SOME PREDICTIONS ABOUT THE P.R. BUSINESS FOR 2009

MediaBistro.com is an important and widely read source of news for the media community.  It is very robust in its scope of coverage, and provides a constant diet of news, features, information of interest to people in the business, and interactive conversation.  They link to a number of blogs they have created for several niches of the industry.  One of those blogs is called PRNewser.  It has become the custom at the end of one year for PRNewser to solicit predictions about what might happen to the public relations business in the year ahead.  They like these predictions to be concise and pithy.  Anyone who has read a previous post here on Death of Time knows that I am rarely concise, but nevertheless, here is my attempt to create a series of concise and pithy predictions about the PR business for 2009, with one caveat:  What I am predicting tend to be events occurring within the process of an evolutionary process, so whereas I am willing to bet these will occur (with some shades of difference), they may not begin and/or end precisely within the confines of the next twelve months.  

1.  The model for the PR business will change because nobody cares how busy PR people are - they only care about the value of their work.

Time is money only when you live by the standards of the manufacturing economy.  But we are transitioning ever quicker to a knowledge economy, and public relations is far from a manufacturing business with lots of fixed hard assets.  So why is the PR business still based on the outdated concept of billing by time?  The process of creative destruction associated with the financial crisis will accelerate the destruction of the old model, as The Washington Post’s Pulitzer prize winning business columnist Steve Pearlstein predicted in October 2006, when he discussed the Qorvis model.  In 2009, we’ll start seeing more firms set fees on the basis of a fixed retainer based on the value of the effort rather than the time it may take to make it happen.

•2.     Segmentation within PR firms will begin to crumble.

In a world where the desired audience for a message can be highly targeted and can be reached through many distribution channels, why are there silos and “practice groups” inside PR firms?  Isn’t the idea to share experiences, approaches, and contacts to maximize all the firm’s human assets for the benefit of the client?  Silos are non-productive.  The only reason they exist is because time sheets allow Management to measure everything into little segments of time, so that’s what drives management actions.  And time also determines how people get paid and how bonuses are awarded.  And who is deemed “profitable.”  And how to tell which clients are most cherished.  Crazy.  Chunks of time have nothing to do with what the clients want.  They want great work.  They are no longer going to be making their budget decisions by how many chunks of time it takes to do something; they are going to be determining the value of every dollar they spend against results delivered.  Delivery on that expectation will be directly related to the degree of collegiality among talented people seeking shared goals.  The silos have to go.  It’s only a matter of time.

•3.     The communications business will stop defining itself by virtue of a distribution channel.

Think about it.  An ad agency is an “ad agency” because it buys time or space on a distribution channel to deliver its message to its targets.  And a PR firm is a “PR firm” because it “earns” coverage in a distribution channel controlled by others.  A digital shop focuses on digital distribution channels.  Sports marketing uses another distribution channel: perhaps a stadium.  But wait.  Is “communications” about the distribution channel or about getting a well-crafted message to a targeted audience to achieve specific goals?  So, why has the industry defined itself by the distribution channel instead of the goal of the effort?  It’s about time to change the way the industry has organized itself.  We’re going to see the end of PR firms, ad agencies, new media shops, etc.  We’re going to see communications firms, where distribution channels are simply tools to get messages to audiences, and not the center of gravity of the effort.

•4.     Social media loses the hype.

Wait!  That’s crazy.  Social media is THE thing.  It’s going to revolutionize communications.  Yup.  Except for one thing:  it isn’t going to revolutionize communications 100%.  It’s important.  It’s going to hurt other ways of communicating.  It is NOT going to kill all other ways of getting messages to people.  It has been over-hyped.  If social media is going to become as important as it can be, it will be because it is a part (a very important part) of a total and robust communications campaign.  To get there, all the proselytizers of social media have to take a breath, get a grip, get real, and bring down the hype.

•5.     At least one of the multinational communications conglomerates bites the dust.

Impossible?  Sure, just ask everyone from Lehman and Bear Stearns (should I mention the rest?) who also never believed that they would go bye-bye virtually overnight.  Look at the big conglomerates.  Massive and duplicative overhead structures.  Silos within silos.  Outdated business models.  Offices in parts of the world where the clients have gone into comas.  Offices dedicated to verticals that are on their back.  Large amounts of debt from their acquisition binge.  The ongoing need to make earn-out payments - and just how are they going to do that?  With stock that is so low that the dilution will be enormous, or with money that (if they have it) they have to preserve? 

•6.     The bifurcation of the communications industry into “consumerism” and “supporterism.”

Since the post WW II expansion, the messages that have inundated the American public have been “buy this” messages.  Whether targeting a business or an individual, the message has virtually always been to buy something.  A small sliver of the total universe of messages has been of the “support this” variety - that is, messages that ask people to do something else: to vote or influence or urge or make a call or go to a rally or do a wide range of other things for the sake of keeping or changing public policy.  That is about to change.  The economy is going to lead to severe cuts in consumer campaigns, and the frequency of those messages is going to drop sharply.  At the same time, the Obama Administration is giving every signal that it is going to address fundamental, game-changing issues in a large number of businesses and arenas of daily life.  Every special interest group in the nation is going to have a mission critical need to defend the status quo or promulgate and promote new proposals.  That will lead to a surge in “support this” campaigns.  Those communications firms with a portfolio of “buy this” campaigns are going to face difficult times as they experience budget cuts from their existing clients and difficulty competing against firms that have a strong portfolio of “support this” campaigns.  What should we expect?  A lot of communications shops are going to try to retool, redefine and reposition their expertise to go after “supporterism” campaigns.  We’ll start to see seminars and college courses and papers all about “how to run a campaign to get people to support a public issue.”  Asserting expertise in running advocacy campaigns will become very hot.

•7.     That will be good news for Washington; bad news elsewhere.

I realize that my own company, Qorvis, fits this description, so I keep poking myself and saying: “Make sure this isn’t wishful thinking.”  But I’ve also spent four decades in this market, and have become a part of it.  Here’s what I see:  During the tech boom, if you ran a software company, it didn’t matter whether you were in San Jose, St. Louis, or Scotland, you were inclined to go to Silicon Valley to at least interview for your VC, lawyer, communications firm, etc.  As the surge in “support this” campaigns occurs, prospective clients will gravitate to Washington communications firms, lobbyists, lawyers, and their industry trade associations, all of which comprise an existing and interlocked community.  Top talent from New York and other traditional centers of the communications industry will relocate to Washington and become part of the culture of advocacy.

•8.     The death of the PR lifestyle business.  The rise of the PR lifestyle consultant.

A public relations business can grow large enough to go public and expand to a global presence.  But that size isn’t necessary to succeed.  In fact, the PR business can be a great business for individuals who pull together to form a small group of professionals and simply want to make a very good living, control their own destiny, and enjoy their work.  I consider those to be “lifestyle” businesses.  I understand the attractiveness - I operated as the ultimate lifestyle business (a one-person shop) for almost seven years.  But very often, these firms do not have significant financial depth; nor do they have a very diversified client base.  In other words, they are always vulnerable to getting hurt by a relatively few number of bad events.  And those bad events are coming, part and parcel of the economic meltdown.  The PR firms are going to have to do one thing to survive: cut back.  And after they cut back, they will likely have to cut back more.  There are only so many expenses they can cut back: people and office, and they will cut back both.  What will be left will be the initial entrepreneur working out of their home.  In addition, those who were cut from lifestyle firms as well as larger firms, corporate organizations, and non-profits will also move to their homes and set-up shop as one-person consultancies.  Many will achieve substantial success.  I think their success will be attributable to the degree of expertise they provide and their ability to find a large universe of potential clients via the web.  I also think those who try to compete on the basis of being the low cost provider don’t have a prayer.

Whether right or wrong, there is an interesting year ahead of us.  It will be easy to count blessings.  Best to all.

IF THE FALL IN THE PRICE OF HOMES IS THE ROOT OF THE ECONOMIC MELTDOWN, WHAT IS THE ROOT OF THE FALL IN THE PRICE OF HOMES?

By my age, habits have become pretty well etched into the pattern of my life.  However, I have to admit that I am joining that crush of people who are getting more of their news online.  I have grabbed The Washington Post at my front door every day for the past five decades or so.  For years, my day hasn’t really begun until I have a cup of coffee and The Post.  But more frequently these days, I find myself early in the morning moving seamlessly from emails to news on my own schedule without worrying about whether The Post has been delivered yet.  Now, I get my news most frequently by watching one or more cable TV news networks while balancing a laptop on my lap.  Usually, on my computer screen is an email from Seeking Alpha, which suits my needs for news and opinion better than anything else I’ve discovered.  They assemble articles from people with very high credentials who publish on the web, often on their own blogs or news services.  The people from Seeking Alpha bring their own substantial and credible editing to the process.  They allow their reader to specify the topics that interest them and send them a daily morning email with links to articles grouped by each area of interest specified.  One of the areas I monitor is Housing.  This morning (12/23/08), I was especially impressed by an article entitled “The Housing Blame Game, Redux.”   It was written by Paul Jackson, who is the publisher of “Housing Wire,” which is a respected source of news and interpretation of the residential real estate market.  In his article, Jackson makes a well-reasoned case that the Bush Administration’s “Ownership Society” policies, coming on the heels of similar goals of every Administration since Carter, must assume much of the blame for the crash of home prices.  That prompted me to leave a reply to Jackson’s article that articulated my view that blaming the crash on political policies still isn’t enough.  It’s a much deeper issue, in my opinion.  Below, I am reiterating the comments I posted at his article, in an extended and edited form.

