Smaller is Better: Web 2.0 2010

Alex and I were fortunate enough to be able to present something at Web 2.0 on Thursday of last week, and I’m happy to report that it went off without a hitch. We spoke about a topic that we’ve both been passionate about for quite some time: that a focus on smallness is the way when it comes to developing and understanding marketing ideas.

In the talk we step through nine connected examples from a variety of industries, sciences and arts, all supporting the idea that conceptual smallness is a defining factor for success in today’s economy. It starts with the idea of differentiation, which at least for us is a constant driver to create incredibly specific things. The way we see it, if people have millions of things to visit, look at, and purchase, whatever we make has to be f*cking awesome if it’ll get any attention. Not groundbreaking at all, I know, but we continually see examples of products and marketing things designed for massive, anonymous audiences. So at least some people aren’t getting the picture.

The nine stories go something like this:

1. People think they’re really special. And not necessarily with good reason.
   We found an article by Christopher Hitchens a while back that talked about the “narcissism of the small difference,” an idea that in places of great conflict, the belligerents tend to share a very tiny differentiating factor that’s caused the hostility between the groups. Without getting into that here, it points to an important human truth: that we think we’re really special, and really different from other people, even though we’re all pretty much the same when we get down to it.
   
   Which gets us to a design problem.
2. Specific, localized design wins.
   Based on an article that we found in The Economist, Panasonic was in a pickle last year, posting a ¥52BN loss in the second quarter. Remarkably, they decided to take their design department and spread them around the world – from 98% designed-in-Japan in 2009 to 15% in 2010 – with incredible results. By designing electronics that took into account local needs (energy efficient A/C units in India, where it’s hot, and fancy-looking ones in China, where they’re a status symbol), their emerging-market sales led them to an ¥82BN profit gain in Q2 2010. It’s easier than ever, and less expensive, to design things that are particular to an individual environment.
   
   Which takes us to rodents.
3. When competition increases, organisms tend to get smaller.
   These two chaps, Lomolino and Perault, studied patterns among rodents in temperate rainforests. They found that as the habitats for shrews shrank over time, the body size among the sample shrank as well. Which makes sense, right? If the habitat is smaller, food supply goes down, and those animals with a smaller “caloric budget” are better able to survive. Our interpretation: habitats for ideas and products are shrinking in response to competition. Which doesn’t have to be a bad thing…it just means that it’s okay for there to be a Foursquare, a Gowalla, a MyTown and a Facebook Places in the marketplace. It also means that we shouldn’t expect $100M valuations for products that are easily imitated and tweaked for an audience or a space.
   
   Which takes us to Fiji.
4. Small doesn’t have to mean unsuccessful.
   Alex found this crazy study by a fellow called Godfrey Baldacchino (from whom you can get a Masters of Arts in Island Studies) that talks about the relative success and failure of innovation and business on island nations. Apparently most islands are hamstrung by a lack of resources, a dependence on trade agreements, and isolation from other thought leaders. But the study holds up Fiji as an example of how to get by: steal thought leaders from other places, luring them with your island charms; create deeper relationships with customers by not only telling them that your coconut soap is excellent, but by showing them where it’s produced and introducing them to the folks that make it; and reframe value propositions in terms of rarity and distinction from competitors (see Fiji water). Our message here: be like an island nation. Embrace your constraints (in fact, add new ones if you’re a huge company and can do whatever you want) and use them to create smaller, more focused things than you would have otherwise. Because a constraint-free environment is an environment that fosters inaction.
   
   Which brings us to a core human failure.
5. In all things – politics and poverty included – we tend to be awed by the big picture.
   When people look at income stratification around the world, they tend to see things in continental terms, or even more broadly in terms of Worlds (First, Second, Third), Groups (Developed, Developing, Under-Developed) and Divisions (North/South, Rich/Poor). Obviously the segmentation is much more detailed than that – see Gapminder – and it’s my contention that a great deal of the failed development projects around the world are a result of “big” thinking: applying something that worked in one country to the problems of another, without seeing the little reasons why the problems differ. Without going off on a rant, it’s important that we avoid the Mashable-promoted population-based thinking to substantiate our clients’ “need” to get onto a new platform. It’s great that Facebook has half a billion people, or that Foursquare had a whole shitload of checkins last night, but that’s not really what’s valuable. It is valuable to find the small groups within these platforms that exhibit similar behaviors. For instance, the 450 people checking into schools every morning might be exceptionally valuable to a company that makes digital research tools. And so on. Unfortunately, most big organizations aren’t set up to talk to very small groups of people, stemming usually from some inability to measure the impact of those people on their bottom line.
   
   Which brings us to microfinance.
6. Microfinance uses highly specific objectives and payment terms to enable smooth flows of capital from one person to another.
   I think we can all agree here that Microfinance is a big, positive development made possible by digital tools. But in our view, it’s the mental models they use/support that lead to their success and the comfort people have in the use of the system. Donors feel good because their contribution tends to be small and the terms of the use of their money are made very clear. Further, the results are clearly communicated back to the donor/sponsor, completing a feel-good feedback loop that’s absent from most “big” charity. This is a model worth adopting. It’s not that big charity is bad, it’s just that it’s almost always unclear where a donor’s dollars are going, how they’ll be used, and the specific returns they’re creating.
   
   Which brings us to the real reason why banner ads suck.
7. We all know banner ads suck. But they mostly suck because they’re in big, anonymous places.
   We found an old study on banner ads that attempted to qualify what makes them work and/or not work. And while it was from 2003, it points to an important truism: adding interactivity, animation, emotional appeal, and incentives didn’t bolster an ineffective ad; however, better targeting did have a measurable impact. On the whole, among the 10,000 ads studied, the B2B-focused ads tended to be in more targeted, smaller locations. And they did way better than the B2C ads, which showed up on big sites, trying to garner the attention of the masses.
   
   Which brings us to the failure and success of Joshua Bell.
8. No matter how good your product is, if you put it in front of a big, lame audience, it’ll fail.
   This one’s pretty simple, and I think is explained particularly well in Alex’s slides. So I’ll keep this brief: when Joshua Bell performs in front of an audience at Carnegie Hall, he sells out the place at an average ticket price of $100; when he played as a busker in a D.C. metro station, he made $32. Don’t try to be all things to all people, and don’t try to get an uninterested, anonymous audience interested in your shit.
   
   Which brings us to the rise of focused, premium content.
9. When it comes to media and entertainment – things people want to watch, read and hear – the more focused, the better.
   This one started when I heard Jimmy Wales speak at the New Museum a few months ago, where he brought up the idea that if media is used as a performance metric, people are getting smarter every year. Turns out this is the thesis of Steven Berlin Johnson, who uses the evolution of popular culture (viewed through the lens of TV) to show that people today desire media that is complex and intellectually challenging…even if not in the traditional sense. And I can dig that. I Love Lucy reruns, for me, are unwatchable and feel generic, while Seinfeld, Curb, Arrested Development, the British version of The Office and even It’s Always Sunny continue to be fascinating. To me (and I’ve not read Johnson all the way through), it’s focus that makes them great. All the aforementioned watchables are intently focused on the needs of a particular audience… in the same way that NPR and The Economist (and even Monocle, in its own special way) continue to deliver a consistent and unique experience year after year. And financially… it seems to make sense. In the midst of a continuing crisis for the media industry, NPR has doubled its market share and The Economist made $92M on a circulation of 1.4M. They’ve clearly got it going on.

And that’s it! All the examples, we feel, provide useful fodder for the argument that a sense of conceptual smallness is the way of the future. Hope you fine folks at Web 2.0 enjoyed the talk.