Brands Embrace Open Participation in Innovation

The walls have been breached. And the invaders are welcome.

There was a time - not so very long ago - when the corporation regarded itself as a castle on a hill. It sustained value by protecting its secrets and defending its territory.

But as any 16 year old with iPhone can demonstrate at will, those defenses are so 1066.

The technology industry has long understood how value can be enhanced through open-source approaches. Which is not to say that everyone agrees that openness is optimal. Simply that it works for some people at least some of the time. But as the power of technology has been extended by mobility and the creativity of users has frequently surpassed that of creators, the open architecture concept has become increasingly intriguing to a broader range of brands.

This is has required a new humility from corporate nabobs. Some have voluntarily adopted it. But many more have simply surrendered to the facts. No one entity can know everything. Innovation is not a market that can be cornered. The evidence is that the returns from collaboration and cooperation exceed those of singularity. Even Apple, the exemplar of the controlled approach, has frequently bought other companies to bring their expertise in-house. Better to partner, adapt and share. A smaller piece of something valuable is better than a larger share of nothing.

The notion of the web has expanded from the internet to the complex set of interrelationships that drive most businesses. But instead of merely acknowledging the financial benefits of that approach, brands and the companies that own them are now celebrating the opportunity to extrapolate from the fruits of collaboration and cooperation. JL

Greg Satell comments in Digital Tonto:

On November 4, 2010, Microsoft launched Kinect, a motion-sensing device for their Xbox video game console. It quickly became the best selling electronic device in history, moving 8 million units in less than two months.

Then hackers started fooling around with the device using it to do things Microsoft never intended. This kind of transgression would usually elicit in nasty “cease and desist” letters and hefty lawyers fees, but this time Microsoft did something different.
They released a software development kit (SDK) to help outsiders modify their product and created an accelerator that offered seed money, office space and training to promising young innovators. Clearly, something important has changed. Brands are no longer mere corporate assets, but have become open platforms for collaboration and creativity.

Brand Image and the Big Idea in the Age of Mass Media
After World War II, most of the globe went through several decades of seemingly boundless economic expansion. Consumers had ever more money to spend and business expanded to meet the demand. It was the dawn of the branding age and marketers strove to make their products popular with a populace hungry to join the consumer culture.

It was also an era of mass media. There was a limited amount of TV stations and programming was geared to mass audiences. Popular broadcasts could reach more than 50% of the population, so if you put an ad on the air you could reach just about everyone with a few spots.

The “big idea” was king. Advertising pioneers such as David Ogilvy and Leo Burnett developed powerful brand images that transformed the landscape of commerce. Great creative work combined with mass audiences proved to be a powerful combination.

Brands soon evolved into consumer icons and created enormous profits for the companies that owned them. Not surprisingly, corporations became very protective of their brand images, controlling them tightly and protecting them fiercely.

Communication Planning and the Quest for ROI
With the 1970’s came the Arab oil embargo and difficult economic times. Financial accountability became central to marketing strategy. Consequently, marketers began to pay more attention to cost efficiency and cost per Gross Rating Point (GRP) became the coin of the realm,

Then, in the 80’s and 90’s, cable and satellite technology transformed the media landscape and fragmented audiences. No longer could you be sure that your target consumer would see your message. The “big idea” became secondary to effective media selection and targeting

In the new environment, media agencies prospered and communications planning was born. The principal strategic question became “where is our consumer and how can we engage them.” When you can’t reach everyone, reaching the right person in the right way becomes of paramount importance.

How Facebook Became the World’s Biggest Website
Technology, of course, would change the game again, but it wasn’t immediately obvious exactly how that would happen. For its first decade, digital was mainstream media’s poor cousin, offering fairly lame consumer experience monetized by banner ads that weren’t especially effective. Marketers watched closely, but mostly kept their budgets in TV.

A harbinger of change came in 2005, when News Corp bought MySpace, the leader in the exciting new category of social media, in which users, not professionals, produce content. At the time, the $580m investment seemed pretty smart. With News Corp’s corporate heft and business acumen behind them, MySpace seemed poised to dominate.

