I’ve been playing with this construct of understanding marketing through thermodynamics for a while now. Then I read Peter Thiel’s Zero to One which referenced it in a similar way so I thought it’s time I came out with it. Entropy or the second law of thermodynamics states that a system will tend towards disorder or a lack of structure. It will become increasingly diffuse over time. Its how engineers discovered the arrow of time by studying the diffusion of heat but thats a side point. It’s also further evidence that the universe is expanding.
The point is that it happens in all things including categories of consumer goods. Categories start with low entropy in which the system isn’t very diffuse, i.e. an inventor comes up with the idea that is unique at that moment. Then other entrants rush in and we all know the story until such time as the category becomes commoditised. This means it is in a state of high entropy. It is diffuse. Competition is perfect and therefore no-one makes profit. Otherwise known as the heat death of the universe.
But entropy can be lowered. Life does this, in fact the most fundamental definition of life is anything that can lower its internal entropy. Order itself in other words. But in less drastic ways it can also happen in categories by reframing the category itself.
Now this is where I might get a bit wobbly but if conventional solutions, behaviours, thoughts, ideas of a category are the things that all run in the direction of increased entropy. Then fighting against these broad conventions is the way to lower entropy and thereby occupy greater profit. I just did a massive leap there but I’ll explain. If high entropy equals a diffuse state of little profit [high competition] then if a brand manages to reframe and lower entropy in their favour it will redefine the category in a way that excludes some competitors and therefore amass greater profit.
If you don’t attempt to reframe then you are heading towards inevitable diffusion. The second law of thermodynamics makes it an inevitability.
In battles throughout the last 400 years a country 1/10 of the size of its foe will win 34% of the time [which is in itself staggering. However if the country 1/10th the size refuses to fight the bigger country by their conventions the 1/10th country wins the majority of the time! What!?
It’s something I found when researching challenger brand strategy for Audi. [Reference below].
So if the normal approach to marketing is for example TV + OOH + digital etc etc, that is a brand playing by the conventions of the dominant players, the ones that formed those conventions, the ctrl C, ctrl V media plans we often see. The real question is how can the challenger act more like the Vietcong? Refuse to play by those conventions, create their own unconventional tactics and win as a consequence?
There was a quote in the HBO series Boardwalk Empire where a character says to the effect; if you can not be discouraged by someones criticism but still take what they have said on board that’s the way to greatness.
As the title of this post says I believe that accurate feedback is everything. If we could get absolute feedback about whatever it is that we want to succeed in we would be unstoppable. The problem is that we need to decipher the good information from the noise in the feedback we typically get in life. If a colleague gives you feedback on your performance you have to ask yourself, do they have the proper perspective? do they have an agenda? Then filter out that noise from the valuable information. This requires a huge amount of cognitive grunt work and is therefore difficult.
However now we are moving into an era of the quantified self in a broad and meaningful way. Sure we’ve always had measures like body weight, how fast you’ve completed the 100 meter sprint & education grades but we are moving closer to broader measures of performance & behaviour that offer a raft of insights about our selves. Measures that are enabled by accelerometer data and digital data trails.
I’ve spent some time studying Strava, a phenomenal platform and community that is incredibly powerful at driving behaviour. The way it gives personal feedback and creates collective competition is astoundingly effective. To the point where they had to remove competitive leader boards from dangerous stretches of road because of an unfortunate fatality. The key learning for me from Strava is that meaningful feedback exists along two basic dimensions: individual feedback [relative to my own performance] and social feedback [relative to my immediate or broader social context].
So I’ll write more on quantified self later, partly because I am in the process of building a prototype device that enables quantified self and am fascinated by it but as a sign off look at the dimensions of Strava in your next strategy. In the context of your strategy ask what is the individuals stake in this context and what is the competitive or social comparative stake in this context?
A simple rule to help us understand a clients potential to invest in service design is proximity to transaction. Basically the closer the service is to the point of financial transaction the lower the risk of the investment and therefore the greater the chance that capital expenditure will follow.
