The Kuhn Connection

(Or what a scientist from 1962 can teach us about ad tech in today.)

In a moment of frustration after meeting some potential tech partners who seemed not to sense that going forward, ad tech will be about the “how” – not the disruptive “wow,” I wrote a post in Ad Age explaining the importance of operational structure in ad tech: “Here’s the only marketing trend you need to know for 2016”.

While my arguments were lost on the tech folks, the article struck a nerve with Ad Age audiences because it expressed a deeply felt marketer frustration that tech is just too damn dominant in the ecosystem, making a marketer’s job just too hard.

I go on to suggest ad tech is overdue for a “paradigm shift” itself that can disrupt the colossal mess of complexity, fraud and technological black boxes that is now ad tech.  My conclusion is that in 2016, “…marketers will replace the “awe” of algorithmic magic with awe-inspiring new questions about how (not if) we balance ad tech with the art of marketing.”

The groundswell of community support for the post was overwhelming. Amid the inbound, there were tons of questions curious about Thomas Kuhn and secondly, which solutions will realize the promise of integrated user experience out of the current ad tech operational chaos.

Therefore, to answer these questions, let’s take a 50 year trek through the historic evolution of paradigm shifting and the disruptive innovation myth so we can see just how ad tech is about to get disrupted itself (and by whom).

Thomas Kuhn – the Father of Paradigm Shifts.     

Thomas Samuel Kuhn was a noted American physicist, historian, Harvard professor and philosopher of science, who published a highly respected book in 1962 entitled: “The Structure of Scientific Revolutions.”

The oxymoronic title of the book alone alludes to its quirky nature but does nothing to hint at the profound impact the book was to have in its day and for the next 5 decades.

When Kuhn was working, the 1960’s were tumultuous and exciting times with many major scientific advances being made in rapid succession. Kuhn undertakes, with profound scholastic discipline, to lay the groundwork for how the scientific community can standardize revolutions; using the well-known term “paradigm shifts;” so they are responsibly vetted before being unleashed on the public. Kuhn didn’t invent the term paradigm shift, but he gave it a specific meaning so it could become the foundation upon which scientific progress can rest upon with confidence.

Kuhn was deeply concerned with ensuring that scientific advancement is based on solid evidence and not wild conjecture or speculation. His emphasis on structure (as in the title) reflects Kuhn’s deep ambivalence about the concept of paradigm shifts. Paradigm shifts for Kuhn were extraordinary events that can only occur when there is an increasing number of paradigm-busting anomalies that challenge known paradigms.  He fully appreciated their fundamental place in scientific advances; “[A paradigm shift] represents a shift in the problems available for solutions … transforming the imagination to change the very nature of how the work is done.”

But he advised caution because: “Almost always the men who achieve these fundamental inventions of a new paradigm have been either very young or very new to the field whose paradigm they change.” This was the scientific version of; “Ah – all these young whipper snappers with their crazy new ideas.” Kuhn was the ancient age of 40 when his book came out.

Kuhn’s Legacy  

Kuhn understood that science was just smart enough to be truly dangerous. He articulated the process for advancement that spoke to generations of scientists because it delivered the needed framework for establishing responsible scientific advancement given the haphazard and dangerous nature of paradigm shifting. His established hallmarks for managing a paradigm shift are:

  • Default position is trust in the current paradigm the scientific community has accepted (“normal science”) even in the face the unexplained anomalies
  • If the number of anomalies continue to increase especially as a result of new data, then the scientific community must reach new agreements about how to measure the characteristic of the anomalies. Note – there is no paradigm jumping going on yet – but a simply a community consensus on how to accurately measure the results observed.
  • Vetting of scientific results must include peer reviews and repeatable results from independent experiments
  • Once community verified, the new paradigm is accepted by the community and thus becomes the “new” normal science
  • “rinse and repeat” …

These principles are widely and rightly credited with the creation of well-established methods and processes for managing paradigm shifts. Kuhn puts tremendous responsibility on the shoulders of the scientific community; “As in political revolutions, so in paradigm choice—there is no standard higher than the assent of the relevant community… This issue of paradigm choice can never be unequivocally settled by logic and experiment alone.”

All this structure allowed the 1970s, the direct heirs to Kuhn’s ideas,  to be considered the Scientific Golden Age. More than that, Kuhn’s principles gave us nothing less than our very high standard of living because scientific breakthroughs could safely developed and adopted.

Clay Christensen – the Father of Disruption Innovation  

Kuhn may have deeply impacted everyday life but he remained obscure to most folks until Clay Christensen who, in 1997, published the run-away best seller business book called:  ‘The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.” It was a roadmap for how businesses take “paradigm shifts” (from Kuhn) and create a competitive advantage through “disruptive innovation.” Failure to ride the disruptive innovation wave, the book cautioned, was likely to put a company on the path to destruction. Disrupt or be disrupted became, arguably, the first mega business meme.