The Crash Of Home Prices, Like The Crash Of The Stock Market, Was Not An Isolated Episodic Event.  It Happened In A Much Broader Context.

Although I think Paul Jackson’s article was enlightening, I also think his discussion misses the major point:  new and ill-conceived financial instruments and political policies certainly exerted major influence on the housing bubble, but they existed within the context of a cultural phenomenon.

From mid-1986 until the very end of 1990, I was VP at NVR, which grew from a small IPO of a Greater Washington regional homebuilding company called NVHomes to become the nation’s largest homebuilder when, in a classic minnow-swallowing-the-whale case history, NVHomes acquired Ryan Homes.  I worked closely with founder and then Chairman/CEO Dwight Schar, a brilliant businessperson who (at least from what I could observe) had an intuitive genius for real estate, how to market new homes, and how to operate a homebuilding business.  (As an aside, he also has become a close friend of George W. Bush, and he has been one of the major fund raisers for the Republican Party for a number of years.)  While working with (and learning much from) him, I attended four years worth of conferences where we and other public homebuilders made presentations to analysts and institutional investors.  In fact, I sometimes took his place making the company presentations at those conferences. 

In the process, I got to see all the other publicly owned builders make their presentations over a very dynamic four year period of boom-to-bust for the real estate business.  This combination of having a close-up view of the homebuilding industry as a part of the senior management team of the nation’s largest homebuilder and as an observer in the audience listening on a regular basis to CEOs of other homebuilders gave me the opportunity to see a fundamental change happening in the residential real estate market.

Product Product Product.

The fundamental rule of real estate had always been: location location location.  In the mid-80s, that rule changed to: product product product. Location did not become totally irrelevant in the marketing effort and it certainly influenced the price of the home, but if you take a look at the advertising and marketing of new homes at the time you will see that they were promoting product over location.  They stressed bigness, open and big volume space, tubs so big that the water got cold by the time the tub was filled, over-size kitchens with islands, master bedrooms with sitting rooms, extensive upgrades, customizing, etc.  In short, how the rich lived became the expectation of the non-rich.  More, in fact, than mere expectation.  Maybe closer to some weird sense of entitlement.  

Consistent and concurrent with this trend, the market began to be segmented so that there was no longer just a “move-up” market but there was a “first time move-up,” a “second move-up,” and then the McMansion market.  In other words, there was always a reason to sell your existing house and buy the next level up.  By creating a “next step up,” homebuilders increased the size of their market.  The consumer was lured to another sale.  Each segment of the market was defined not so much by location but by the features and look of the house itself.  Product became king.  So what if the house was located in the far suburbs requiring an awful commute?  Look what you could live in once you got home!  How great you would feel!  How impressed your friends will be when they see the house!  Worth the commute.

The real estate crash of the early to mid-1990s popped the market bubble for about seven years or so until people who bought at the market high saw their homes’ value recover to the price they originally paid.  When the market came back, it came back with a vengence, fueled by homebuilders who built and fed into the consumer’s appetite for more-and-better as defined by product.  The marketing that was used to turn-on the market could not have succeeded unless the market itself was susceptible to that pitch.  And that is my point: the market itself (our culture) also must assume a major burden for what has happened to home values.  And, because the crash in home values is a major reason for the crash of the equity and debt markets, you could say by a simple extension of logic that it was our culture that gave rise to our current financial condition.

The evidence of wealth became a priority to Americans, and the house became the most important evidence of wealth.  Even if you didn’t actually have wealth, you could still look like you had it.  Remember the TV commercial that showed the guy with all the props of wealth who admitted that he was “in debt up to my eyeballs”?  That was a perfect summary of the American Culture:  The appearance of wealth not only became more important than actual wealth, it became so important that debt would be assumed to the degree that it actually undermined the reality of (or prospect of building) wealth just for the sake of giving the appearance of wealth.  How perverse was that logic?  So perverse that it could be attributed to only one thing: a bandwagon mentality gone horribly off-track.

Although the consumer’s ability to get themselves into that fix was helped by new financial instruments and government policies, as Paul Jackson’s article suggests, the consumer’s decisions and priorities were fueled less by financial instruments and more by the culture that dominated our society and nation at the time.  

To dismiss the cultural issue when trying to identify the causes of the current financial crisis is a major mistake because if we are not sensitive to it as a cause, we will not observe cultural shifts as they occur as a necessary component of the solution.  I think those cultural changes will exert at least as much influence in how and when the residential real estate market is reshaped as any new mortgage instruments that may be appear on the scene.

What Cultural Changes Might We Expect?

If my premise is correct, then the question becomes: What sort of cultural changes might we expect?  I think that will be very difficult to predict correctly, but here’s my current guess as to attitudinal shifts in the American Public’s view of their homes:

• Resurrection of the importance of a home’s location.
• Acceptance of the concept that having a house that can be afforded is more important than having a house that is a financial stretch but gives you a certain image. 
• Rejection of the importance of the appearance of success and wealth as a priority in life.
• Willingness to at least consider the proposition that in some cases renting a home might be wiser than buying a home.

If …

If those cultural changes are made as part of the revitalization of the residential real estate market, there will probably be similar and related cultural changes in society as a whole.  As that occurs, the current American Dream of “Buy more … Buy bigger … Buy more expensive … Buy on credit even if you can’t afford it” will be transformed.  Perhaps the transformation will include a reversal, at least in part, to the traditional American values of liberty, freedom, and individual responsibility and opportunism.  We’d also be likely to see increased savings rates and decreased levels of debt.  But I think the cultural change on the horizon will be much more than an updated restatement of former ideals.  I believe new standards, priorities, ways of doing things and the basic definition of what makes for a “good life” will emerge. 

I do not think this will happen overnight, and I think many of the changes will begin to emerge in very small and maybe unnoticeable increments (which would increase the need for being sensitive to the issue so that we can observe changes as they evolve).  In the meantime, given the destroyed wealth that formerly existed in peoples’ homes, the ongoing southward direction of the equities and debt markets globally, increasing unemployment, and more dramatic stories of the Madoff ilk, it’s going to be very easy in 2009 for people to count their blessings.  But the blessings they count will be less of the materialistic variety – less tied to money (or even the lack of it).  And if “blessings” morph FROM things like the latest flat screen television in the media room with theater chairs TO things like reveling in family and non-capital-related assets, then the cultural change will be significant indeed.  After all, there won’t be another catastrophe in sub-prime mortgages if there is no market for sub-prime mortgages in the first place.  

THOUGHTS ON THE RISE OF “SUPPORTERISM” AND ITS IMPACT ON WASHINGTON – THE VIDEO

At the December 2, 2008, “New Washington” conference held at The National Press Club , I gave a brief presentation on how I believe the convergence of the economic downturn and the new political environment will give rise to a decline in “buy this” messages and a surge in “support this” messages.  This is a video of that presentation.  For videos of each of the other speakers, including David Rubenstein of Carlyle, Gov. Tom Ridge, and Joe Robert (real estate investor), plus Steven Fuller’s presentation of his most recent projections for the region,

click here.

STEVE PEARLSTEIN’S “LEADERSHIP” BLOG IS GREAT.  BUT THE PREMISE IS FLAWED.

I have a great deal of respect for Steve Pearlstein.  Not only have I read his column for a long time, but I have had the opportunity to spend some time with him one-on-one when he prepared his article about the Qorvis business model versus the outdated model of most communications firms.  He and Ben Bradley have launched a very important blog called “On Leadership” based largely on the premise that the current turmoil of our economic system is a failure of leadership.  I applaud the effort, but I also believe there is a basic flaw in its premise, as articulated below (which is a more complete statement of comments I submitted to the Leadership blog)

THE EFFORT TO IDENTIFY ANY SINGLE “BLAME” FOR THE ECONOMIC SITUATION IS A FUTILE PASSION AND DIRECTS ATTENTION AWAY FROM A MORE ACCURATE DIAGNOSIS.

Any effort that tries to point a finger of blame is flawed from the start because a finger has a point that is too sharp.  Its focus is too narrow.

I understand the desire to try to identify one thing to blame.  There is a sense of security and closure when you can say: “Yes!  That’s it!  That’s the reason!  Let’s blame THAT!”  But when you blame something on a single “that” (be it lax regulation or not enough leadership), by implication you are dismissing that and that and that and ….”  And that, I think, is a big mistake.

When I try to look at the economic situation broadly instead of narrowly, I find that the economic situation is the consequence of a very broad and deep cultural issue, not a single reason.

START WITH AN ANALOGY … AND A KEEN SENSE OF THE OBVIOUS.

I’ll start with an analogy.  A few weeks ago I was listening to the news in my car and heard the report that a recent survey showed that teenagers who had been subjected to more messages about sex had sex sooner than those who didn’t receive those messages as much.  That was not shocking to anyone with a keen sense of the obvious.  When someone is hit with a message constantly, from all directions, presented in a compelling way, guess what?  The person very often is influenced by that message.

