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We believe we work in turbulent times.
A quick skim of the industry press and you’ll learn that ecommerce is upending retail. Social media is uprooting advertising. Private labels are replacing brands. Advertising is dying. And TV is dead.
We believe change is the new normal. That its pace is accelerating. That technological adoption is faster than ever. That unicorn company’s are constantly being born. And that incumbents are being killed at breakneck pace.
So we hyperventilate. We panic. We rush to the new and shiny. We bolt on technological tactics, believing the band aids will save us. From drone delivery to cheap chatbots we are seduced by the superficial.
Tom Goodwin, Head of Innovation at Zennith, sums this up perfectly:
“I’m not sure when our industry became so obsessed with what’s shiny over what’s profound. I’m not sure when we became so keen to use buzzwords that we didn’t check what they mean — or that they even have any meaning at all.”
There is a better way.
This article argues that the industry is not a runaway train of uncontrollable change. That our fear is misplaced. That by focussing on what might be important tomorrow, we miss out on what is important today.
Let’s start at the top.
The pace of change is not accelerating
According to the advertising, marketing and technology consultant Shelly Palmer, the pace of change will never be as slow as it is today.
“Tomorrow will not be like today. Today you will experience the slowest rate of technological change in your lifetime. Tomorrow, it will be faster and the pace of change will continue to increase.”
Once you spot this argument, you’ll see it everywhere. You’ll see it in books and business journals and marketing magazines. But perhaps its most ardent proponent is the futurist Raymond Kurzweil, who pushes the perspective to its extreme.
“We’re entering an age of acceleration. The models underlying society at every level, which are largely based on a linear model of change, are going to have to be redefined. Because of the explosive power of exponential growth, the 21st century will be equivalent to 20,000 years of progress at today’s rate of progress.”
At first glance, it’s a compelling argument. It’s provocative and persuasive. There’s only one problem. It isn’t true.
Compare Kurzweil’s words to those of Elbert Hubbard:
“The world is moving so fast these days that the man who says it can’t be done is generally interrupted by someone doing it.”
Hubbard, a writer, artist and philosopher died in 1915. For all their panicked similarity, Hubbard and Kurzweil issued their warnings 100 years apart. Clearly the feeling that we are being carried along by an uncontrollable current of change is not unique to modern times.
While this may sound contrarian, this idea is fairly well documented by academia. An article by Chris McKenna, of the University of Oxford’s Saïd Business School, traced the sentiment back to 1900:
“They said that change was accelerating in 1900. They said it in 1920. In 1940, in 1960, in 1980 and in 2000. So the presumption is that the people who said it before were wrong, but we’re right now.”
But why stop there? Geoffrey G. Jones, Professor of Business History at the Harvard Business School tracks the idea back even further:
“If you go back and read what people wrote in the 19th century, they thought change was happening at an incredible rate we had never seen before.”
It’s easy to see why we perceive today’s pace of change to be so fast. Moore’s Law provides decades of exponential growth in computing power. Data is more abundant and more swiftly processed than ever before. The smartphone supply chain has given birth to an ever-expanding set of smart devices. Yet evidence of a great acceleration is hard to come by. In fact according to Justin Fox, the ex-editorial director of Harvard Business Review, the evidence is almost non-existent:
“In the business community, especially in and around Silicon Valley, there is a widespread belief that we live in an age of mind-boggling economic upheaval and change. But economists have been churning out research for several years now that seems to show a decades-long slowdown in almost every indicator of business dynamism.”
The idea that the pace of change is accelerating uncontrollably is a myth.
But it is not alone.
Technological adoption is not accelerating
There’s a series of similar charts that make the rounds on social media every few years. The charts plot the amount of time various technologies have taken to reach 50m users. One of the most popular, from Boston Consulting Group, claims it took 75 years for the telephone to reach 100m users, 16 years for the mobile phone, 7 years for the internet, 4 and a half years for Facebook and under 2 years for Candy Crush Saga.
Again, it paints a compelling picture. But again, the truth is not quite so neat.
First, the charts tend to combine data from a number of sources. The BCG chart referenced above, for example, cites over 15. In the process of aggregation, different metrics are treated as if they are the same. According to an investigation by The Wall Street Journal:
“The chart botches the basic rule of apples-to-apples comparison. The gauge for telephones, radio and TV appears to be the number of U.S. households with that technology, (…) while the Internet, Facebook and Angry Birds numbers include users of all types.”