At its core, Christensen’s idea rests on Kuhn’s concept of paradigm shift but it was recast in a decidedly sleeker package:

  • Identify those paradigm shifts likely to change industries
  • Create the disruptive innovation to capitalize on the paradigm shift
  • Automate everything so you can produce a product at a lower price with lower but acceptable quality
  • “Rinse and repeat” so as to maintain competitive advantage

Christensen astutely provided stress relief to business leaders who were reeling in the chaos of the 1990’s digital revolution with his “silver bullet” answers to complex problems. The 1990’s were a “Reality be damned as long as it’s disruptive enough” kind of decade.

An important side note is to recognize that in the 1990’s, many future VCs were cutting their teeth at organizations where the Disruption Myth was a widespread, accepted business strategy. As we will see, this plays an important part of our story.

What’s different between Kuhn and Christensen?  

The decades when Kuhn and Christensen were influential had many similarities. Generally speaking, both decades saw major technological advances; the 1960’s focused on industrial scientific advancements and the 1990’s digital revolution kicked off on August 6, 1991 when: “Berners-Lee posted a short summary of the World Wide Web project on the alt.hypertext newsgroup, inviting collaborators.” (Wikipedia). Just a few years later, Amazon and Google launched and the digital revolution attracted investments to anything “dot com.”

Whereas the decades themselves strongly paralleled one another, each man’s response was quite different. For Kuhn, a clearly paid out process for integrating new ideas into scientific knowledge was critical. By contrast, Christensen’s model was more concerned with the “big” concept around the importance of disruptive ideas, leaving big operational (yes – structural) gaps in his theories.

  • How was one to define a paradigm shift?
  • How do these disruptive innovations get incorporated into existing business models?
  • What were standards for measurement?
  • Could technology be duplicated so that it was transparently verifiable?

These and many other questions remained unresolved in Christiansen’s theory because he offers no framework for the industry’s development and evolution for disruptive innovation.

In practical terms, this meant and still means a lot of bumbling around in pursuit of the disruptive idea. Christensen’s meme did what every good meme does – go viral and in the process become a “truth” upon which almost all technological disruption since must rest.

Reality be damned.

In Disruption We [shouldn’t] Trust

Kuhn’s legacy is our trustworthy system to integrate new scientific ideas into our body of knowledge which has helped commercialize many new technologies; improving our standard of living decade after decade.

By contrast, while Christensen’s book itself was financially successful, it seems his theories were not. Probably because of its popularity, it took nearly 17 years for anyone to actually pick apart the math behind the Christensen’s work. Jill Lepore, a professor of American history at Harvard University and chair of Harvard’s History and Literature, analyzed the data behind his theories and scathingly observed in her 2014 New Yorker article, The Disruption Machine: What the gospel of innovation gets wrong:   “Disruptive innovation is a competitive strategy for an age seized by terror …founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation based on shaky evidence.” She continues; “Most big ideas have loud critics. Not disruption. Disruptive innovation …has been subject to little serious criticism,”

Lepore’s goes on to challenge the underlying assumptions about the disruption myth and wryly notes that the investment fund established by Christensen using his principles was a total failure and shut down.

While Christensen spoke to the angst many business leaders felt, he left out any process for vetting the new technologies that were flooding the market. We can’t chalk it up to coincidence that the “dot com” bust happened just three years after Christensen’s book was published, washing away many disruptive Internet ventures. In other words, our faith in disruptive innovation to build sustainable business is as real as a unicorn in the forest.

Christensen’s Legacy Haunts Ad Tech Today

To this day, ad tech continues to live in the shadow of the Disruption Myth, trapped there by an investment community that believes unblinkingly in the ideology of disruptive innovation, largely I think because of their early exposure to Christensen’s model. This devotion shapes what and who VCs invest in, with blinders on as to the effect the tech has on marketers (agency and advertisers). This Ad Age post I did called, “Why Excluding Marketers from the Ad-Tech Boom Is a Failed Strategy” (April 30, 2015) laments the flood of “cool” ad tech that is increasingly detached from the real world of marketing. “My anger swelled at the scope of the marketing efficiency devastation. And my frustration knows no bounds at the abundance of tech “products” with an appalling lack of “productive” solutions. Mostly though, we lack systems where everyone has a chance to benefit — investors, ventures, advertisers, agencies and of course “Judy Consumer.”

The vestiges of the Disruption Myth that continue to haunt ad tech today are:

  • VCs who continue to fund ventures based on their disruptive algorithm or automation platform without considering how the technology lives within the marketing ecosystem
  • CEOs with little or no direct experience in the industry who create disruption without necessarily creating value for marketers
  • The community of marketers that has largely been marginalized leaving the disruptions to be shaped in the VC/ tech echo chamber
  • Measurement standards that are “best we can do” – not the best that can be done
  • Lack of transparency fed by the “black boxing” of disruptive tech

On a human level, Christensen’s legacy means that if you work in marketing today, you are in peculiar type of hell. You appreciate the potential of digital marketing to build businesses yet you’re frustrated at the chaos and corruption of ad tech that is built on pillars of impressions sand funded by disruption-obsessed VC money.

Marketers are reeling from trust issues; between agency and advertiser and between brands and digital audiences. They are reeling from attribution issues and most challenging of all – they are overwhelmed in understanding how measure the artistry of marketing into the ecosystem as an equal partner to the technology. This is why the word “bust” is not far from the lips of any investor in ad tech in a “history repeating itself” déjà vu moment evocative of 2000. But it doesn’t have to be that way.