Everybody to whom I’ve mentioned that survey responded virtually always with some version of “of course.”  Now let’s consider the messages that have been aimed at all Americans since the Post WW II expansion began.  Basically, they have been “buy this” messages.  Buy bigger.  Buy newer.  Buy better.  Buy more expensive versions of what you already have.  Buy what you can’t afford.  So, if it is a restatement of the obvious to say that teenagers who hear more about sex are more likely to have sex, isn’t it just as obvious that people who have been inundated their entire lives with “buy this” messages have become consumers-to-the-extreme?

IN THE PROCESS, THE AMERICAN DREAM HAS BEEN REDEFINED.
AND SO HAS THE AMERICAN CULTURE.

How is the American Dream defined today?

The family story of how my father’s father came to the United States has been distorted, I am certain, by him and those who elevated him to a pedestal.  But I think the story, regardless of the embellishment, was basically right.  He may or may not have come to Ellis Island with nothing more than “a satchel” and a piece of paper with someone’s name.  He may have come with a pocketful of coins and a network of people who would help him.  But one thing is sure: he came (about 100 years ago) to pursue a dream based on certain human principles.  Here, he could observe his religion without persecution.  He had the freedom to find his own work or even start his own business (which he in fact did).  He could say what he wanted.  He could bring up kids with the strong prospect that they would live a better life than his own.  He could become “comfortable” in many ways, directly related to his own standards and initiative and willingness to take a bigger risk whenever he sought a bigger reward.  He could enter into a lifetime deal of any size with a handshake.

Shortly after the war, aided by veteran’s loans, the American Dream started to became symbolized by ownership of a house.  At first there was “cookie cutter” Levittowns.  But the ante was upped.  Success, status, social network, all became tied to the size and location and looks of a person’s home.  As that phenomenon grew, the homebuilding market began to be segmentized into various tiers.  So we saw the move-up buyer further segmented into the first-time move-up buyer, the second-time move-up buyer, the dream home buyer, etc.  The American Dream became measurable by a home’s location, style, and square feet.

However, as important a component of the American Dream as the home became, it was joined with other defining factors:  the car, flat screen TVs, clothes, vacations, bragging rights for how well you “played” the market.  As this environment gained momentum, the power and frequency of “buy this” messages aimed at the consumer produced an increasingly voracious appetite for buying things, and placing importance on having things.

Now … look around:  What is the American Dream?  How far is it from my grandfather’s dream?  One is based on standards and ideals and personal initiative and responsibility; the other is based on consuming.

THE CULTURE OF THE VORACIOUS CONSUMER AND THE INEVITABILITY OF AN ECONOMIC COLLAPSE.

We became a culture where REALTORS encouraged their customers to step-up to a bigger sale, even if they couldn’t afford it this year because real estate values always go up (don’t they?).  And once that sale was made, there was someone to help the consumer get a mortgage with a teaser rate (don’t worry about whether the mortgage won’t be affordable after the first rate adjustment).  We became a culture where the home buyer rejected the real estate basic law of “location location location” in favor of “product product product.”

We became a culture where individual pieces of questionable debt could be bundled into packages whose value was determined more by activity in the secondary market than by the basic value of each part.  A culture where if someone was told: “It’s hot; it’s going to increase in value,” the response was “buy it” rather than “what is it?”  We became a culture where people who packaged those loans and sold them were paid millions of dollars for … for … for doing what again?  How did they actually earn that big paycheck?  By being lucky enough to sell something with a higher price tag than refrigerators to customers who actually congratulated them for making so much money for calling them to say “buy this.”

We became a culture that knowingly elected a President that was anti-science.  A culture that allowed its healthcare and public school systems to sink in quality from the world’s role model to among the lowest ranked in the world.  Where not only the very rich were entitled to ride in a chauffeured stretch limo, but so were teenagers who were going to a high school prom.  We became a society where some pairs of sneakers assumed such status that some people would kill to own them.  A culture where for years and years leaders of a union (UAW) and executives of an industry (automobiles) knew that they were burning a big candle at both ends and the flames were bound to meet, but they clearly preferred living in denial to living in reality.

We became a culture where real leadership became too rare.  But lack of leadership wasn’t the only problem.  It wasn’t the single thing that we can blame for today’s economic situation.  It won’t be the only solution.

THE COMING CULTURAL CHANGES.

The current economic situation will ultimately be remedied.  We’ll even get to another period of growth and wealth creation.  And another period of correction after that.  The questions are:  How?  When?  With what pain (and opportunities)?

If I am right that the true cause of the economic situation was no single thing but the total impact of a culture, then the remedy will be largely cultural in nature.  Indeed, I believe that we are just beginning to see the first signs of a cultural change.  I am in the process of writing an analysis of the Obama election as evidence of an important cultural shift where the political passion moved from the extremes to the Middle.  I have also posted previous articles, including one entitled “The Emerging Shift in the Focus of Messages Aimed at the American Public,” in which I discuss another indication of cultural change associated with the political environment.

We’ll see more indications of culture changes as we live through this economic situation.  However, it will be difficult to identify the nuances and patterns of this process because it will occur in a world in the process of making a fundamental move from a manufacturing to a knowledge economy; where vital commodities including oil and food have volatile prices and availability; where individual economies are intermeshed into a truly global economy; and where people interact on a real time basis where geography, time and (often) language are irrelevant.  This is a different world in which fundamental change is happening; we can’t look at it (exclusively) in the same way that we have traditionally viewed the world.

In this emerging world, people can (and, I think, will) coalesce on line into new communities where members share vested interests not unlike the vested interests that in centuries past gave rise to new nations.  How will these new communities take shape and grow in a world disrupted by economic turmoil, heaving from the failure of a culture, tied together by the Internet?

I think the Washington Post’s online “Leadership” forum is important and I applaud it.  I think that it should be expanded to “Leadership & Culture.”  Because if we do not accurately define the cultural changes that are about to sweep this nation, and probably the world, we may find ourselves overwhelmed with a new cultural environment that could be very dangerous.  That would be awful under any situation, but especially now when we can use the new tools of communication to help shape a world that stands for some great standards, maybe even standards that are ethical in nature, and that encourage and nurture individual and collective responsibility as well as individual and collective hope.  Just like the American Dream that attracted my grandfather and so many others to this nation.

THE EMERGING SHIFT IN THE FOCUS OF MESSAGES AIMED AT THE AMERICAN PUBLIC

& WHAT THAT WILL MEAN TO WASHINGTON (AND NEW YORK)

 The following are my remarks prepared (and slightly edited) for the conference on “The New Washington” held at The National Press Club in Washington, D.C., the morning of December 2, 2008.  Qorvis Communications was a sponsor of that conference and helped initiate it.  The conference, for which almost 600 people reserved seats, was hosted by Bisnow,  and other sponsors included Patton Boggs and Deloitte.

In the first quarter of this year, Chrysler and Ford cut U.S. advertising budgets by 42 percent and 31 percent, respectively.  In April and May, Proctor & Gamble, the largest advertiser in the world, cut its ad spend by twenty percent.  In the second quarter, Netflix, one of the largest advertisers on the Internet, cut its marketing expenses by 27 percent.  All of that was before the financial meltdown of October – before the consumer went comatose.

It is simply restating the obvious to say that the economy is bringing with it a dramatic decrease in messages that basically say “buy this.”

At the same time, the changing political environment is leading to an accelerating increase in messages that say: “support this.”  We have already begun to see these messages and it’s only spring training — the real season hasn’t even begun.  Support the importance of chemistry.  Support this way of  conducting union elections.  Support reforming the nation’s healthcare system this way and certainly not that way.   These are part of the tip of an iceberg.  We’re going to live in an environment of a permanent political campaign that does not end with an election but goes up and down in intensity as issues move onto the front stage, get resolved or deferred, and new ones come up to take their place.

The reason for the current and emerging growth in “support this” messages is obvious:  The new White House and executive branch, led by an enormously charismatic President with dramatic persuasive abilities to articulate the messages for his own agenda, is giving every indication that he will be unafraid to address very fundamental issues.  He will be supported by a new Congress that will take office feeling a mandate for change from a highly engaged and interactive constituency.

Together, the new White House and new Congress will propose game-changing rules for a broad range of industries including healthcare, energy, defense, the nation’s transportation infrastructure, financial services … the list goes on.  As a result, special interest groups of all sizes, ideologies and motivations will have mission critical needs to defend those existing policies – and/or promote those new policies – that serve their vested interests.

There are some important inherent differences between campaigns to get an audience to buy something versus campaigns to get an audience to support something.  The very metrics for success are different:  seeking votes in the Senate for proposed legislation is a vastly different process than seeking to get a consumer to buy an SUV.  For example, asking someone to make a phone call or send an email to a Senator is a major goal of campaigns for supporters, but inane in campaigns for consumers.

Supporter-driven campaigns are combinations of public affairs, grass roots, crisis communications, media relations, guerilla marketing, political strategy, special events, interactive and social media, and traditional advertising, all working in tandem with lobbying and legal efforts.  This is the type of expertise that has grown up in DC, and that has become a separate and distinct communications industry segment.