Then came something unexpected. MySpace competitor Facebook made the unusual move of opening up its site to outside developers through application programming interfaces (API’s). Those developers, in turn, built clever new applications that improved the site and increased revenues.

With one brilliant stroke, Facebook became more than just a website or even a brand, it became a platform. By May 2009 Facebook passed MySpace on its way to becoming the most popular Web destination in the world. In 2011, News Corp sold MySpace for a reported $35 million, a loss of more than 90% of their investment.

From the World Wide Web to the Web of Things
When Tim Berners-Lee first developed the World Wide Web in 1989, he conceived a vast connection machine that would allow people to communicate on a universal platform. A decade later, he felt he had not gone far enough and so he created a second Web, which he called the Semantic Web, in order to let machines communicate seamlessly as well.

Just like his first creation, this new Web of Things, is starting to take hold and manifest itself in four new areas that touch consumers lives:

Smartphones: At the center of the Web of Things is our smartphones, which is not only a communication device, but a sensor platform. In effect, we are using them as “universal remote controls” for our digital environment.

Smart Homes: New super-efficient chips are putting connectivity everywhere and our home appliances will be as much a part of the Web of Things as our tablets or smartphones. There are already a number of products that allow us to control aspects of our home (e.g. security, lighting) remotely.

Smart Cars: Our cars are becoming an integral part of the new Web of Things as well. Ford’s Sync and Toyota’s Entune, which are already installed in production units, connect with both the web and with smartphones.

In Japan, McDonald’s is experimenting with a system that will allow for downloading menus and in-car ordering. Ford is reaching out to medical device makers to collaborate on apps that help diabetics monitor glucose levels (a serious problem behind the wheel) and monitor allergens in the air for asthmatics.

Smart Retail: Probably most pervasive trend is the digitization of the retail environment. From in-store apps to recommendation engines to elaborate in-store augmented reality displays and a rapidly evolving mobile payments environment, brands are learning how to interface with every aspect of the shopping experience digitally.

Now many suggest that Apple will integrate near field communications (NFC) chips into their new iPhone, which will allow consumers to effortlessly make payments and interact with digital retail environments without cumbersome QR codes.

The New Consumer Conversation
What this all amounts to is a new form of conversation that brands are having with consumers. Marketers have long known the importance of listening to consumers and being responsive to their desires and needs. However, up till now, they had only crude methods such as surveys and focus groups available to them.

Consumers are now providing a wealth of information to marketers in real time. Their comments on social media can be aggregated and then analyzed using sophisticated new natural language processing algorithms. At the same time, their smartphones are communicating with other machines around them, offering a wealth of new data.

Make no mistake, these are conversations and in more than an abstract, philosophical sense. In 2003, Google asserted in a civil suit that its search results are a form of free speech and won a favorable opinion. Today, a vast array of recommendation engines is affecting what we watch, buy and do based on machines talking to other machines.

These new types of conversations don’t replace the ones that came before, but augment and extend them, allowing brands to identify, evaluate and act on changes in the marketplace with speed and effectiveness unthinkable in previous decades.

The Brand as an Open API
Digital technology is forcing marketers to rethink their historical approach. No longer are they providing Pavlovian stimuli in the hopes of a profitable consumer response, but are instead looking at their brands as platforms and ecosystems, with the consumer playing an active part.

These days marketers need to think beyond simple metrics such as GRP’s and CTR’s, but also in terms of collaborative technologies like SDK’s and API’s. New platforms like Innocentive and Kickstarter are enabling companies to source, test and fund new innovations by utilizing the vast collective intelligence in the marketplace.

In this new semantic economy, scale of a particular enterprise is nothing compared to the potential scale of connections to a multitude of collaborating, co-creating entities, be they 3rd party developers, hackers or even everyday customers.

Brands are no longer images or even ideas, they are platforms and, increasingly, the most successful ones have open architectures that not only allow, but encourage active consumer participation.