Household penetration is a different measurement to user penetration. And as such, the two metrics should not be directly compared.
Secondly, the chart maintains the same 50m threshold over time despite huge changes in population. This is a problem. The telephone, for example, “launched” towards the end of the 1800s, 50 years before the USA even had 50m households. It took the telephone so long to reach the required adoption because there were not enough households in the country for the first five decades of its being.
To account for this, many economists use a proportional (50%), rather than absolute (50m), threshold. This reframing has a dramatic effect. In his analysis, the computer scientist Gisle Hannemyr found the internet reached 50m households more quickly than television but reached 50% of households more slowly. The change in metric, reversed the finding. This inversion is consistent with research conducted by the Leading Edge Forum:
“The time it takes for a new technology to be adopted by 50 percent of US households has long been used by economic historians for cross-technology comparisons. (…) Experts generally agree that both radios (8 years) and black-and-white televisions (9) reached the 50 percent threshold much faster than personal computers (17) or mobile phones (15).”
A third and final critique is that the older technologies (TV, radio, mobile phones) tend to be expensive hardware. In contrast, more recent technologies (Facebook, Candy Crush, Angry Birds) tend to be software that is downloaded to that hardware for free. When viewed through this lens the apps which achieved lightning fast adoption are more akin to TV shows, films and songs. These have always gained widespread adoption quickly. Again, these are different categories and should not be directly compared.
So the pace of change isn’t accelerating. Nor is the rate of technological adoption.
But these are not the only myths.
Creative destruction is not accelerating
The ‘pace of change’ and ‘pace of adoption’ arguments are often complemented by the claim that big, successful companies are being destroyed faster than ever.
We can all point to VC-backed startups that came out of nowhere, grew to multi-billion dollar valuations and stripped share away from category incumbents: Uber in transport. AirBnB in travel. Facebook in media. But focusing on these few winners does not give us a representative picture.
Once again, the data tells a different story.
Here the evidence is overwhelming. According to The Economist, the odds of a company dropping out of the S&P 500 have not changed in 50 years. Similarly, according to Bloomberg, the number of companies exiting the Fortune 500 has been declining since the turn of the millennium. Researchers at Duke University and NYU Stern found a similar pattern among the USA’s 50 biggest corporations.
So, fewer big firms are falling away. But the opposite is also true.
The rate at which new firms are being born is almost at its lowestsince records began. In fact, this slow-down is so profound that it has been termed the “start-up slump”. Ben Casselman, of the New York Times, provides some numbers:
“A total of 414,000 businesses were formed in 2015 (…). It was a slight increase from the previous year, but well below the 558,000 companies given birth in 2006, the year before the recession set in.”
Casselman’s data comes from the U.S. Census Bureau. The same source also tracks the share of companies founded in the past year. In 1980 that figure was around one in eight. By 2015, it had fallen to fewer than one in twelve.
The truth is, rather than becoming more disruptive, industries are becoming more consolidated. Back to The Economist:
“Of 13 industrial sectors in America, ten were more concentrated in 2007 than they had been in 1997. Since then there has been a huge round of mergers in health care, consumer goods, airlines, cable-TV, telecoms and technology hardware. Most of these deals have created bigger firms with higher market shares and more pricing power.”
The result is that the share of economic activity occurring in older, incumbent firms is increasing. This is true, according to research from the Brookings Institution, in every US state and across every industrial sector.
After reviewing the data, the hyperventilation of change gives way to a stable, stolid reality. Change isn’t a relentless, ever-accelerating process. It goes in waves. And for about 15 years we’ve been in a lull. The runaway train is increasingly looking like a slow coach.
If only marketing got the memo.
Despite the abundance of evidence, the marketing industry is enamoured with the notion of accelerating change.
We believe the pace of change is accelerating, but it’s not. We believe the rate of technological adoption is speeding up, but it isn’t. We believe incumbent companies are being picked off at pace, but they aren’t.
It is this myth, this misunderstanding, this misconception that makes us fearful. We fear we won’t keep up. We fear we will be left behind. We fear we will be replaced, rejected and removed.
So we rush to the new and shiny.
From VR and AR to beacons and blockchains, our industry has become saturated with the new and novel. The foundational has been replaced by the fashionable. The desire to find a disruptive idea has been replaced by the desire to find a disruptive technology.