What does this mean to the future of Greater Washington?

• The communications industry is dividing in two.  The center of consumerism will remain in New York, LA, and certain other markets such as Detroit for the automobile industry; but the center of what I call “supporterism” will be here in Washington.

• This should benefit our region.  The consumer-oriented segment of the communications industry started getting hit even before the October financial crisis and has already begun to cut expenses and people.  But the supporter-oriented segment of the industry – that part of the industry that exists in Washington – has been growing.  And it is likely to continue to grow substantially as campaign promises transition to possible new realities … and when what is at-risk – or what can be gained – becomes perhaps all-too-clear to all parties.

Or, to paraphrase Willy Sutton, who robbed banks because that was where the money was, taking messages to Washington will grow because that is where the money is now — as well as the power to enact new game-changing rules.

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THE FOUR VITAL COMPONENTS
OF THE ORGANIC MESSAGE:
An Introductory Guide

In my post “The Organic Message,” I discussed my view that messages can attain a life of their own and that the more they achieve that status, the more powerful they become.  Those messages that achieve a state of “existence” can be considered to have become an “organic message.”  I concluded that post by defining what I believe to be the four factors that are essential for a message to become organic: it must have frequency, relevancy, credibility, and exist within a context.  In this post, I take a closer look at each of these factors.  In an upcoming post, I will analyze the Obama and McCain campaigns from the perspective of these four factors and draw conclusions that can be applied in the forthcoming fight for control of messages in the new economic and political environment.

FIRST OF ALL, THE MESSAGE HAS TO BE COMMUNICATED FREQUENTLY.
BUT THE DEFINITION OF “FREQUENTLY” HAS TO BE RETHOUGHT.

“Reach and frequency” have been standard concerns for communications campaigns for decades.  The logic is simple:  the more a message is communicated the more effective it will be.  Unfortunately, that logic is over-simplistic and wrong.

There are many ways to measure the number of times a message is communicated to its targets.  But whatever measurement system is used, the total numbers are deceiving because they judge how many times a message is delivered – but that becomes less relevant in a world where people are hit by messages constantly from all directions.  The true number of “frequency” to measure is the number of times a message has actually been received.

Gross frequency numbers are not unlike gross sales on a P&L – they are misleading because something (pass-through expenses in the case of the P&L, for example) has to be deducted.  Both objective research and subjective opinions can (and should) be used to determine what and how much should be discounted from whether a message has the frequency needed to become “organic.”  In doing so, the following questions must be considered:

• How compellingly is the message presented?  People are being hit more and more with all sorts of messages wherever they turn.  For a message to be received, it must cut through that clutter – if it doesn’t, does the effort to communicate the message even matter?  Messages compete against other messages in terms of grabbing attention.  For a message to become organic, it must stand out so that it can be received.

• How intuitive is the message itself?  If the message isn’t understood at an immediate and intuitive level, then it isn’t going to get through to the target.  It is important that the packaging be memorable, but if the packaging is remembered and the core message isn’t, the message is not going to become organic.  That is to say, if someone cites an ad because it is funny, or a promotional stunt because it grabbed so much publicity that it becomes widely talked about, or a web page that has great flash, but cannot reiterate those ideas or feelings that were the reasons for the communication effort in the first place, the message may have been delivered but it wasn’t received.  The message needs to break through the packaging and break free of the distribution channel.  To do that, the message itself must be intuitive and immediately understood.

• How constantly does the message get in front of the target?  As I argued in previous posts in this blog, a message can become ubiquitous.  I’ve also written, specifically in “The Death of the Internet,” that when peripherals or components become incorporated into something (the way the caller ID box has been incorporated into telephones and transistors have been incorporated into just about everything) they can become so ubiquitous that for all practical purposes they become invisible and “die.”  That is the case for things, but it is not the case for ideas (messages and stories).  When an idea becomes ubiquitous it can become a “myth” and thereby pick up the components of a true existence.  New communications capabilities allow a message to be communicated through numerous distribution channels so that it can get basically ubiquitous for the people targeted for the message.

However, there is a risk of losing control of the message when different distribution channels are used because in most instances different teams are created for each distribution channel (e.g., an ad team, a grass roots team, a web team, etc.).  Different teams equal different silos, and different silos mean lack of collegiality and coordination.  That isn’t always the case, but the exceptions are aberrations.  The way to combat that risk is by starting with a seamlessly integrated campaign approach from the start.  That way, when measuring how frequently a message reaches an audience, there would be no need to discount for lack of consistency due to the fact that the message is being communicated differently (even if only modestly) from channel to channel.

Starting with a totally integrated approach also allows for another benefit:  there is no need to avoid any distribution channel out of fear of losing coordination.  In the world of information overload, for a message to become organic it needs to surround the audience, and that means using all relevant distribution channels.  It would be a mistake to avoid using any distribution channel for fear of losing control of the message.  It makes more sense to develop or acquire the ability to use the channel.

JUST AS “FREQUENCY” NEEDS TO BE REDEFINED, SO DOES “RELEVANCY.”

There has been an explosion in the number of messages hitting people in all their environments at all times.  For example, unless you got a printed version of this article for some strange reason, you got to this point by being on the Internet.  The chances are that you were hit with several messages on the way here.  Maybe a banner ad.  Maybe some ads at a search engine you used.  If you used a search engine, you also got hit by messages from the listings themselves (some of which were on the first page of results due to deliberate search engine maximization efforts).  Chances are pretty good you also have gotten some alerts about news or stocks or sporting events that interest you.  And maybe some IMs from friends, business contacts or spammers.  Is the TV on while you are reading this?  Maybe the radio.  Somebody may even be speaking to you or trying to get your attention right now.  Whether for a nanosecond when you looked for a way to close or delete a banner ad or other alert or for longer if it actually grabbed your attention, numerous messages have been attacking you.

The only way for someone to cope with so many messages competing for their attention is to go through a prioritization process – very quickly and usually without thinking about it.  Certainly a great presentation helps elevate the priority, as does the clarity of the message, as I mentioned in my first point above.  But people also prioritize by virtue of relevancy.  Imagine that you are a collector of baseball cards.  Here comes a message about a sale on baseball cards.  Here’s a better message because it’s about cards for the old Brooklyn Dodgers – that‘s my team.  This one is even better – it’s about a sale on cards of players on the 1955 World Series team.  Four messages hit you, one of which was more relevant that the other three.  That’s the message that actually got through to you.  That’s the message that has the chance of becoming “organic” with you.

Admittedly, the example about baseball cards is pretty mundane.  But people go through the same process when hit by messages about which car they should buy, which new healthcare plan they should support, or which candidate should get their vote.

Thus, although relevancy has always been important, it is even more important today (and even increasingly so in the future) for two reasons: 1) more messages are fighting for attention so the message doesn’t have a good chance of getting through to the target unless it appears to be relevant; and 2) the ability actually exists to target audiences and personalize messages for a very high degree of relevancy – so that ability should be exploited.

THERE IS CREDIBILITY.  AND THEN THERE IS “HYPER-CREDIBILITY.”

Regardless of how well a message is packaged and how frequently and clearly it is presented to a highly relevant audience, if the message isn’t credible it’s meaningless.

That statement is so obvious that it is very rare for an enterprise or a person to put their credibility at risk.  And even when they do, the risk is considered so great that the effort is hidden or covered-up if discovered.

But over the course of my career in communications I’ve discovered that credibility can be extended from the past and present into the future and thereby help create a self-fulfilling prophecy.  In making this point in the past, I’ve referred to 1968, at the Mexico Olympics, when Dick Fosbury made history not only by winning the gold medal for the high jump, but for creating a whole new way of doing the jump, which has become known as “The Fosbury Flop.”  You can see a clip (little more than one minute) by clicking this link.   What interests me is not so much the radical change in jumping style that Fosbury created (which has become the standard among elite high jumpers), but what he did before he jumped.  What the video to which I linked above shows only a hint of was his preparation at the starting line (see the clenched fist and the way Fosbury is seen rocking back and forth slowly on his feet).  In fact, he stood there for a full four minutes before starting his run.  He did not start to run until he completely rehearsed every nuance of the jump in his own mind.

Of course, the visualization of the jump by itself would not be enough for Fosbury to win a gold medal.  But the combination of his skills and practice plus his visualization of the jump before the actual event of the jump could make the visualization become reality.  In this instance, the credibility that has been projected into the future translated into the future reality.  I believe the same thing can happen with ideas.

In my first post about The Organic Message, in the section titled “AN INVESTOR RELATIONS PITCH THAT FAILED TAUGHT ME ABOUT HOW TO CREATE IDEAS THAT CAN REALLY EXIST,” I described how a meeting with an investment analyst led me to understand how Genentech used credibility to present themselves to him and other investors as a smart investment.  They painted a picture of their future (not unlike Fosbury visualized his jump), and then they described that picture with such credibility that it gained “existence” — and then the viability of the existence of that idea “pulled” the current reality in the direction of the idea/vision, just as the visualization of clearing the high jump bar helped Fosbury win the gold medal.

When credibility is so strong that it can be leveraged to the degree that it enables and accelerates the realization of a vision, I consider that to be more than credible.  I consider it “hyper-credible.”  And “hyper-credibility” – as difficult as it may be to acquire – is absolutely necessary for a message to become “organic.”  This begs for a more complete explanation, and I will provide that in an upcoming post.

