Why Marketing Should Be Your Friend

I have a soft-spot for Box. I think Aaron Levie and his team are building a really interesting and valuable business. One with a simple proposition that is succeeding against multiple 800lb gorillas in an increasingly competitive cloud storage and sharing environment. Impressive stuff.

One of the major reasons they’re succeeding is that they’re really smart marketers.

Now, I know this statement is going to be about as popular as passing gas in an elevator for some people, but please bear with me for a second.

Lets start by heading back around 50 years to quote the late, great, Peter Drucker:

“The aim of marketing is to make selling superfluous. [It] … is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy.”

The final sentence here is key. What Box have been so good at is creating customers who are ready to buy.

They do this by getting individuals to sign up for a free Box account, thereby familiarizing themselves with a product type they’d never considered they needed before. Once there is a large enough set of individuals from any one organization using (and demanding) the product, the Box sell to the enterprise buyer for that organization becomes as easy as saying “why not buy a license so that you control the use of the product your people are already using anyway? Secure and managed for you, no change in behavior for them.”

While the Box product is great, the above approach has nothing to do with product and everything to do with marketing. In Drucker’s words, they’re creating a customer who is ready to buy. And if you consider how conservative enterprise IT buyers have traditionally been, this approach is pure genious. In fact, in hindsight, it may have been the only way for them to succeed in the enterprise space.

Of course, I recently saw an article with the following headline: “How Box built a multi-million dollar business without spending a dime on marketing”.

The truth is that of course Box spent money on marketing. What they didn’t spend money on is advertising. Instead of going out there and spending on media placement, they gave the product away for free. Giving the product away for free is in fact a marketing cost. The revenue you forgo up by giving the product away for free is a pure cost of customer acquisition.

The difference, and why this really matters for startups, is that money foregone is very different from money spent. If you have $10m to spend building a product (and a business) you’d obviuously be foolish to spend that $10m on advertising. You probably can, however, afford to give away $10m worth of free product (particularly since the marginal cost per unit in the digital environment is generally very low). In effect doubling the available budget for your business. $10m on the product, $10m on customer acquisition. Navigating this course is exactly what Box have done so well.

Looking forwards, we can look again at Drucker to find another nugget of marketing wisdom:

“Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

This quote is again important when we look at the direction Box are innovating in. A recent article stated that they are working with their clients to create cross-platform solutions. The unmet need is simple. The modern day enterprise environment is multi-platform (particularly when we take mobile into account). However, the major cloud competitors all have their own platforms they want you to use exclusively, meaning little or no interest in building cross-platform solutions. (As cross-platform solutions mean lost revenue for them)

By working with their clients to innovate cross-platform, marketing is in fact driving product innovation for Box. Not marketing as advertising. But marketing as value creation. Marketing designed to create a customer by creating a product that will, in effect, sell itself.

Unfortunately, a fundamental misunderstanding of what marketing is has become pervasive today, particularly in this startup space. Instead of value creation (creating a customer) many people see marketing as a pure cost (selling me crap products I don’t want). And while this may be true for some, particularly some of the biggest advertisers, the advantages of marketing as value creation are so strong that we should be careful not to fall into this mental trap.

My advice for anyone who wants to replicate some of the success of Box is simple. Get past the idea that marketing is your enemy. Instead focus on how you will create a customer, how deeply you can understand this customer and how you can create a product that meets their needs so well that it makes selling unnecessary.

Get this right and you too will be a great marketer.

Oh, and everyone should try to read Peter Drucker if they can. He said it better than I ever could a very long time ago.

Products, Ventures & What I Learned

Prior to leaving Wolff Olins, two of our long running discussions related to the importance of product and technology relative to brand and the need for the agency to experiment with new business models beyond the traditional project/billable time mentality.

Although these were generally two separate conversations, there were some of us who believed quite fundamentally that the gap between product, brand and technology is narrowing and that in the future only cohesive experiences that connect these dots will win.

Rather than continue to talk about it, we decided to do something about it and experiment with creating something for ourselves rather than for a specific client.

We called the program “Project Venture”, and recently the first product from this approach was launched. Whtespace is a collaborative email journal designed to help people curate and navigate the web. It’s really great and you should check it out.

However, rather than get into the details of the product itself I thought I’d write about some of the learnings that came out of the initial process, which might help others considering a similar approach.

