Systems Marketing for the Information Age

With its newly unveiled adCenter platform, Microsoft Corp. has entered the keyword-advertising market dominated by Google Inc. and Yahoo! Inc. Like those two companies, Microsoft will offer advertisers a targeting capability through the medium of paid search. It’s easy to understand the Microsoft counteroffensive. Google and Yahoo have built online advertising into hugely profitable businesses, while Microsoft has waited to get in on the action. Microsoft’s revenue is slowing from a software market mature with the company’s Windows and Office products, so the time is now right to make a strategic push into the steadily growing Internet-advertising market, expected to reach $26 billion in 2009, according to Forrester Research. For its part, Google has plans to sell web advertising that includes video as a first step to selling advertising on television, a business niche the company intends to enter in the near future. But the story here is not about sibling business rivalry, media convergence or the Internet’s growing role as a platform for marketing. It’s much bigger and more complex than that. The real story has to do with the dissolution of conventional industry boundaries, rampant commoditization, a saturated information environment and a conceptual gap in the way these strategic issues and business realities are being confronted.

Globalization has changed the strategic context for business. But globalization isn’t about opening offices in Beijing and Mumbai. At its core, globalization is about a new operating theory of the world based on connectedness between, across, above, below and through pre-existing political, social, economic, thematic, geographic and security boundaries. It is this connectedness, and its complexity, that is increasingly the source of heaving disorder engulfing nearly all industries (and nations). The connections and interactions can be so intense and transformative that we can no longer fruitfully distinguish between actors and their environments, let alone say much about any piece in isolation. Whereas previously it was possible to separate customer from competitor and to analyze the performance of individual pieces, advances in telecommunication have linked the information and economic domains of customer, competitor and collaborator as never before.

At the same time, the dynamics of information production, dissemination, storage, display and retrieval have changed radically, to the point where significant amounts of information are produced and obtained outside the control of any one organization. As the cost of processing and communications power has tumbled, it has become cost-effective for organizations and individuals to adopt and utilize information technologies in more and more situations. So what was once a highly constrained and vertical information flow has evolved into a torrent of vertical and horizontal flows pushed and pulled from a galaxy of sources, both on and offline.

The issues associated with information glut, including the increased potential for overload, second-guessing, micro-management, redundancy, irrelevance and distraction, are critical business and societal challenges.

In this kind of reality, there is no technical solution that can fundamentally improve the performance of marketing. Assuming all players have access to virtually the same information and information technologies and can therefore equally target a demographic with precision, there is no compelling competitive advantage in any digital-marketing capability, regardless of how deeply it can reach to personalize a message. When every brand team in every product and service category — restaurants, automobile manufacturers, hospitals, pharmaceutical companies, florists, computer makers, accountants and department stores — decides, for example, to leverage global positioning systems in cell phones to tailor a promotional message based on a consumer’s location, personalized promotion based on location becomes a zero-sum game. The same goes for e-detailing, direct marketing, anonymous patient-level data and ads linked to search results.

The problem with microtargeting as a strategy-making philosophy is that it is consistently reactive to the latest technological wrinkle in information distribution and completely ignores the complex networked environment in which businesses, customers and brands coexist. The already fragmented media environment is splintering even further as technology companies continue to enter the (Continued on page 95) (Continued from page 96) market with new media packages and ever more finely parsed ways to distribute and measure advertising-related content. The human mind is being overgrazed by a marketing industry out of sync with the dynamics of complexity and consumer behavior. So at the end of the day, marketers confront the same dilemma they turned to the Internet and information technology to solve: consumers opting out in ever greater numbers by skipping the ad and hiding behind their own technologies, which exempt them from the onslaught of promotion.

To grow a business to the current environment requires a new strategy-making philosophy based upon system-level competition. Companies must view both their internal actions and those outside the corporation as coordinated, interconnected and mutually reinforcing. This marketing ecosystems view shifts away from the logic of brand as the primary unit for business strategy to an aggregated view of strategy and action at the system level. Rather than replicating what already exists, matching what a competitor may be doing or trying to squeeze more life out of a worn-out branding paradigm, marketing creativity should center on designing and evolving an environment of changes and opportunities simultaneously. The only sensible way for a company to compete is not by offering new products with similar functional attributes, but by being better than its rivals at molding the ecosystem in which the competition takes place. In other words, the key to market dominance and customer value now lies in making strategic choices across industry boundaries to form entirely new economic spheres.

As advances in information technology have opened new spaces within which organizations can operate, the accepted notion of what constitutes marketing creativity and strategy has absorbed a rapid succession of body blows. Both globalization and information diffusion have contributed to a kind of world-is-flat reality that has Google involved in selling advertising space, AT&T creating TV programming, McKinsey now examining media budgets, Starbucks in the music and movie business and Pfizer competing with UnitedHealth Group for patient-care solutions. In response, the advertising industry is beginning to stir and change, and growing attention is being paid to realms outside of traditional advertising. The example of Microsoft v. Google ultimately reflects the dissolution of old interpretative frames of the most elemental aspects of marketing. The big question for marketers is whether we are witnessing merely an incremental shift from the traditional brand-and-promote approach or the advent of entirely new forms of creativity and conceptualization based on ecosystem-centered strategies.