TO BECOME “ORGANIC,” A MESSAGE MUST EXIST WITHIN THE CONTEXT OF A STORY.

Consider the properties of a story.  There are some characters and events with which you are already somewhat familiar (a past).  Something is happening now (the present).  But what intrigues you and keeps you from walking away from the story is the prospect of what is going to happen in the future.  The TV show “American Idol” is the perfect example.  Each season thus far, the show has established a life of its own.  It isn’t a single event.  It has a beginning, middle and most of all it has an end that is so compelling that once you get into the story you’re going to stay in the story to see how it unfolds.

I really came to understand the importance of “the story” when I was focused on investor relations (a period of about 20 years).  In fact, investors very often sum up a company in terms of its “story.”  The earnings and releases that have been issued constitute the past.  This quarter’s earnings and the achievement of events that are expected to happen at the current time (for example, a new product release) constitute the present.  The vision is the future.  That’s the story.  That’s what investors buy.

Once I gained that understanding, I learned that I could add life to the story in direct relation to how much I related episodic events to the story.  Consider, for example, the crafting of a fairly mundane release for the announcement of a new VP for HR for a software company.  Here’s the episodic version:

ABC Software Inc. announced that John Smith has been named its new VP for Human Resources.  Prior to joining ABC, Smith was Director of HR at XYZ Corp.  He graduated from this school etc. etc.

Here’s the story crafted in the context of a story:

ABC Chairman Tom Jones said today that the company was advancing its goal to attract the best database software engineers by naming John Smith VP for Human Resources.  Jones said that database engineers are highly recruited and that ABC wants to maintain its reputation for being a great place to work.  He said Smith was recruited from XYZ Corp. because of his success there in increasing employee morale that translated into a significant increase in efficiency etc. etc.

That’s a pretty simplistic example and rather obvious.  However, when it comes to announcing or discussing events that are more complex than the announcement of a new VP for HR, what should be obvious often becomes overlooked.  Consider earnings releases and the conference calls associated with them.  There is no question that the numbers are important – but their importance is not simply in terms of the actual numbers, but how those numbers relate to the prospects for when and to what degree the future that is anticipated will be realized.  That’s why earnings are discounted when inflated by a one-time non-operating beneficial event that has no relationship to future results.  What is true with earnings news is true of all events – they do not exist and cannot be readily understood in episodic terms, as isolated events.  They should be communicated in the context of how they relate to the realization of the future vision.  How they move the story forward.

The more episodes that are communicated in the context of the story, the more intriguing the story becomes.  The more intriguing the story, the more the person who is exposed to it becomes concerned about it and follows it.  As that happens the story becomes more palpable – it becomes real.  It acquires its own existence.  It becomes organic.

In an upcoming post, I will relate these four components to the success of the Obama campaign for President.  Obama won the election, but I do not believe the campaign is over.  I believe he has an intrinsic understanding of the organic message and will continue his campaign throughout his Presidency – unlike anything we have ever seen before. Remember: the rally on election night in Grant Park was far from impromptu.  It was a part of the ongoing campaign.  If you want an alert about when that is posted, send an email to dporetz@qorvis.com, or use the email link above.

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 IT’S TIME TO RETHINK THE BALANCE SHEET

There are three critical pieces of information for every business: the P&L statement, the cash flow statement, and the balance sheet.  Together, they tell how profitable (or not) the enterprise is, how it is positioned to pay its obligations, and the net value of the business.  The balance sheet as we know it has worked well for a long time, but it is has become largely out of date and is becoming increasingly irrelevant and in some ways counter-productive.

The most important assets that impact the current balance sheet are hard assets: property, plant and equipment.  Those are fixed assets and depreciate over time.  They are the assets of a manufacturing economy.

However, when you consider many of the businesses that have emerged with increasing frequency over the past few decades from start-ups to become major institutions you don’t find much fixed assets.  Consider Google …  Microsoft … EDS … even companies that sell hardward such as Cisco.   Their balance sheets don’t reflect great value in terms of their fixed assets, because there isn’t much value in computers and desks and the other components of a knowledge-based business.  But their balance sheets also don’t reflect any value at all in their core assets:  their collective current and legacy intellectual capability (human assets), which actually appreciate in value over time.  That raises a fundamental question:  If the goal of the balance sheet is to indicate the value of the business, but there isn’t a single line item to reflect the most important assets of many of today’s most important businesses, then isn’t the balance sheet failing to achieve the reason it exists in the first place?

I think the answer to that questions is “yes,” but I do not know how to remedy the situation.  I’m not certain it’s even possible to build a balance sheet for the human asset-intensive business.  If that is the case, then let’s have a real appreciation for the basic flaws of the current balance sheet and lessen its importance when making decisions about such important issues as an organization’s bankability.  However, rather than settling for just dismissing the issue, as many investors do now anyhow, it would be beneficial to  change how we measure an organization’s net book value.  That’s because the way we measure things influences the way we manage things.  We shouldn’t look at the knowledge based business with the tools and mindset used for the manufacturing business.  Maybe the way to do that is to scrap the current balance sheet entirely and start from scratch.

Our nation is in the midst of a massive restructuring of its banking system and the public debt market – at the least.  Even if the scope of change is not expanded, the depth of the change seems to be significant enough that it would justify a reconsideration of current accounting standards.  If and when that occurs, that effort should include a new look at the balance sheet.

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FOCUS WASHINGTON INTERVIEW

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THE “ORGANIC” MESSAGE:

UNDERSTANDING THE CONCEPT

In my last post (“The Message Is The Medium”), I suggested that it is possible to employ a wide variety of distribution channels to communicate messages so potently in terms of packaging, targeting and frequency that the messages become virtually ubiquitous to the people receiving them. I consider such messages to be “organic.”  In this first in a series of posts, I suggest a way to understand what that is all about and what I think is necessary for making a message “organic.”  I expect to devote more posts to this concept, including my thoughts on how the Obama campaign for President is a great case history.  It showed how various distribution channels were used to communicate an extraordinarily controlled and simple message.  It is a precursor to what is emerging as a new cultural phenomenon: a never-ending political campaign where the goal is not so much to get votes on election day as to gain support when and in the fashion needed to defend and promote special interests in the new environment of economic and political change.

TO UNDERSTAND WHAT I MEAN BY AN “ORGANIC MESSAGE,” LOOK AT A COFFEE CUP.

As I write this, as usual, I have a cup of coffee within easy reach.  There is no question about whether this coffee cup exists – of course it exists.  Pick it up; use it to sip coffee; there is no doubt as to its existence.  That cup was made by a corporation.  The corporation also exists; there is no question about that either.  But in fact I can’t prove its existence.  I can’t hold the corporation as I can hold its products.  I can observe the corporation’s headquarters, but that is just the building, not the corporation.  So how does it exist?  It exists as an idea.

The American Philosopher George Santayana, whom I studied in college, would explain that the coffee cup’s existence is open to an empirical test of truth or falsity, and it therefore has a “scientific” existence.  On the other hand, the existence of a corporation is not open to an empirical test of truth or falsity.  It is an idea.  It has what Santayana called a “poetic” existence – not open to a test of truth or falsity, but it exists nevertheless.  Poetic existences rely on a leap of faith on the part of the individual(s) who believe in it.

Early in my career, I concluded that, in the final analysis, communications campaigns are all about creating ideas: the idea of a corporation, the idea of a political philosophy, the idea of needing to buy a flat screen television, the idea of buying fast food because I can get it fast and cheap and it meets my expectations.

So, I began to ask a core question: How can you create an idea so strong that the existence of that idea motivates people to think or act consistent with specific goals?  How can you make that idea actually come alive – make it “organic”?

AN INVESTOR RELATIONS PITCH THAT FAILED TAUGHT ME ABOUT HOW TO CREATE IDEAS THAT CAN REALLY EXIST.

In 1981, I joined Flow General Corporation to head its corporate communications and especially its investor relations program.  It was an NYSE multinational company headquartered in McLean, VA, involved in technology research for the Federal government (mostly the Department of Defense) and what was initially defined as “biomedicine” but was repositioned to “biotech” when the company won the first contract awarded by the NIH to produce human interferon.  At the time, interferon was not only considered a cure for cancer, but it was considered by many (especially the irrationally exuberant investors of the time) to be “the” cure for “all” cancers.  Needless to say, for some period of time, Flow General was a hot stock.

After a long effort, I finally persuaded a highly respected analyst from Hambrecht & Quist to visit our company.  This analyst was very bullish on Genentech, which at the time had no revenues and was reporting major losses as it was in the early stages of producing its then hoped-for first product: human growth hormone.  By contrast, Flow General had an international presence, was the global leader in cell cultures and related products, and generated significant revenues and a profit (before things started falling apart for the company for a wide variety of reasons, ultimately ending with the company being sold-off piece-by-piece).