Slaying the Disruptive Innovation Myth.

Till 2014 or so, marketers were all too happy to take a hands-off approach, leaving the geeks to work it out amongst themselves. Marketing trade organizations belatedly scurried to catch up, by that time, the VC disruption die had been cast and tech disruption obliterated any investment in marketing artistry or operational excellence.  Marketers had very much lost control of their own industry.

Reality be damned ads long as it was disruptive enough.

By 2015, though the “disruption” cracks were becoming gaping holes as marketers struggled even more in the fragmented ad tech landscape. An Entrepreneur article I did exposed the high cost of ad tech to people: “Disrupting the Disruption Myth” (August 2014) My aim was to crack open VCs narrow definition of what a disruptive venture can be, using Xiaomi’s (pronounced SHOW-me) phenomenal growth as a prototype of a wildly successful venture without any disruptive tech in sight.

Back in 2014, I may have been just one voice, but by 2015, there was a growing chorus of marketing voices demanding ad tech disruption be about human disruptive technology.

Looking for Disruption in all the Right Places.

If Kuhn had been writing in the 1990’s instead of Christensen, I suspect the ad tech landscape we have today would have been far different. There would have been “community” due diligence around how a disruption is an improvement over existing approaches.  There would have been peer review to establish standards to describe these approaches. And most certainly there is would have been vetting process ensuring that potentially deeply invasive technology is used responsibly and to serve people well.

But as it was, the technologists and the “disruption myth” devotees at investment firms, have been in charge for the last five years with pretty much a free hand to “disrupt” at will. Now that many ventures are struggling – even the high flying ones, many VCs and technologists are scratching their head wondering what went wrong.

Any marketer can tell you. The only thing that ad tech really disrupted is the human element of marketing; so crucial in the creation of meaningful connections between brands and audiences.

That’s why going forward, there will be a new paradigm in marketing where the “how” is more valued by investors than the disruptive “wow.” The ventures emerging will create innovation specifically geared to balancing the art and science of marketing within a structured model of transparency, vetting and measurements. From 2016 and on, the community of marketers will be far more active in creating and assessing the disruptive value of new tech as disruption will mean innovation that drives genuine progress.

Ad Tech Disruption in the Future

By now, we can appreciate how the structured approach to “paradigm shift” that Kuhn imagined, was morphed by Christensen into a non-structured disruptive myth ideology that for ad tech, means a lot of chaos and operational dysfunction.

In 2016, the disruption dust cloud will lift, allowing clear heads to pivot; abandoning their reliance on tech-based disruptions in favor of ventures that focus on operational ad tech as their innovation.

Strategically, these ventures will share some common characteristics that are Kuhn inspired, distinguishing them from their Christensen-imbued predecessors:

  • The distinct lack of disruptive “wow” or black boxes in favor of an operational analytical “how.”
  • Abandoning the near sacred MVP (minimum viable product) model of most ad tech startups in favor of a new MVP = Maximum Valuable Product. Consumers are very sensitive to subtle changes that can occur in frequent platform iteration causing changes to expected campaign ROI.
  • New “outcome-based” SaaS models as marketers begin to drive better contextual experiences through new contextual tech AND processes.
  • Engineering obsession around a highly satisfying and frictionless user experience without ad tech compromise.
  • The financials of these ventures will be realistically investable but also sustainable by the industry. Plainly put, today’s current VC expectation that ventures achieve 60%+ margins is unrealistic causing much of the click fraud that is weighing down the industry.
  • Their leaders will likely be experienced marketers rather than 20 something tech geeks. Marketing is as much about processes as it is automation. It takes real world experience to create that merged vision of art and science.

And the winners are…

Taken together, we will see a blossoming of ad tech over the next five years in various industries and functions making these ventures interesting (and dare I say disruptive):

1) Healthcare as an industry is going through a “retailization” transformation that is largely about creating user responsive systems and services. This is, for the healthcare industry, a paradigm shift as the industry moves from “fee for services” model to an outcome based model.

A host of disruptive marketing technologies will burst onto the market from innovations around wearable tech to tackling the mountains of medical/ provider data. Healthgrade (http://www.healthgrades.com/) is an example of a company working on wrestling all this data into a user friendly format. Today, they help about 1 million people a day make sense of the vast amounts of doctor and hospital data (like reviews) available all customized to meet the needs of that individual. They plan to expand to power better ways for consumers to manage medical expenses through aggregating medical information, offering product information and making it transparent for the patient to decide while managing users’ online security.  Ultimately this, like other ventures in this space, rely on an excellent user experience.

2) Direct marketers are likely to be winners in the new ad tech disruptive game because they are making the leap to deliver personalized experiences where tech supports the very human side of customer acquisition and retention.

Going forward, direct marketers will expand their email/ database capabilities into new marketing cloud offerings like Bombora (http://bombora.com/products ) who; “Aggregate. Organize. Activate.” data to make it incredibly useful for B2B marketers across business applications.  Cue Connect (http://www.cueconnect.com) is also interesting because it takes a “direct” product level approach to helping retailers stay connected with customers and create excellent user experiences. Their online platform gives retailers new insights and tools to provide a better, integrated on/offline shopping experience for their customers using products level (not the more typical user level) insights based on their behaviors (i.e. – share or saving as a favorite).  This product centered approach reflects a sensitive understanding of “how” real people shop for stuff – the “wow” is there but it’s not the point.