The overall hypothesis that we worked from was that we could identify an idea for a new digital product/business and a founding team from within Wolff Olins. That we could then coach and fund this team to quickly create a product, which we could then launch into the world in order to understand whether or not it would be viable. If viable, we’d then investigate potentially attracting further funding or maybe even sell it to someone.

This is what I learned:

1. Put learning at the heart
There’s no guarantee that anything you create will make any money. 75% of all new products fail, less than 5% of all startups succeed. With those kind of odds stacked against you, there has to be an inherent value beyond making money. For us, the experience of identifying a potential product, building it and getting it out into the world was an incredible learning opportunity. It was a chance to put theory into practice and gain a deeper understanding of some of our clients issues. Putting this at the heart, rather than a revenue target, freed the process up and took a tremendous amount of pressure off of what was essentially an experiment. We simply didn’t know what the final output would look like. This isn’t to say that we didn’t want to do something that would make money, we did. We just didn’t put undue pressure on it having to succeed straight off the bat. I’m glad we did that, and I think the product is better for it.

2. People generally aren’t entrepreneurs just waiting to be released
There is an easy to make, but flawed assumption, that people in creative businesses are inherently entrepreneurial and that they just need the right opportunity to release it into the world.

The truth is rather more complicated. Rather than having a drawer full of business ideas waiting to be brought out, we instead found that although people were excited they were also quite intimidated. They were concerned that their ideas perhaps weren’t very good, or that they didn’t know how to be entrepreneurial.

To get past this, we created a very simple brief:

“What is a problem in your life that you think needs to be solved?”

We weren’t asking people to figure out the next Google or Facebook, but we did want them to think about things they’d like to see improved in their own life.

3. Coaching beats competition
In our original plan, we wanted to do things in a very pure startup and VC kind of way. We wanted people to come up with ideas that they would then have to “pitch” to a venture board. Because of point 2 above, we quickly realized that we’d have to abandon this approach. Instead of “pitching” ideas we instead created drop-in casual advice sessions where people or teams could discuss their ideas and be coached in how to tweak them into something really interesting.

After a few weeks of these coaching sessions we had six groups who felt they had really good ideas they wanted to share with the rest of the office. At that point, we turned their five-minute pitch presentations into a bit of fun and asked everyone viewing for anonymous views on their preference.

While a small venture board (made up of people from different seniority levels from most junior to most senior) made the final decision, everyone got to participate in this entire stage of the process.

4. Get help
Wolff Olins weren’t a digital product development company, so we had fairly limited capabilities when it came to building a product and keeping everything under control. To help, we reached out to the very nice folks over at Prehype. Their approach meant that we could deliver the coaching sessions, and focus not just an idea with commercial potential but also something we could build in a very lean way with a limited financial commitment.

Getting this kind of outside help was also beneficial in other ways. It gave an honest broker aspect to the process, gave us new and different insights and created a learning and coaching environment for skills that we didn’t already have.

5. Make everything as clear as you can upfront
As we started the process, there were some areas we didn’t have answers to. The biggest was the question of who owned what and who would benefit if it made any money. Unfortunately, we had some unanticipated accounting and financial issues here that really held up getting to a definitive answer (Which to be honest, I’m not really qualified to get in to).

The net result, unfortunately, was a lack of clarity to people in the organization around what they’d get out of it should their idea be chosen. I guess its human nature to assume you have a multi-million dollar idea even if the chances of its success are extremely low!

If doing it over again, I’d recommend being clear upfront about who owns what, and also be clear that the value proposition to the employee isn’t just about what they get out of it financially, but also the learning they get from what the agency is putting in.

In our case, Wolff Olins was funding the process, the employee time, the Prehype assistance, a development budget and some financial support for running the business post-launch.

Effectively, this was a zero risk proposition to the employee, with the opportunity for the winning team to learn from top digital product people how to get something new out into the world.

I think the overall driver of success though lay how flexible we were. When things weren’t working we changed them, creating an extremely positive experience in the process. We learned a lot, we had six really great ideas to choose from, and the one which was chosen has turned into a really interesting version 1 product.

I know that Wolff Olins intends to continue doing more of this in the future, and that everyone involved has learned tremendously about how to align brand and product in a new way.

I’m certainly very proud of everyone who participated. I know that I learned a lot, and I really look forward to Whtespace having great success in the future.

Image borrowed from http://www.whtespace.com