The analyst traveled to the Washington area not simply to meet with me, but for other meetings.  I was a courtesy stop along the way.  Our meeting was at my office late one day.  The hum that usually exists in an office setting had abated, and as he sat down, his body language made clear that I wasn’t going to have a lot of time to make my points.  So I went right into it:

“Why would you invest in Genentech, which has no revenues, no product, and no sales and marketing capability, and not buy Flow General?  After all, we have an international presence, big line of products, well-known brand, no need to raise capital, we’re involved with a significant R&D project, and we have a much lower enterprise valuation.”  Pow!  I gave him my best shot.

His answer wasn’t about Flow General but about Genentech: “I’ll pay $50.00 for a $200.00 stock any day,” he said.  He said that Genentech Management outlined their vision early in their history.  They identified their benchmarks, and what the results would ultimately be if they hit those benchmarks.  The projected results were manifested in a P&L that would be realized if they produced their products, if they got the share of the market they projected, if they sold it at the price they projected, and if they incurred no more than the expenses they projected.  The P&L showed that revenues would start being generated years out, and a black bottom line would be even further off.  “All I need to do is determine the likelihood of them hitting this P&L, then apply some time cost of money factors, and come up with what I am willing to pay today.  Every time I meet with Management they review where they are on the schedule of hitting their benchmarks, they re-establish credibility with me that they will in fact achieve their goals, and I maintain my view that if they do that the share price will go to $200.00.  At $50.00, it’s a buy.”

It dawned on me that he was less concerned with the company’s current situation and more concerned with the way the current situation related to the prospective future.  But today was real.  The future was an idea.  A vision.  It was a story he was willing to invest in because he believed it would be real.  The story – nothing more than an idea – existed.  And not only did that story drive the analyst to support the stock, but the story drove the growth of the corporation itself.

SO THEN THE QUESTION BECAME:  WHAT ARE THE COMPONENTS OF THE STORY THAT ARE CRUCIAL TO MAKE THE STORY TRULY EXIST – TO MAKE IT “ORGANIC”?

Over the course of my career, I have identified that to “exist” a story has to have four critical components:

1)    It has to confront the audience (one or millions) frequently and with a powerful presentation through a variety of distribution channels;
2)    It has to be relevant and relate to the audience;
3)    It has to exist within a context; and
4)    It has to be credible.

The “more” the story has of each of these four factors, the stronger the story’s “existence” and the more powerful its impact. .In my next post, I will discuss these four factors in more detail.  Use the appropriate link to subscribe to an alert when it is posted.

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THE MESSAGE IS THE MEDIUM:

PREPARE FOR A NEW ERA OF COMMUNICATIONS CAMPAIGNS

The following article is long by current blog standards.  I try to tie together a few thoughts that are of concern to anyone with an interest in how policy changes may impact their industry, interests or personal lives.  I try to make a case that the current global economic and political environment will lead to a fight for message control and how issues are defined.  This activity, combined with a dramatic change in the capabilities of (and access to) a new communications infrastructure, requires a new way of thinking about communications campaigns.

CONSIDER JUST HOW FUNDAMENTALLY THE WORLD IS CHANGING:

A new global financial environment that is highly volatile and still too risky to predict.  A new White House, all new cabinet, and new Congress about to be swept into office by a highly energized and engaged electorate, including four million new voters.  A populist mandate, not necessarily for any specific action, but for long-lasting, fundamental and as yet undefined change itself.  A new regulatory environment with new laws, new regulations and new standards about to become new realities.  A new role for governments as bankers and investors in a truly global economy.  Constant communications.  Constant news.  Constant action and reaction.  Never-ending political campaigns - not appeals for votes but for support for (or opposition to) proposed changes.

NOW CONSIDER THE FIGHT THAT IS ABOUT TO EMERGE
AS THE POLITICAL MOOD AND GLOBAL EVENTS GIVE WAY TO THE NEXT STAGE:
SPECIFIC PROPOSALS FOR CHANGE.

The nation’s anxieties are so intense that serious consideration is being given to holding a lame duck session of Congress even before the Inauguration and the new Congress convenes in January.  The economy, the war in Iraq, the global war on terrorism, education and healthcare will be at the top of Congress’ agenda, but the agenda will not end there.  And, even if there is a lame duck session, the momentum for action will be far from vented by the time of the Inauguration.  By then the flurry of proposals for change that exists now will become a tsunami of proposals, not limited to any particular issue.

Although partisanship-as-usual was ultimately overwhelmed to the degree necessary to address the debt crisis and enact a “bailout” bill, it happened neither quickly nor well and it took a panic to force it.  It would be naïve to believe that a new era of bipartisanship has been born.  As theories start being translated into action, both honest ideological differences and parochial political interests will become much more in evidence.

A debate will emerge over each aspect of each call for change.  The intensity of the debate will be unprecedented because of what will be at risk:  fundamental rules of the game in matters as wide ranging as how the global financial markets are structured, how industries are regulated, who pays how much for healthcare, and how entitlement programs continue to be funded.  In this environment, every enterprise in the nation, along with many throughout the world, will have vested interests they will want (need) to protect and promote.

This will not be a quiet process.  Enterprises from the left and right, for profit and not-for-profit, public and private, local, regional, national and international will focus on the issues that concern them.  They will come to an understanding of what the potential impact may be, and they will come to the brutal realization that they have a mission critical need to communicate to their members, customers, investors, vendors and the public at large to build support as powerful as possible for their agenda.  They will want to take control of the critical messages that define their issues.  They will need to develop ways to mobilize their supporters.  They will fight to expand their base.

And it will all happen in a new era of digital communications.  In real time. Largely uncontrolled.  A platform for every message.  Non-stop.  Global.

THE NOISE LEVEL WILL GROW AND THE VERY NATURE OF THE NOISE WILL CHANGE. 

Although global banking action may have put the brakes to what looked like an inevitable crash of the debt and equity markets, it seems clear that a worldwide recession is emerging and that it will be significant both in terms of length and depth.  The strong economy we enjoyed for so long was largely fueled (and enjoyed) by consumers – and consumers will be hit very hard as the crisis in the capital markets moves to “the real economy.”  Billions of dollars of equity the consumer had in their homes has evaporated, and with it so has the buying power they had when they were able to tap that equity to buy another flat screen TV, fund a vacation, or send a kid to college.  They now find themselves with debt obligations higher than they thought they’d face just at the same time as crucial expenses such as gas and food have increased in price.  Without the ability to draw on their home equity or credit cards, they have less ability to meet their expenses.  This is about to be exacerbated as headlines about esoteric debt instruments convert into headlines about layoffs and higher unemployment.

The consumer market won’t die, but it is likely to be in a coma of some degree for a substantial period of time.  What will that mean for all those advertising dollars that have traditionally been spent to get at the consumer’s wallet?  Why would that money be spent now when the wallet is depleted or the consumer is not ready to open it out of fear from uncertainty?

So here is a certainty: advertising budgets of those who market to the consumer will be slashed.  This doesn’t mean advertising will stop, but much higher efficiency will be sought.  We will see traditional appeals for the wallet move to the web and other new media, where buying decisions can be made quickly, impulsively and at lower overhead to the seller.

This will leave TV and radio stations with major inventories of unsold time and it will leave newspapers and other print media with unsold space.  The print media will reduce their unsold inventory of space by reducing the number of pages they print and we will continue to see print media shrink in size (and continue to devolve as a business).  But TV and radio stations cannot expand or contract time.  They’ve got it for sale and they’ll keep dropping the price until it becomes so compelling that buyers will step forward.  And that will lead to a change in the “noise” that hits people in their everyday life:  the lower priced advertising will attract those who have the critical vested interest to appeal to hearts and brains for support, supplanting those who have historically appealed to wallets for sales.

Imagine a pie chart of advertising messages that reach people.  The chart has two slices: one represents advertisers going for their target’s wallet and brand loyalty for their product or service, and the other represents those going for the target’s emotional and intellectual buy-in for their support in one form or another.  Although the latter has grown in size over the past few years, for decades the former has been the bigger slice of that pie by far.  We have lived in - and been shaped by - an environment that has been inundated with messages that in most basic terms have said: “Buy Me.”  That is about to change to an inundation of messages that say: “Support This Position.”

Just as the constant barrage of “Buy Me” messages created a consumer-driven culture, the “Support Me” messages will also create a culture.  That new culture, which will emerge and evolve over time, will be different than the culture that grew with the Post World War II period of expansion and the Baby Boom.  It is probably too soon in the process to predict exactly what that culture might look like as it becomes real.

However, it’s not too early to come to a conclusion about what’s at risk.  Just look at how the global capital system has changed in the past few weeks: a change in ownership and control of the world’s most important financial institutions, a substantial negative change in the value of virtually every publicly traded enterprise in the world, and a change in the geographic centers of power in our nation’s financial industry, with the equity market still in New York, but the center of gravity for the debt market now in Washington.  Those are pretty momentous and game changing events.  But the list of such significant change has already grown longer since the debt crisis, and it would be a mistake to think it won’t grow even longer.

And in every instance of proposed change - each carrying its own dramatic, fundamental and debatable set of possible consequences - proponents and opponents will arise and vie to control the message and frame the debate.

A chorus of diverse voices will emerge, each arguing for their point of view:  employers and unions; those who want to focus on the critical issues associated with whether and how we exploit resources and conserve our environment; those with more “family room” issues such as whether money goes to fund school lunch programs or school music programs; and those who just want to use a time of turbulence as an opportunity to advance their own political or social agendas.