3) Content marketing is on ascend almost in direct inverse proportion to the degradation of CTRs on many forms of display advertising.

Today though, this category of ad tech is a messy, fragmented, incomprehensible landscape of content creation, social publishing, sentiment tracking and on. Each venture, eager to be disruptively investable, went deep into a functional silo leaving the marketer with a dizzying myriad of options that don’t play together too well. Native, just one form of content marketing, is an example with its dizzying array of networks and “platforms.”

Disruption here will revolve around ability to deliver true relevant brand messages through contextual advertising technology that will be well-defined; merging human creative process with programmatic RTB technologies. Our venture is an example in this space as we link data related to content and RTB programmatic advertising. Another example is Kargo, a great mobile venture that excels at amazing, rich and personalized video experiences.

4)  The massive business called TV will be (finally) disrupted with the arrival of VR (virtual reality) in 2016 and Apple TV which will drive the final nail in the old world TV distribution model. The paradigm shift here will be the reverse of control from broadcasters and content providers to individuals where video streaming, gaming, shopping are all delivered seamlessly across devices.  It is likely that TV disruption will come from the mega networks (ie Facebook) as any large tech company (ie Samsung).

The way forward depends on the human element.

Current marketing chaos is rooted in an excruciatingly unsustainable model imposed on marketers by VCs who limit their vision to disruption described with words like scale, algorithm and SaaS anything.

But now the alarm bell is ringing in everyone’s ears because more money is spent on more tech, yet marketers are getting less done and investors are getting less returns.

We can do better and Kuhn showed us the way.  In 2015, marketers have experienced a paradigm shift of their own in the form of community unity propelling marketers to take back control from the technologists. Redemption will come from discarding the unproductive Disruptive Innovation mythology from our thinking (it may take VCs longer to let of this cherished tenant) and replacing it with a disciplined process as Kuhn imagined but coupled with a new sensitivity around the need for practical solutions that allow marketers to create new user experiences.

2016 will see the triumph of marketing brains and art over pure disruptive tech brawn. I’d like to think would Kuhn be proud.

Top 8 tech terms marketers love to hate.

Nothing rankles the ire of any marketer with even a tad of experience more than those highly touted “new” tech terms or concepts positioned as silver bullet answers to, heretofore unsolved, marketing   problems. And to those of us who’ve been around the marketing block a few times, these new terms resemble a toddler’s early attempts at speech – cute but a phase they’ll grow out of. depression

Unfortunately, though, some of these usually harmless little word experiments “stick;” taking on a larger-than-life meaning that does a disservice to everyone.  My plain hope here is to put these concepts into context so they can be practically applied in the day-in-day-out business of marketing.

1. White labeling:

The history: It started life decades ago in the tech world referring to the practice of re-branding 3rd party technology as your own so it can be resold at a higher price.  This was worked well for many tech platforms like CRM or email service providers because the “resellers” were often system integrators or tech companies themselves.

The impact: When the practice began to be applied to the marketing industry, i.e. an agency white labeling a tech platform, it translated poorly because a marketing company is poorly skilled to take on the management of a tech platform.

Why I hate the term: The term shines a spotlight on the bigger disconnect between the business models of tech platforms versus advertisers/ agencies. White labeling is no solution for anyone; agencies have to fake it, tech companies get no credit for their innovation and brands are sold “black boxes” – a sure recipe for problems down the road.

2. Native ads:

The history: This term was recently coined by Fred Wilson in 2011 as “native internet marketing model” and “native monetization systems” (Fred Wilson’s 2011 talk on this topic). This concept was picked up by a social media tech platform and morphed into meaning advertising that’s consistent (a.k.a. native) with the environment around it.

The impact: If only Fred had asked any marketer, he’d have learned we had a term for that concept; alternatively called advertorials (1980s), sponsored content (1990s) or custom content (2000s). And just like in years past, the trust issue about separation of “content church” and “advertising state” plagues the effectiveness of today’s “native ads.”

Why I hate the term: Tech platforms can push demographically accurate “native advertising” but that doesn’t make it trusted advertising, (disclosures notwithstanding). Experienced marketers know that advertising that is not trusted is not worth doing. Tech ventures are climbing that steep learning curve.

3. Growth hacker:

The history: Somehow this term evolved as an awkward mash-up of the terms “hacking,” the ability to use tech wits to achieve results usually at “low/ no cost,” and “marketing growth.”

Ugh! This pairing spawned a Frankenstein child capable only of crude brute tech force that is ultimately unfit for the delicate business of marketing.

The impact: I don’t think anyone has a real clue what a growth hacker really is. I do know that anyone who is actually hiring marketing folks snickers at the phrase.

Why I hate the term: Some things seem obvious and yet require saying nonetheless. For the record, no marketer wakes one day to say; “Let me spend the most money possible to create the least result possible.” Marketing is about getting the most bang for the least buck.  That’s not “growth hacking” – that’s the marketer’s job description.

