As a consultant, entrepreneur, academic, researcher, author, as well as founder and CEO of the global branding strategy firm Vivaldi, Erich Joachmisthaler is one of the leading voices in branding. Vivaldi’s innovative online series, “Press Play on Platforms,” challenges brands to reposition their business models in order to maintain a competitive advantage — the most recent being the topic of shifting from pipeline to platform thinking. The series covers a multitude of topics, including one of our favorites: the definition of social currency and how brands can harness the power of it.
In this edition of The C-Suite, Erich speaks with us not only about the reasoning behind his successful series, but also about why some brands miss the mark when it comes to social listening (most notably, Dove and Pepsi) and what steps brands can take to mitigate this in the future. Finally, Erich discusses the next great challenge for bands.
Read on to find out more…
Sidney Evans: In one of your recent articles, you express your opinion that consumers’ willingness to share has great brand-building potential. What is “social currency” and what are some tips for brands to harness the power of it?
Erich Joachimsthaler: About 10 years ago, we discovered this pattern where consumers use various forms to share information about brands – they either advocate the brand or simply share information about the brand. We call that “social currency.” A brand has social currency when they have consumers not just consume or use the brand, but also talk about it and share information (data) about themselves and the brand. And we saw that that has great brand-building potential. We thought, “Wow, this could really be an alternative to building brands in the traditional way through advertising.”
About twenty years ago, I wrote a Harvard Business Review article on the subject of brand-building being our advertising, so I was drawn to that. If you look at it now, years later, I think I was perhaps a bit naive. Maybe social currency wasn’t that powerful in the beginning and hasn’t been for many years now. I think there’s a big change currently taking place. Even though social currency isn’t the replacement of traditional advertising – if you will – or traditional ways of building brands, it is still a very powerful way of connecting with consumers in a way that also sells the way consumers like to engage.
One of the examples that I’ve used in some of my writings is GoPro. When GoPro started in 2004, everyone immediately called its demise. First, there are other cameras out there. Second, there are other camera manufacturers that could produce an equally-good action camera. Then, the iPhone came around in 2007 and everybody said that phones already have very good cameras (and GoPro is dead).
But GoPro isn’t dead at all; it is actually thriving. And the reason why it is thriving is because they figured out that what they solve for in the life of consumers isn’t just a better picture or video of a stunt on a surfboard or snowboard; what they’re really about is enabling consumers to share those pictures and memorable experiences with others. So, GoPro (instead of investing only in the camera) invested in technology that allows a surfer to go back to the shed in the morning after a few hours on the waves and, as soon as he gets a WiFi connection, automatically upload the film or pictures on a GoPro server or site, which then edits videos down to 15-second short clips or automatically selects the best pictures. And with the press of a button while you wait for your coffee, you can share those visuals with friends.
And therein lies the real power: people like to share something that they love or treasure in their lives. In this case, the #2 most frequented social channel on YouTube is from GoPro. GoPro, this small company if you will, is hugely successful with that. Every time you share one of those videos or perfect picture of yourself with others – the moment you share that – there’s a GoPro print on that picture and people of all walks of life say, “Hell yes! I’m going to do the same thing!” They buy a GoPro camera and then off they go, down the slopes. Their brand-building actually becomes a consumer-driven activity; you invite consumers, draw content from them, and then help them publish and post it – that creates an awareness of and familiarity with the GoPro camera that then translates into sales. And on and on and on… It’s a wonderful virtuous cycle that has the power of building the brand in a non-interruptive way.
SE: One of the things that’s interesting about that is that it also brings out a competitive nature. If you’re skiing in Vail, do a black diamond run, and download it on GoPro, then I might want to do that course, as well. So there’s a little bit of a competitive edge that it draws out in people, as well.
Ej: You’re hitting the mark. The competitiveness, for the most part, is healthy. It’s a little spark in your life, a little, “Hell! I can be there too!” I sit in my apartment here, working on an article, and I see that my buddy from across the city here in New York is just posting something as he races through Central Park. It’s a good social thing. It’s similar to what social psychologist and behavioral economist, Richard Thaler, wrote in his book Nudge: it nudges you in a friendly way – and it builds the brand.