As more enterprises realize the risks inherent in how proposed changes could touch them, they will join the public debate.  Then, as the time for debate ends and the time for voting or adoption of administrative action nears, they will raise the volume of their messages even more.  This will create a cacophony of messages that will become increasingly louder - and more difficult to break through.  And to achieve that will require a radically different view of how to think about communications campaigns.

“ADVERTISING” WILL BECOME OBSOLETE.
SO WILL “P.R.”

The communications industry and communications campaigns have distinct sub-segments that are often defined by virtue of the distribution channel used to communicate a message.  For example, ”advertising” is defined by virtue of the fact that the message is communicated using distribution channels that are bought.  “P.R.” refers to using ”free” space or time that is “earned” on a distribution channel.  “Interactive” refers to using a digital distribution channel.  Because distribution channels have defined the communications industry, they have also defined the borders and scopes of communications campaigns.  As a consequence, communications efforts are too often approached with thinking that is neither robust nor bold enough.  It would be a serious mistake to continue that type of thinking under any circumstances.  In the current and emerging environment, the mistake could be fatal.

After all, what advertising has in common with P.R. or social media or event marketing or any other communications specialty is one thing: the effort is undertaken to get specific messages to specific audiences to achieve specific results.  So why define a communications effort by virtue of the distribution channel?  Why not define the communications effort by virtue of its goal rather than its process?

Enterprises that reject a distribution-centric definition of communications in favor of a goal-driven approach are achieving a new level of effectiveness and efficiency through truly integrated campaigns.  The successes of these campaigns will be emulated.  Over time, the silos of communications “practice groups” will fall.  Eventually, neither the communications industry itself nor communications efforts will be defined by virtue of a distribution channel.  The message will become paramount.

THE MEDIUM IS THE MESSAGE.

I was graduated from George Washington University in 1967.  I majored in philosophy.  I thought then (and still believe now) that I and my friends were studying philosophy at the same time that a major new idea was emerging.  I confess that I cannot summarize it better than this Wikipedia entry (http://en.wikipedia.org/wiki/The_medium_is_the_message):

“The medium is the message” is a phrase coined by Marshall McLuhan meaning that the form of a medium embeds itself in the message, creating a symbiotic relationship by which the medium influences how the message is perceived, creating subtle change over time. The phrase was introduced in his most widely known book, Understanding Media: The Extensions of Man, published in 1964.^[1] McLuhan proposes that media themselves, not the content they carry, should be the focus of study; he said that a medium affects the society in which it plays a role not only by the content delivered over the medium, but by the characteristics of the medium itself.

McLuhan made a legitimate point that is still relevant.  But today, there is a collateral statement that may be even more important:

THE MESSAGE IS THE MEDIUM.

When engaged in truly integrated communications campaigns (as opposed to “an ad campaign” or “an interactive campaign,” etc.) the message is launched to targeted audiences through any distribution channel that makes sense for the effort, limited neither by geography, deadline, nor language.  The message reaches its desired audiences when they watch TV, when they work at their desks, and wherever they go, with unprecedented power, specificity and immediacy.  For example, iPhone and its forthcoming clones will deliver messages with compelling impact tailored to the individual’s interests at the spot they are standing at the moment they are standing there.  The fully executed integrated campaign results in messages becoming virtually ubiquitous with their intended audience, based on the person’s individual’s interests and their prospects for taking an action such as supporting a bill or buying a product.

McLuhan was right in that the medium can deliver a message with an impact that influences or even becomes more potent than the message itself.  But, today (and increasingly so in the future) messages can be so relevant to the target’s interests, so constant, so powerfully presented, and coming at them in so many ways that the specific distribution channels employed to take the message to the target will become irrelevant and largely unidentifiable.  In that case, the message becomes ubiquitous and more powerful than ever because, for all practical purposes, the message itself becomes the medium.

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THE DEATH OF THE INTERNET

Yesterday I began to use my new kindle, which is an entirely new device available from Amazon.  If you haven’t seen it in person, you can find out more on the web at www.amazon.com/kindle   Imagine a device that looks sort of like a frame that is about 8″ high and less than 6″ wide, maybe half an inch thick and weighs a few ounces.  Now imagine that the glass part of the frame only takes up the top two-thirds, with the bottom third devoted to an easy-to-use keyboard and a few special keys.  Under the “glass” is a new type of “page” using a new type of “ink.”  You can see the contents easily in any light, indoors or out, and if you are reading type, you can increase the font and put away your reading glasses.  What you see is what you access wirelessly and virtually instantaneously from Amazon, including books at less than $10.00, subscriptions to newspapers and other news sources from several nations, blogs, and a lot more that I haven’t discovered yet.  One nice thing is that you can (as I am doing currently) read a book or two (or more) and some newspapers, put them “down” whenever you feel like it, and when you come back to it, you come back to exactly where you left off.

The kindle is far from perfect.  As is iPhone.  As are lots of other devices and services that are being introduced to the market.  Whether these new innovations are perfect or not is irrelevant.  Taken together, they are indicative of a trend that I believe can be defined as the Death of the Internet.

To explain what I mean by the Death of the Internet, I want to reflect on two other comparable deaths: the death of the caller ID box and the death of transistors. Remember when caller ID first emerged?  What a great device!  For the first time, you knew who was calling before you picked up the phone.  The benefits are obvious.  But caller ID was not without controversy.  In fact, California at first banned caller ID technology from being used in the state, and was the last state to allow it — in about 1993 or so if I remember correctly.  Caller ID was first offered as a “peripheral” — that is, a box that you attached to your phone.  But fairly soon after its introduction as a stand-alone device, responding to rapid and broad acceptance by the marketplace, manufacturers of telephone units began to integrate the caller ID box into the phone itself.  Today, all phones, wired or wireless, for the home or office, incorporate caller ID.  It became ubiquitous, and when it became ubiquitous it was no longer “there” as something unique or even identifiable.  The peripheral itself died as it became part of the thing into which it was integrated.

I remember the year 1955, because of a few reasons.  My family moved from New York to the Greater Washington area (Alexandria, VA).  And the Brooklyn Dodgers beat the New York Yankees in the World Series.  And there was also my first transistor radio.  It was not “a portable radio.”  It was not even always “a transistor radio.”  Often it was simply “the transistor.”  It was remarkable.  Radios shrunk from those pieces of furniture you gathered around to listen to Dragnet to something you could hold up to your ear with one hand and carry with you everywhere.  No plug; one special battery.

Transistor radios, we all knew, were made possible by transistors themselves.  The hype about transistors, and what they could do, and how they would change our lives was at least as great as the hype that exists for the Internet now.  Transistors would be everywhere.  They would be part of everything.  They would change the way we live.  The predictions actually came true!  Transistors ARE everywhere today, from your wrist, where they are used to keep time, to the device on which you are reading this, to your car, your kitchen.  It is hard to think of a device where transistors are not integral components.  They are ubiquitous.  They are no longer peripheral to anything; they are a vital part of our lives and the way we live.  So vital and so integrated into our lives that we no longer think of them.  Transistors have basically “died.”

Just as transistors have died from ubiquity, so too will the network that today makes possible my new kindle and the iPhone, Blackberry, cell phone, text messaging, GPS devices, streaming video, Internet Radio.  This network operates through wires and wirelessly, within a house and throughout the world.  I no longer go to a special place, such as my desk, to access this network.  Remember the phrase “I’m going to log on”?  When did that phrase emerge?  Ever hear it anymore?  We no longer need to use the phrase because we no longer need to “log on.”  We are connected all the time.  And as these devices — plus devices we aren’t even aware of yet — do move beyond their initial flaws and get closer to perfection, they will be integrated into our lives even more.  Our connection to a network we currently refer to as the Internet will no longer be peripheral to us.  It will be part of us.  Wherever we are.  In one form or another, obvious and totally hidden.

As this is happening with accelerating speed, the Internet is dying as certainly as caller ID boxes died and as transistors died.  I think this will have enormous implications on the way we communicate and the communications industry.  I expect to write about that some more in the future.  But in the meantime, if you want a hint of how the communications industry is going to change, take a look at what The Washington Post is doing with the iPhone — I am very excited about the fact that Qorvis has been part of that effort.  This is a prelude to a new era in communications.  Here is the release that announced the first in a series of applications for the iPhone:

July 23, 2008 10:20 AM Eastern Daylight Time  

washingtonpost.com Launches First iPhone Native Application

City Guide App Provides On-the-Go Info for D.C.-Area Hot Spots

GPS-Enabled Search Plus Reviews on Restaurants, Bars & Clubs

WASHINGTON–(BUSINESS WIRE)–Today washingtonpost.com launches the site’s first downloadable application for the iPhone and iPod touch, providing an on-the-go, personal entertainment guide for over 2,000 Washington, D.C.-area restaurants, bars and clubs.The City Guide app uses a GPS feature to find and map all nearby locations within blocks of where a user is standing. With an easy-to-navigate design, the application lets users search by name, neighborhood and cuisine. Users can quickly look up an address, phone number, hours, price range, directions and more.Popular Washington Post food critic Tom Sietsema’s restaurant reviews and top picks from washingtonpost.com’s Going Out Gurus guide users to the city’s best destinations. Users can make a list of their personal favorites to reference regularly or create a list of hot spots they want to try.We are continuing to explore opportunities to translate features on washingtonpost.com for mobile audiences and the City Guide application was a natural fit,” said Jim Brady, Executive Editor of washingtonpost.com. With this application, we are giving mobile users all of the information they need to conveniently navigate the entertainment scene in and around D.C.The City Guide iPhone application is available for free from Apple’s App Store on iPhone and iPod touch under the Lifestyle category. Users can download City Guide using the following link: http://phobos.apple.com/WebObjects/MZStore.woa/wa/ viewSoftware?id=285887422&mt=8 (Due to its length, this URL may need to be copied/pasted into your Internet browser’s address field. Remove the extra space if one exists.)The new iPhone City Guide app is an expansion of washingtonpost.com’s mobile entertainment offerings. Anyone with a Web-enabled mobile phone can look up information on D.C. area restaurants, bars and clubs or movie show times by visiting: http://twp.com/cityguide. Users without that capability can text a search term plus a location to WPOST (97678). For more information on City Guide mobile offerings visit: http://www.washingtonpost.com/wp-srv/cityguide/mobile/.  washingtonpost.com worked with Qorvis Communications to develop and design the City Guide iPhone application.