4. MVP (Minimum Viable Product):

The history: The “when to ship” decision remains probably one of the most excruciating decisions every tech CEO must make. Investors, eager to reduce their risk, push CEOs to ship the least offensive product possible a.k.a. the MVP (Minimum Viable Product).

And they’re not kidding when describing it as “minimum viable.” This virtually guarantees that almost immediately, iterations are needed to adapt to market feedback. Problem is, in this context, MVP and the “iteration” model (deserving a place on this list in its own right) fails marketing practitioners.

The impact: The MVP problem lies in the fact that a constantly “iterating” marketing platform can mess up the very delicate and time consuming sales conversion process with just a single interruptive interstitial here or badly retargeting ad there.

Why I hate the term: MVP encourages a UE race to the bottom with more and more users getting more and more frustrated. Worse, it seems the MVP concept has become a “get out of jail free” card to excuse a tech platform’s particularly bad results or awkward UE. “Iterations” offer little salvation, actually exacerbating the problem (more on that below).

5. Iteration:

The history: Software development is a process of creating, testing, fixing, testing, fixing a.k.a. iterations. This “agile” process has evolved over the years but it is always based on some machine-based process of trial and error.

The impact: While machines are great at handling iteration – people aren’t. Making continual changes or iterations to a marketing platform is fraught with possible bad user experiences that can blow any marketing proforma out of the water.

Why I hate the term: Iterations have become so pervasive in an MVP world, it is virtually impossible for marketers to keep up. Facebook alone is planning an “iteration” of six ad products in the next few weeks. Iteration is chaos for marketers.

6. Earned media

The history: This term does not have its origins in tech but in PR where it referred to the additional “earned” or free media a story got. This additional “free” media coverage was in direct contrast to “paid” media coverage.

But sometime in the last 5 years, the term was co-opted by the tech world and linked to social media with unintended but harmful consequences.

The impact: The damage was done in talking about “social media” as being able to generate “earned media” – setting up the dangerous expectation that social media is free or cheap just like “earned media.”

Why I hate the term:  Any marketing practitioner knows it takes lots of time and hard work to get social media to work properly. That is not free or even cheap. The mythical “earned media” beast creates false expectations that are hard to overcome.

7. Impressions:

The history: In the old days, it was relatively easy to estimate the number of people an ad campaign would reach given the limited number of outlets; TV, magazine, radio and even movies. This diverse yet limited media was measured in terms of standard “impressions” easily translatable to a real-world audience number.

The impact:  Theuse of impressions worked with traditional media because of its tangible audience delivery numbers but it fails in today’s digital landscape that is capable of serving billions of impressions but incapable of telling us how many people were actually reached.

Why I hate the term: This term, more than any, IMHO is the root cause of a system-wide loss of trust between agencies and tech platforms; advertisers and publisher audience numbers; consumers and advertisers. This epic trust failure explains the steep decline in all forms of digital advertising interactions.

8. Engagement:

The history: The term was long used to describe great creative because it was “engaging.” Later, sometime in the 1990’s, it was applied more specifically to direct marketing because of its ability to precisely measure direct response engagement (i.e. – email or banner ads).

The impact: It’s rather humorous to watch marketing tech platforms gush about engagement as though it just hatched from the brain of the clever tech set. That would be benign enough except that a tech platform’s idea of engagement is a herky jerky set of user “twitches” and clicks instead of the elegant dance that a great engagement experience can become.

Why I hate the term: Technologists’ slavish devotion to engagement is rather shallow; lacking in the nuance to understand the profound ROI difference between just an “interaction” and true “engagement.”

The marketing tech industry is trying to respond to the continued stream of bad news of plummeting digital ad response rates. At its heart, I believe the challenges stem from the lack of connectedness between technologists’ capabilities and marketers’ requirements. Language can be a bridge connecting technology with the business of marketing. Only then can we begin to unleash all the potential.

7 schizophrenic traits every startup CEOs must adopt

CEO PSYCHOSIS The role of CEO is often described in gauzy, glowing terms espousing passion mingled with ambition that runs deep enough to change the world. All this noble ambition belies the uncomfortable reality that the inner world of a start-up CEO is often a constant state of conflicting realities that can distract from the mission at hand.

This list reflects my personal experience as the CEO of a social commerce startup. I can tell you – the dual reality can be disconcerting at first but after a while it gives you a certain edge that makes you tougher and smarter the longer you stay at it.

1) Your vision must be out there enough to generate investor interest but not so out there so as no one knows what you’re talking about. We’ve heard it from the pundits a lot – be different, don’t just iterate on another idea. Gotcha but then when you truly do go out on the limb – you may not get investor interest because you’ve too far out on that very limb they asked you climb out on.

2) Being 100% committed to do the best you can do but realizing that it might not be the best that can be done. As CEO, people want to believe you know more than you do – especially if you are chartering new territory. Unfortunately, you know that your best is probably not close to the best that can be done. You have to hope that it good enough to get by.

3) Truly believing in your vision yet living with the reality that the odds are definitely against you. I heard Brad Feld of Foundry Group remark recently that they get about 1,000 pitches a year but only invest in about a dozen ventures. So do the math. Your chances of getting funded are very small and even you do get funded – your chances of success are not in your favor. It’s a miracle anyone actually takes the plunge.