SE: As a former executive, I can personally attest that healthcare is poised to experience its own transformation as it relates to the digital revolution. What are some tips to mitigate some of the innovation challenges, as well as the turmoil, for healthcare brands moving forward?
Ej: That’s a great question because I’m fascinated by the complexity of healthcare. And the question is so big that I don’t really know how to begin… I am frustrated by the fact that much of what happens in innovation on the healthcare side is the pill-plus sort of digitalization: you sell pills, add an app, and then you can sell more pills (or something like that). And I think there is this huge opportunity of bringing together the payer and the payee, the patient and the provider, the various constituents in this digital age because once information and data can be safely shared, a lot of great things can happen.
And I don’t think there’s one brand right now that has cracked the nut that is the healthcare business. I do see examples of good intentions, though. For example, the other day I studied the digital health platform of Philips. I like the brand Philips Healthcare, they’ve done some really good work. So I perused through it and studied it as far as I could from my vantage point. And, when I looked at their results, they showed how they increased the throughput time of patients in a hospital and reduced the number of emergency care visits (which are quite costly). I thought about it and, at first, I was thinking how great it is that digital has improved the efficiencies of a hospital. And that’s precisely the point: the whole point of healthcare should be to start from the patient perspective. I like what I heard from one company on the West Coast: “We don’t maximize the number of people insured. Our objective is to ensure healthy years lived.” And I think that’s the idea. It’s not about how many times I go to the hospital or take advantage of healthcare providers’ services, but it’s about healthy lives lived. That’s the right objective.
I was just reading an article about employee culture and what motivates people to engage with their companies. One of the results that the study showed is that when you lose that meaning that exists in your company (whether you’re really saving lives or simply solving something for your customers), your employees become disconnected. And with that disconnect, there will be a significant loss of engagement as people become demotivated (and leave the company). Sometimes you find an industry where you simply cannot do anything because the context of the industry is petrified.
SE: Congrats on the success of the “Press Play On Platforms” series. Please explain the concept of pipeline to platform thinking. How are business models making this transition?
Ej: Right now, we are at the brink of a massive, massive change in the way companies create value for customers, consumers, patients, what have you. And they’ve never, in their history of hundreds of years, been at the same brink of transformation or change. This change has to do with the idea that, until today, what we have done is created what we call a supply or value chain where a set of activities produced by a firm results in a product (perhaps a car) for which a consumer, at the end of the pipeline or value chain, is willing to pay an extra price. If it becomes a German car, from Munich, from BMW, then the various activities BMW performs along their value chain produces a car that is a luxury technology performance vehicle they call “the ultimate driving machine” and for which the rest of the world is willing to pay a premium price. In this way, the value is created along each of these steps, with the consumer at the receiving end of those steps. Economists call this supply-side economies of scale: the more you standardize these processes, the more the cost per unit goes down and companies’ profit increases as volume goes up.
Everyone has that value chain and some people have optimized it more than others. Zara has optimized it at the level of speed in the fashion business. And everybody has their pipeline. But here’s the thing: for the first time in history, the optimization/improvement/digitalization of that pipeline or value chain doesn’t yield any more significant benefits. Everyone today can optimize their pipeline to the max. So value creation between a BMW, Mercedes, and Audi is pretty much identical – there is no difference and they all run at the same cost level. Many companies are, therefore, in this pipeline world where they are obsessively trying to optimize something that cannot be optimized or maximized anymore.
Now, for the first time in history, we have arrived at a business context driven by technology where we are not driving value through the pipeline or value chain, but rather through the platform. And the platform is very different from the pipeline. The platform is something which is called, in economic terms, creating demand-side economies of scale. This means that it creates advantage through connectivity and interaction: the more users use a product or service, the more valuable that service becomes. And that creates what’s called network effects, which translates into exponential growth.
There are many examples, but there are two big ones that people talk about in the new world, the startup world. One is Uber. The more drivers there are on one side of the platform, the more consumers are attracted to the platform. The more drivers there are in the city of New York, the more consumers will use Uber because of the shorter estimated arrival time due to there being more cars on the road close to where you are. And because I, as a consumer, provide my information and highly sensitive data around where I am right now and where I’m going, Uber has access to data that they can use to optimize where they place their drivers across the city. So, by getting the data from the consumers, they can optimize their platform and interactions to create more value for other riders – and, of course, for other drivers (because the more consumers there are, the more drivers can make money driving for Uber rather than Lyft or taxi companies).
