of truth lay all undiscovered before me.” – Isaac Newton