4) You are constantly recruiting even though can never afford most of the people you would love to hire. I learned never ever recruit when you urgently need to fill a job. That increases the chances for a bad hire because hiring in a moment of need won’t bring the best candidate forward – it will merely bring the most convenient one to the table. Instead, you should be recruiting ALL THE TIME. The trick is keeping the candidates you want on simmer until you are ready.

5) You must be a perennial optimist yet become exquisitely good at “productive worrying.” The grind of a startup requires a positive, upbeat attitude to get the team through the inevitable tough times. Yet, a Pollyanna attitude won’t get the job done to overcome the inevitable stumble that’s to come. For that eventuality, it best to be prepared with a Plan B and a Plan C too. In my case, I’m such a good worrier that my Plan B’s have Plan B’s (ya – I know – that’s extreme worrying).

6) You want to be fully transparent but realize there are some things you should NEVER EVER tell your VC. There is great serenity in knowing that you have been totally open and trustworthy in all your dealings with your people, your customers and your investors. Despite that – never confuse transparency with “true confessions” when dealing with investors. You need to convey confidence with a healthy dash of cautious optimism. Keep the deeper “what if’s” worries to yourself unless you have a specific ask of your VC.

7) People call you “Brilliant” and a “Visionary” but you feel like you are faking it. If you are a half articulate and just passionate enough – people will use the “B” or “V” word around you a lot. They hang on your every word waiting for the inevitable pearls of wisdom to trip off your tongue. Yet, often people confuse “Brilliance” with deep experience and a “Visionary” for someone who has a good grasp of history. Truth be told though, often you feel like you are just muddling through. That’s OK because if you admit you don’t know then others can step in to help. Otherwise the visionary, a.k.a. prophet must always have the answers. Not.

There you have it – the seven habits that are vital for any startup CEO.  I guess ya’ need just a touch of crazy to pull it off.

The real effect of The Facebook Effect.

The last few days were eventful for Facebook and its ever so precocious young founder.

First, Facebook went public to much fanfare. Here is how the Mercury News summed it all up:

“After opening at a price of $42.05, shares of Facebook’s wildly anticipated initial public offering closed a mere 23 cents above its pre-set price of $38. The failure of Facebook’s shares to rise well past $38 was seen as a disappointment by some observers. Nonetheless, it remained the most successful technology IPO in history and set a record for the number of shares sold — more than 567 million — in a company’s stock market debut.”

Then before we could absorb that news we learn, in stark contrast to the hullabaloo of the IPO, our young CEO-HERO gets married before a humble gathering of 100 people ostensibly there to celebrate the bride’s graduation.

With two such momentous events surrounding our CEO-HERO, we saw endless stories about Mark Zuckerberg as the driving force of Facebook. Even more stories were written about whether Facebook was a good investment for individuals.

But what interested me more was really understanding what was Facebook’s secret sauce that made it worth a $100 B (“B” stands for breathless also – ya’ know). Why did this stock seem to defy all rational evaluation?

No one seemed to really answer that question well.

I knew early on (by about 2010) that social marketing and Facebook were going to be powerful when I observed: “social media was not just a tactic to be tacked onto the backside of a traditional campaign”. Yet everyone, me included, was surprised at the speed of Facebook adoption. It was breathtaking.

Many ascribed that stellar growth to the brilliance of Mark. Yet, it just did not feel right to me to assign Facebook’s unprecedented growth to his vision or drive alone. I give the kid credit – but giving him so much credit just left me unsatisfied.

And because everyone ascribed Facebook’s stellar growth to some alchemy borne of CEO-HERO brilliance, people are willing to suspend critical thought to its value and its future.

For me, the Facebook mystery deepened. At a most fundamental level, why was Facebook worth so much?

The answer came to me in a blinding flash from a recent Harvard Business Review article (“Your brain on Facebook” ) that describes the neuroscience behind Facebook’s meteoric rise. In fact, “a decade’s worth of work reveals some unexpected quirks of the brain that all link to one big idea” – we are social creatures with a “social brain” and that drives a lot of behavior in a lot of unexpected ways.

“Here’s how the social brain works. There is a “default” brain network that is always “on” and it is involved in thinking about yourself and other people.  When not doing anything else, the brain’s favorite pastime is to think about people. We actually have to suppress the activity in this region when we want to do any active processing, such as doing math.” But in the absence of any other cognitive activity – our social brain kicks in!

This explains why Facebook can capture so much of our attention because, neurologically speaking, we are wired to be addicted to being social and “connecting” and “liking”. And like any other addiction, the reward centers in our brain seek ever more satisfaction just to stay “normal.” If you spend a lot of time on Facebook, you are basically “high” all the time. That makes it really hard to focus, think deeply, or perhaps learn something new.

Now that gives a new spin to the term The Facebook Effect because we are, in effect, wired to become Facebook junkies.

That explains, for example, the irrational exuberance the market places in Facebook’s future. It also puts a new spin on Mark Zuckerberg’s success. No doubt he is clever but maybe his real luck was that he became the first efficient digital distributor of social addiction.