The economic value that is now being created for consumers is through this interaction where we get from consumers some type of data and use it to improve the services or products that we deliver. Think of Tesla. The other day I said, “I have to own a Tesla. I’ve got to buy a Tesla.” I said to myself, “Who wouldn’t like a future that Elon Musk envisions?” Electric cars, safer driving, no CO2 emissions, I don’t have to go to the gas station, and the cars are produced with 10% or less parts than gasoline-powered cars (meaning that it’s much less likely to break down). It’s produced at a much lower cost and, over time, there is a lot less effort that is also good for the environment. From building a hyperloop to going to space, I kind of like what Elon Musk says. And, in the immediate sense, when I buy a Tesla (unlike any other car that you can buy in the world) and roll it off the showroom, every mile driven in that car immediately contributes to an algorithm that optimizes the autopilot and enables semi-autonomous driving. Despite the fact that we’ve all created safe cars, hundreds of people die (let alone get injured) every day in car accidents. And one way to solve this real problem is through a semi-autonomous or autonomous car solution – because the only way to improve human error is to minimize our mistakes. So, when I think about buying a Tesla over a Chevrolet Volt, I would buy a Tesla because I buy into the future and I believe that they are doing something good for the world. (Not to mention that it’s also good for my pocketbook because I don’t have to buy gasoline anymore.)
In short, Tesla gets the data and, because more drivers contribute that data, the value of Tesla cars increases for everyone. I, as a consumer, am a contributor to the value that I create for myself and others – I’m not just on the receiving end of a car company that tells me what I should have as my next car model. I am actually, in part, creating that value. That’s a platform.
And here’s how powerful this is: In one week, Elon Musk’s idea sold more than a quarter (namely 15 billion worth of Model 3) of what BMW sells the entire year. And at a premium price. And without a penny put into advertising or dealerships or other sales interruption methodologies that you and I know very well as being part of the car industry. He didn’t even have to write a brochure. All he had to do was say, “Starting Monday, you can order a Model 3.”
SE: As you are well aware, there have been a number of socially insensitive ads as of late. Most recent and notably, Dove and Pepsi have missed the mark as it pertains to cultural sensitivity and social listening. Of course, the root of the problem is complex and speaks to a number of failures. In your opinion, why do some brands miss the mark and what steps can they take to mitigate this in the future?
Ej: There really is no excuse for these mistakes. In this day and age, these things happen because the guardrails between the agency and Dove, in this case, or Pepsi aren’t properly designed anymore. In the old days, when it was just print ads and you had a long cycle of producing the ad and pushing out the ad, we used to have something which we called brand guidelines.
But, in 2017, in this accelerated world where you’re pushing out to so many channels in so many formats and so many different media at the same time, the decisions have to be very quick and agile. The guardrails cannot be a set of guidelines that you prescribe to creatives and agencies; instead, the guardrails have to be human. If the guardrails are set properly from a human perspective – if there’s enough diversity – on the client and agency side, then these things don’t happen. But I think that, if somewhere along the hierarchy the human guardrails are not properly aligned, then that makes it difficult.
SE: So, what role do you think social listening plays in that, Erich?
Ej: Social listening is extremely direct. I write something bad about a brand and immediately get a response. If you have those human guardrails – the right level of hierarchy in an organization, the right network that approves things – in place and treated with care, then social listening helps to call out what happened, what the problems are, and how to solve them with speed.
SE: My trademark question: What’s next? As it relates to your business, what is the next great challenge for brands?
Ej: There is an interesting dynamic where we went from brands as image and awareness (think the Don Draper world) to brands as emotions. I think we are now going back to what I call brands of substance and I think that brands can become really meaningful in people’s lives. They can make a huge difference. And consumers invite brands in. I invite Tesla into my world, or maybe Amazon Prime who really minimizes my time – they become the way I manage the world I live in. Brands treat consumers not as objects anymore, which is the old way. Brands now build real substance and can give you time back.
Instead of being mechanisms of interruption, brands become mechanisms of attraction – they pull you in, they invite you in.
That’s where we are.