But instead of aiding progression, we hinder it. According to Jennifer Romaniuk, Research Professor at the Ehrenberg-Bass Institute for Marketing Science:
“Today’s world of never-ending technological breakthroughs creates the illusion that jumping from bandwagon to bandwagon is moving us forward, when we are really going around in circles.”
Clearly, this comes at a cost. By mindlessly chasing a possible future we neglect a definite present. Mark Ritson, Professor of Marketing at Melbourne Business School, sums this up neatly:
“When you lose your shit talking nonsense about all the massive, gigantic, tectonic changes, you miss the possibility of making good solid strategic decisions for the year ahead. Things are not going to change that much next year so how can I, a good marketer, benefit from that knowledge and the things I have learned this year?”
But as more practitioners adopt the approach, pressure builds on their peers to do the same. The trend proliferates. Multiplies and mushrooms. Richard Shotton, Head of Behavioural Science at Manning Gottleib OMD, points out that this isn’t entirely irrational:
“Marketers are interested in career progression as well as brand success. If their colleagues are paying disproportionate attention to the latest social medium then it’s dangerous not to do so. An unwillingness to follow the herd may be interpreted as being old-fashioned or out of touch.”
When did it become more important to be fashionable than effective? When did the current outweigh the crucial? When did we lose sight of what’s needed and focus on what’s new?
It’s time this changed.
So there you have it. Change isn’t accelerating exponentially. We do not need to fear. And we do not need to rush to the fashionable and the faddish.
Once you accept this reality your perspective shifts to one of pragmatism. Whilst media may have changed, the fundamentals of our industry have not. In an interview with Forbes, the legendary business strategist and Harvard Business School professor, Michael Porter tackles this head on:
“The underlying principles of strategy are enduring, regardless of technology or the pace of change.”
The principles of strategy haven’t changed. And Planning is no different. In an article for The Drum Prabhakar Mundkur celebrated the 50th birthday of advertising’s strategic function and, in the process, echoed Porter’s pragmatic prose:
“Many people are inclined to think that the new world in this millennium might have changed planning. Media has changed and we live in digital world now. But I think that the basic principles of planning haven’t changed.”
Just like business strategy, the core tenets of the Planning profession remain unchanged. We still seek a deep understanding of consumer behaviour and we still formulate strategies for how we can change it.
Many will tell you that the internet has rewired our brains. Or that our attention spans are now shorter than those of goldfish. But the evidence tells a different story. The fundamentals of human nature have not changed. It takes thousands of years for evolution to affect tiny biological adjustments. 3D printing and a geofence won’t make a dent.
This time, over to advertising great Bill Bernbach:
“Human nature hasn’t changed for a million years. It won’t even change in the next million years. Only the superficial things have changed. It is fashionable to talk about the changing man. A communicator must be concerned with the unchanging man with his obsessive drive to survive, to be admired, to succeed, to love, to take care of his own.”
So strategy, Planning and the fundamental needs of our consumers have not changed. I’d argue the same is true of almost all marketing. Sure, the channels in which our products and messages are distributed are evolving. But they always have been. Everything changes, and nothing changes.
Today’s best business minds use this insight to their advantage. Jeff Bezos, the founder of Amazon and world’s richest person, for example, builds businesses around that which is stable in time. He knows that consumers want low prices, fast delivery and vast selection. He knows that this will be as true in 10 years as it is today. So he invests heavily in these areas. Warren Buffett, CEO of Berkshire Hathaway and world’s third richest person, does the same when it comes to investing.
Marketers must learn this lesson. We must stop fetishising change. We must stop fixating on the futuristic and start focussing on the fundamentals. We must stop prioritising that which might change and start prioritising that which won’t.
Because the brands that do so will be the brands that win. In Mark Ritson’s words, it might be less sexy, it might make for fewer tweets, but it is clearly the more important route.
Or to paraphrase the World Economic Forum, the winners of tomorrow could very well be the boring companies of today.
Thanks for reading Magpie Marketing. If you enjoyed the piece, you may like to check out some of my other articles. Among my most popular are The Ageism in Advertising, The Digital Dark Side and Big Questions for Big Data. You can also subscribe to receive new articles direct to your inbox at alexmurrell.co.uk.