Gives one pause – doesn’t it? As well it should and you would not be alone. More and more “resisters”, people to who shun Facebook, are coming forward as an emerging trend. More and more, people are getting ready to kick the Facebook habit:

–  Over 82.2% of people would not pay for Facebook according to a HuffingtonPost poll – April 25, 2012

 As Facebook grows, millions say, ‘no, thanks’ – USAToday May 16, 2012

–    “Facebook Loses $10mm From General Motors – HuffingtonPost May 17, 2012

 Silicon Valley Can Do Better Than Facebook – TechCrunch May 20, 2012

What’s next for Facebook as it starts business Monday morning as a public company? I have no idea but while many of us may be hooked on Facebook now – it only takes one disruptor to knock the addiction from our system.

The only question is who or what will that be.

Judy Shapiro

Why the “cha ching” of the $1B Instagram sale might actually bankrupt Boomer parents.

By now, most of you have heard of Facebook’s $1Billion sale of Instagram, an app developed by a bunch of young 20 somethings that lets users post photos. Today, Instagram has about 50 million users which works out to about $20/ person. “Cha ching” for anyone involved …

Punditry aside about whether it is a shrewd deal for Facebook – instead of “cha ching” – all I hear is hissing as the air escapes from Boomers’ retirement funds.

It is alarming and here’s what I mean.

You see, I have worked with tech ventures for over a dozen years, starting at Bell Labs New Ventures and continuing to this very day. In that time, I have worked with many startups, often gratis, because it’s so rewarding when my expertise can really make a difference in the early days of a venture. CEOs have the product vision but they rarely have marketing know-how to get the product to market.  That’s where I step in. I help startups assess their market potential so they can monetize.

And in the dozen years or so I have been doing this, I see an alarming new twist to the never ending parade of venture dreams that haunts me. I liken it to the disturbing “Gold Rush” era where many more prospecting failures bankrupted folks versus the rare, outlier successes.

In today’s day and age – here is how it goes down.

Johnny or Jane are in college and – wham – they hatch an idea for a company often inspired by the innovation incubators on every campus. The idea grabs their passionate attention because at least they can try and make it happen versus trying to get a job which is tough and depressing.

Mr. and Mrs. SupportiveParents are happy their kids have found something that inspires them, so they cover more of their kids’ living expenses so the kids can commit themselves to their “passion.”

After about three or four months, their idea has some substance and the kids realize they need some money to create a “demo”. Of course, there is no cogent business plan (if a business plan even exists) but Mr. and Mrs. SupportiveParents kick in the $10,000 or $20,000 to create said demo –  on top of the extra expenses they are already incurring to keep their kids in school. (This is when you can start to hear the air escaping from Mr. and Mrs. SupportiveParents 401K accounts!)

A couple of months later said demo is “almost done” but not quite because the kids did not really do a business plan and as they worked, the idea kept changing (translation = more cost). “But I only need another $20,000 to finish it off. Then it will take off because it is so cool. Please …” Again, as we would expect, Mr. and Mrs. SupportiveParents step in and shell out what their kids need.

Slowly but surely, over time, as their kids refine their idea; there is steady attrition of the parents’ savings plans because startups need constant funds. This tableau is playing out again and again and I know it because I have met too many Mr. and Mrs. SupportiveParents in the last few months who have depleted their savings by $150,000 or more to help their kids live their passion.

It is frightening to see since most new ventures are “high risk” in the best of circumstances, making them wholly unsuitable investments for most any Boomer given their proximity to retirement.  And if that’s not bad enough, it’s even worse once you understand that kids’ ventures, proportionately, have a higher mortality rate because they are borne of 90% enthusiasm and 10% practicality despite their parents’ 100% support 100% of the time.

This is a dangerous combination – especially in frothy times like ours where opportunities for kids are limited yet perversely, the potential for untold wealth is tantalizingly possible.

And this brings me back my point. The Instagram sale was an aberration – a fluke – an outlier event – possible because of a unique set of circumstances. Yet it infused a new level of Gold Rush fervor into the passionate hearts of ambitious young entrepreneurs despite the reality that the chances of striking it rich today are about equal to striking it rich in the Gold Rush of 1848.  And just as sadly, their loving parents are funding these ventures despite the improbable odds.

So while many people hear the “cha ching” of $1B, all I hear is the air escaping from parent’s retirement funds. It is not a happy sound. Not at all.

Judy Shapiro

P.S. – I am posting this as my personal Mother’s Day present to Mrs. SupportiveParent. Be careful – please!

The surprised entrepreneur – The last moment I can allocate GRATITUDE Grants

I am surprised how fast shares go in a startup company that people are excited about. Our plan is mostly done and the investors have begun to make overtures. My total ownership has been happily whittled away to include the wonderful talent this company will need.

I gratefully allocated shares to our president who is deeply experienced as both an entrepreneur and a VC. I was deeply honored when our CTO, who gets hundreds of business ideas in a year but only considers “one or two,” signed up.

Ever so carefully, I identified the key talent we would need and one by one each person on this amazing team is coming onboard with their allocation. Yet until we officially close our first round (scheduled for February), I’ve still got ability to allocate shares pretty much as I want.

