Digital Disruption: Similarities To The Gold Rush Days?

In his latest post, B&T regular and all-round raconteur, Robert Strohfeldt, proposes in this race for all things digital, two thing’s are for sure- there’s plenty of porkies being told and possibly plenty of money to be had in telling them…

Everyone wants to “get rich”. Crass but true. You only need to look at the lines of people queuing to buy Lotto tickets when first prize hits an outrageous amount – $50, $70 $100 million and more. Though the odds of winning are three-tenths of five-eighths of fuck all, people scramble to get their their numbers in. Many go into syndicates, so they can buy many more chances to win – if the winning amount is say $100 million, then the old adage of better to have 10 per cent of a lot than 100 per cent of nothing, comes into play.

History tells about the gold rush days during the 19^th century. Whether in Australia, California, South America, the activity was the same. Thousands of people packing up and heading off to the gold fields to try and make their “fortune”.

And no matter where the gold rush occurred the outcome was the same – only a tiny minority made much money from Gold. It was much more common for people to become wealthy by selling the miners over priced food, supplies and services.

One of the most popular people, in terms of followers, on LinkedIn uses digital transformation and disruption as the basis of almost all their articles. I liken it to the reaction to 1850s and 60s newspaper articles when the headline screamed: “Gold Discovered at (name of place)………”. You could bet your bottom dollar it would pull readers and desperate hopefuls by the thousands to where ever the so- called gold discovery was.

In Marketing Week another of the articles was published.

Being 2018, there would not be a lot of people in marketing and advertising who were around before the internet became the centre of most people’s universe.

Very cleverly put is the following paragraph:

The key to digital transformation and the most powerful question you can ask yourself is “what would your business look like if you started it today?”. It’s such a provocative question that it draws a defensive reply. Nearly everyone on the planet understands that knowing what they know now, knowing what technology is now here, being aware how consumer behaviours have changed, in hindsight they would have done things somewhat differently.

What they don’t say is that if you asked the very same question in 1975, you would receive the same answer. Bottom line is you learn a shitload when you start a business and if you are the one in seven (on average) that make it, you would have certainly done things differently when asked seven years down the track, then when you first started.

The saying that “history repeats” is because people are more interested in the here and now and don’t think the past has any relevance. Sure, technology has increased its rate of change. But it has always been changing.

The internet does not do anything different to what it could do when first conceived. Take the “Cloud” – in the late 90s, Oracle was saying software would be delivered by the internet. I am sure there are some people who were worried when last week’s cloud burst occurred, flooding a bug part of Sydney, that a lot of their data was being washed into the gutter.

I have often said the internet is a far better distribution tool than advertising medium. It has allowed companies to go straight to the consumer, rather than be held to ransom by the distribution chain. (Though that still occurs).

Many retailers have gone “under” recently and this has incorrectly been attributed to online retailers. Rubbish. The main reason many retailers have not been able to survive is cost, but the cost of rent. Look at the rise of retail rental price per square meter in high street areas and it far and away exceeds CPI. Online has not helped by making it easier for consumers to price shop/compare online. Though always the case, it is more than ever for retailers to rely on more than just the lowest price.

By selling online, the retailer does not have the rent problem. But they face an equally large problem – attracting shoppers. There are just as many stars in the sky as there are websites and social media pages. And just like bricks and mortar retailers, if they “live by price, they will ultimately die by price.”

No retailer has ever survived long term (pre and post digital), with “lowest price” being their one and only competitive advantage.

How can you tell an online retailer is doing well? They advertise on TV. Look at the results of marketing effectiveness awards (yes, they are not the be all and end all), but the brands or companies that do best take an integrated approach. As a retailer, you could not survive without a website. But this is a destination, not a promotional item.

Our highly read author works for a large media company. You may think I am an idiot, who has no idea, but one thing I NEVER do in any article is push my company’s services (or any associated with me).

In this same article he has a link to “Direct to consumer brands who shun agencies”. He uses as an example a mattress company, whose co-founder says:

Nurturing talent in-house by building fully-fledged marketing teams is helping these disruptive players take control of their creative, digital and social campaigns as they seek to maintain high levels of authenticity.

“One thing direct-to-consumer brands are best at doing is building their own brand. We’ve got such a strong brand proposition here, which an agency will never get because it’s part of our DNA,” explains Kuba Wieczorek, co-founder and chief brand officer of Eve, the sleep brand which delivers mattresses to direct to consumers’ doors.

But the he lets slip this bit of background on the co-founder:

Wieczorek comes from a creative advertising background, having spent 18 years working at agencies including JWT, WCRS, Fallon, BBH and McCann, before becoming head of sports marketing at Channel 4 and helping to run Channel 4’s in-house creative agency 4Creative. He also worked as a photographer for eight years, giving him a clear perspective on how to create a visual identity.

But the company uses a media agency (of course), with twice weekly meetings and even “embeds” the media agency person in the client’s offices.

With the continued progression of programmatic. It could be just as easily argued that media should be planned and bought in-house and creative out-sourced.

The founder has a strong creative background, but there is a massive difference between knowing and understanding your product/brand and being able to creatively express this. And as the business grows, he would have less time for writing ads and should be focused on big picture strategy and being a leader.

The Commonwealth Bank attempted to have their own in-house agency in the 90s. – called 360. It failed. Really good creative people want to work on more than one brand.

So, one exception is picked as an example meant to be extrapolated to all businesses.

Do you want to be the person our author tries to stimulate – one who charges off looking for a new idea driven by disruption and digital transformation, or someone who looks at and understands the changes (and the things that don’t change), brought on by technology.?

Some of these so called “disruptors” are pioneers, more likely to end up with an arrow in their arse than be long term successes. Take Airbnb – a high profile disruptor with tons of data at their disposal.

A friend received an email from them, supposedly to help set prices. The email advised they should lower their prices as their average nightly price was higher than the average nightly price of all accommodation in the same area.

Yes, the average price was higher, but the occupancy rate was also significantly higher – below is the table contained in the email.

My response was WTF?

Anyone with hospitality experience knows the balance of rate and occupancy is the key success. They have a help centre, which he called on numerous occasions. On most he received often contradictory information (couldn’t call it advice). I asked him to find out the background of the people he spoke to. “Google” was the most frequent response.

It seems Airbnb believe they are a technology company, rather than a hospitality organisation.

Rather than try and “invent” a new product or service, there are many Airbnb’s out there. They have spent a lot of time and money developing a new product or service which a small business could not possible afford to do. But now a new “market:” had been developed, they could take advantage by going after smaller segments and offering a far superior service.

They would not have to find the gold, rather take advantage of the bigger and slower operator’s “digging”.

There is way too much hype around “digital transformation” and “disruption”. The digital aspect is relatively new to business, but disruption has been around since commerce began. Someone is always trying to develop a “better mouse trap”.

The basics of business and marketing don’t change. Technology has provided many potential advantages. But it is easy to be side tracked and use technology for the sake of it, rather than for genuine improvement.

A gold rush mentality has developed. Do you want to be the person who hopes they can beat the odds and find gold, or the smart operator who takes advantage of the money and time invested by a big player?