A simple example is e-commerce investment all other things being equal and another is CRM. The former is incredibly close to transaction and later creates value in terms of retention, repeat purchase and up-sell all close to the transaction.
I think this rule can be stretched out to explain strategy in a broader sense as well. I.e. the closer you can make a perceived link between investment and transaction the greater the chances of you unlocking investment. And now to rationalize my own existence, the further the investment from the point of transaction the greater the need for investment in strategy to establish that link in terms of causality.
Good old Maslow’s Hierarchy of Needs is a nice model for understanding why people follow some brands, an important understanding particularly in the realm of social media.
As the title states my theory here is based on the premise that if you want someone to follow you, you being an individual or a brand you need to facilitate your followers movement higher up into self actualisation. If you think about anyone or anything that is followed fervently they offer a path to higher self actualisation, this sounds all very religious and in many respects it is. Morality? All religions offer morality. Creativity? many brands with large followings offer a ‘path to creativity’. I would argue that this is Apple’s strength as a brand. Apple has always been about facilitating creativity in people and it has amassed a huge following as a result.
An exercise worth conducting is plotting brands that have a large scale following against Maslow’s Hierarchy. You will notice I think that this pattern holds out. So assuming this is a correct assertion the next step is to ask yourself how you can help your brand facilitate high self actualisation in your followers. If you can do this I believe you will create a strong basis for building a large scale following.
To take another final example just t try and convince you further. Coca Cola operate from their brand purpose centered around ‘happiness’ that takes form in them facilitating happiness for their followers. Happiness when deconstructed has a few of the elements of high self actualisation; spontaneity, morality, lack of prejudice etc etc. They seem to be benefiting greatly from this approach.
I’m ecstatic that the Guardian has opened its Australian editorial arm. They are not only a fantastic publication in editorial terms but are also a strong innovator in the online editorial space. However, its also another example of an innovative UK business that has set up shop in Australia looking to eat the lunch of the seemingly complacent Australian competitors.
Online retail is another realm in which this is happening. ASOS has successfully invaded the Australian online fashion retail space. Even The Iconic is a German backed business whose model was create by online business incubator Rocket Internet. So why is this happening? We are a well educated nation with a relatively skilled workforce. We are per capita a very wealthy country. What is the missing ingredient?
It is a lack of true competition as a consequence of most categories in Australia being oligopolies which has meant we havent developed the entrepreneurial culture needed to drive innovation?
And so is this the double edge of the sword of us being the lucky country? The country with the best lifestyle in the world as according to recent research. “If it aint broke don’t fix it”. I hate that saying. It basically says just plod along and ignore the changing world around you. It is in fact in my opinion the complete antitheses of the global innovators mantra of “innovate or die”, one that rings true time and time again in the highly competitive global market place.
“If it aint broke dont fix it”. We need to eradicate that sentiment from our cultural vernacular if we want to become a nation of innovators.
Just a few thoughts I’ve had while being a passenger on a highway trip. I think one day not only will cars have sensors processing reams of data but they will all be networked, sharing their data with one another and the broader traffic network. For example cars much further ahead of a car will be constantly reading the conditions and if anomalies occur such as a sudden breaking by a car ahead that event will ripple through the network down to the cars behind, alerting them to changes in traffic conditions however minor, allowing them to respond and react accordingly.
If we go even more granular on this the car could use eye tracking sensors to determine the alertness of each driver and factor that information into its risk assessments. I.e. their is a car ahead being driven by a driver that is showing signs of drowsiness, that car could be highlighted in red in the augmented front windscreen allowing all drivers to keep an eye on that specific driver. For motorcyclists this would be particularly helpful and their augmented visor could alert them to high risk situations [given most risk to a motorcyclist is other vehicles].
On top of this the traffic network of cars could also use this data to help individual cars calculate their their best route based on traffic and other conditions. Even the infrastructure grid itself could use this data to set traffic conditions such as traffic light timings. Even bus networks for that matter could use this and other data collected at bus stops by passing cars to dynamically set the number of buses on specific routes.
Perhaps one day this will mean far less accidents and far greater efficiency in traffic movements through cities.