But not for long.  

Now, much to my surprise, I realized how very quickly my ability to make unequivocal awards of shares will be gone. Now is the last moment I have to express my gratitude to people who have believed in my ability to create a new way forward in marketing.

So with the urgency imposed on me by our first formal funding round, I have barely a few weeks to share these gratitude grants.

I get to tell my dear gentle creative storyteller, a giant in the business of video, how valuable his lesson was in the meaning of video to create a powerful experience.

I finally get to ‘give-back’ to my “hard core” (hehe) entrepreneur, investor and civil liberties activist friend. She taught me perhaps one of the most important lessons in this space – the focus needs to be about creating shared experiences using content rather than solely focusing on the content. It is a powerful mind-bending insight that has deeply shaped how engageSimply develops its concept.

I can go back and reconnect with some of my ex-colleagues and CEOs who, over the years, inspired me, instructed me when I just didn’t get it and generally invested in me by teaching me ever so patiently. I can’t imagine how I would be doing this without their support and faith.

In the end, each gratitude grant is my way to repay the gift of confidence that each person so unselfishly gave me. It helped me turn a blind eye to the limitations imposed by stereotypes about what a tech CEO looks like (age or gender) or should do.

Over the next few weeks, I will have the distinct privilege and (one time only) opportunity to award these gratitude grants – without justification or encumbrance. To those of you on the list – stay tuned.

Lots of people track “firsts” (e.g. first investor, first alpha) – I want to note the “lasts.” I want to acknowledge these last few precious moments when I have full control of my company and I can still allocate equity as I want. This privilege is fleeting likely not to be ever repeated.

I best be sure I don’t leave anyone out. What a happy chore.

Judy Shapiro

The Surprised Entrepreneur – Why Me?

These posts about my journey with this new venture are often characterized as a surprise. In fact, it’s a surprise on so many levels that the unlikeliness of this enterprise is, in itself, a pretty big surprise.

So in this sea of surprises – the biggest surprise rests in the unlikeliness of me as the one to coalesce this vision; only useful to ponder so that we know what makes us different from many other marketing tech companies out there today.

Clearly I am an outlier given my age, gender, training and temperament causing even the casual observer to wonder: “Why me?”

On the surface, one could point to my diversity of experience spanning B2B and B2C marketing. I’ve been fortunate to have worked in a diversity of industries spanning advertising (NWAyer), technology (Bell Labs, CloudLinux), software (CA, Comodo) and telecommunications (AT&T, Lucent, and Paltalk). The combination means I have a quirky understanding of how to look at a marketing situation from the brand point of view as well as the end-user perspective at the same time.

O.K. – That begins to answer the question but doesn’t wholly get at it since many of my colleagues are tech savvy too. While they express curiosity about the new marketing technology, they aren’t going off and creating new businesses.  Instead, most of my friends leading marketing agencies or marketing departments (like I was) are banging their heads against the marketing brick wall trying to figure out how to incorporate the “new” technologies into the “old” system profitably. In the chaos of “creative destruction” (a term coined by economist Joseph Schumpeter), my peers can’t see the marketing forest for the financial trees.

So again I ask; Why me?

In digging deeper, I then realize that my experience with communications networks gave me a unique understanding about social networks. Both types of networks serve a similar purpose – the efficient transport of a call or a marketing message from the network edge (the initiation point) through the switching stations along its way to its ultimate destination.

Side by Side Comparison: Telecom vs Social Media Network

It also became clear to me that as social networks evolved into a powerful marketing network – it urgently needed system architects. But I saw no hint of any serious understanding of the issue or how to address it – not at the agencies or the social network companies or even the armies of consultants who offer insights but few tactical road maps.

When at first I noted this architecture gap back in 2010, I wondered out loud in Ad Age about the impracticality of integrating new technologies into existing marketing systems in posts like “Five Trends That Marked TechCrunch Disrupt Conference 2010.”  Then, my wonderment continued unabated at the lack of system attention when I wrote: “Has Facebook jumped the Shark”. Actually, I was writing mostly in the hopes of uncovering the technology companies that were focused on solving this system gap. I knew someone had to it…

But all I heard was deafening silence. I seemed rather alone in recognizing the utter futility of trying to retro-fit the older marketing system with the newer technologies. The sheer tonnage of all these new marketing “platforms;” so defined because they incorporated some combination of the mighty  local, social, mobile triad; were built by technologists (usually under 30) and not marketers. This meant they were long on cool but pathetically short on practicality. Yet as slim as many of these businesses seemed, they were getting valuations disproportionate to their real world usefulness (think Groupon), further highlighting the underlying weakening of the business of marketing.  It was an ominous echo from a decade ago.

This explains “Why me.” It takes depth of experience to see beyond the buzz to the potent marketing model evolving. I wanted a role in that evolution largely because it seemed few of us with any real world marketing experience were doing the heavy lifting of operationalizing the brilliance of all this new technology.

The journey to understand “Why me” is useful in that it defines the business we are in – creating the system upon which the rich marketing innovation engine can flourish.  It’s a surprise that it is me – but perhaps, this is the sweetest surprise of all.

Judy Shapiro

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