About washingtonpost.com: washingtonpost.com is an award-winning news and information destination that delivers world-class reporting and innovative multimedia content, creating a truly interactive news experience. Using the latest technology and tools, washingtonpost.com encourages participation and content customization across all platforms, allowing readers to engage with washingtonpost.com anytime, anywhere. Winner of four consecutive Edward R. Murrow Awards for Overall Excellence for Non-Broadcast Affiliated Web site, washingtonpost.com is owned by Washington Post.Newsweek Interactive, the online publishing subsidiary of The Washington Post Company. (NYSE:WPO)

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THIS “RECESSION” MAY BE SOMETHING OTHER THAN A RECESSION 

The official definition of a “Recession” is that it is two quarters in a row of negative growth. By virtue of that definition, we are not currently in a “Recession” albeit there are many who would argue that we are about to enter one.

I think the debate of whether we are or are not either in or about to enter a “Recession” is a very misguided discussion. Here’s why:

Let’s start with an over-simplified example to make a point: Alzheimer’s Disease used to be known as “senility.” It became redefined as Alzheimer’s when the illness could be more accurately described. When that happened, the treatment also changed. The point of this example: When there is a change in the way something is defined there is also a related change in the appropriate response to it. If a patient with Alzheimer’s was labeled as “senile,” not only would the patient’s characterization be wrong, but the likely treatment of the problem would be wrong.

That’s what concerns me about whether the current economic situation is called a “Recession” or not. I think that if we try to define the current (and likely emerging) economic situation by virtue of whether the exact economic statistics have been achieved is comparable to defining Alzheimer’s as senility.

I’m far from an economist, but I think of recessions as topical events that occur in irregular cycles, often as corrections from periods of over-exuberance. The symptoms of one recession versus another are also very similar: people lose their jobs, spending and investment goes down, valuations go down, mistakes are washed through the system, etc. There are variations on the theme, often colored by the fact that a select number of industries (such as home-building or financial services or autos) are particularly hard hit and whether other trends (inflation, for example) are associated with the recession. But that is it in broad terms. We know what a “Recession” is and we know (more or less) how to treat it and what to look for to determine how and when the treatment is working. Exactly the way we knew how to identify and treat senility, until it was redefined.

I think that although we may well experience the two sequential down quarters of growth that would put us officially into a “Recession,” it will mask the reality that we are in (not “entering”) something different.

The commodity of oil is hitting extremely high prices as there is a dramatic surge in demand from developing nations, especially China and India, and that is leading to the formation of new international political alliances. Food shortages and the associated increase in the price of food are global problems. New economic centers of gravity are rising (Dubai) as well as new currencies (the Euro) while the US dollar has lost buying power (and respect). Jobs move not simply from a union market to a non-union market, but from one nation to another. Quickly. The gap between rich and poor is widening. Information is an industry and it operates non-stop real time globally. There really is a global economy so that econmic conditions are also global. Want to build a business? Leverage your brain instead of capital-intensive property, plant and equipment (soft vs. hard assets). The list goes on. It isn’t hard to observe all sorts of fundamental changes that I think point to a conclusion that the Knowledge Economy is real and growing and fundamentally different than the Hard Asset Economy from which we are moving.

Consider this recent item from the Bureau of Labor Statistics: ”The number of manufacturing jobs in NYC, which once exceeded 850,000, fell below 100,000 in recent months… Manufacturing now accounts for about one of every 40 jobs in the city, down from almost a quarter of all jobs in the mid-1960s.

If we are indeed shifting from a Manufacturing to a Knowledge economy, wouldn’t it be fair to say that the characteristics of one (such as an economic downturn defined as a “recession”) would not be characteristics of the other? Didn’t the characteristics of agrarian economies largely become irrelevant to enterprises involved in manufacturing?

If we begin to think about the current economic (and social/cultural/political) realities as early examples of conditions of the new global Knowledge Economy, we have a chance of developing ways to coping with them and maybe even remedying them. But if we continue to think of these new realities in terms of parochial Manufacturing Economies, we are in for a long, difficult road.

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THE BIGGEST LESSON I’VE LEARNED FROM THE QORVIS MODEL

It took a while, but I have come to appreciate what I believe to be the most important lesson to be learned when executing with a new business model.  It’s this: new models have new mistakes.

The lesson doesn’t end there.  The other, even more critical thing to know is that you can only identify new mistakes after they have happened.  As new mistakes, they are unknown by definition.  So you can’t see them coming.  You can only identify new mistakes after they’ve bitten a hopefully-not-too-vital-part of your body.  If you accept that as a fact of life then you also need to accept the identification of mistakes as a very high priority of the company.  The higher the priority the identification of mistakes becomes, the sooner you will identify the mistakes so they will cause less damage and your definition of the mistake will be clearer, thereby allowing you to develop a more successful solution sooner and better.

There are at least two major consequences when mistake-identification becomes one of the company’s highest priorities.

First of all, as you proceed to solve the unique problems you bump into, you discover that your solutions are also unique.  Over time, as they prove to be successful, you institutionalize your unique solutions and they become integral to your culture.  As that process evolves, you imbue into your culture more and more unique attributes.   And that makes you more different.  At Qorvis I have seen that the internal awareness that we are different is often evidenced in a pride that is palpable.  That’s a good thing.

But there is a price we pay.  We look for mistakes all the time — a more positive way of saying that would be that we are looking for ways to do things better all the time.  It is a part of our mind set.  And that means we focus on what is wrong, and that does exert a negative influence on the culture.  Fortunately, we’ve discovered that the potency of the mistakes we encounter has subsided over time — and so too does the impact of their negative force.  Basically, the mistakes you encounter in the early stages of executing on a new model are more serious because they tend to be fundamental.  Not only will the real basic mistakes be the first mistakes to arise, but they are likely to do so quickly, catching you by surprise, just at a time in the business’s life cycle when even little problems are difficult.

As Qorvis has grown up as a company, we have simply accepted that having a mistake-focus is a necessity and it has really become a part of who we are, good and bad, and we try to balance the bad by enjoying the benefits of being unique.

Another way of saying “we’re unique” is to say that “we’re different.”  In the Knowledge Economy, service providers are increasingly selected based on how their differentiators translate into value for the customer.  Some firms will want to say “we’re different because we can do your work quickly and ok and cheap.”  There is often (justifiably) a big market for companies with such positioning, and some of them will become successful and some will even become dramatically successful.  But we prefer to seek the differentiators: “we’re different because we are the best in the world.”

The fee you charge will be limited by and directly related to the extent you can make such a claim of providing uniquely high value.  The most simple evidence of your success for being great will ultimately show up in your P&L, especially net margin as a percent of sales.  The more you are valued, the more clients will be willing to pay a premium for your services.  What that means is that both the service provider and the client share the same exact vested interest:  achieve definable goals as quickly as possible as completely as possible.  That is not the case when the service firm is selling time.  In that case, success for the service provider is measured by the amount of time they take to achieve the goal, with the more time spent being better.  That just doesn’t make sense to the client.

As more firms shun the concept of “time is money” and adopt the concept “value is more money,” and as they develop their own unique ways of doing business, they will merit respect for the value they provide, succeed and grow accordingly.  More and more clients will learn about the option of doing business with firms who have such a business model and will want to work with those companies. Those who sell value will grow while those who sell the commodity of time will lose market share. Eventually, time will no longer dominate business as it does now.

Will this happen next Thursday?  No.  Neither will it happen in 2009 or 10 or whenever.  The evolution may be slow, but the shift will occur.  As it does, time will die.

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A BRIEF INTRODUCTION TO THE CONCEPT OF VALUE VS. TIME

Imagine you were an international star.  Imagine that the news media is going crazy over allegations that you just might be a pedophile.  Now imagine that the District Attorney where you live initiates legal action based on that allegation.

Here’s what you would do:  First you would ask “Who was Michael Jackson’s attorney?”  Someone would tell you it was Thomas Mesereau.  You would say: “Let’s see him right away.”  When you see him, after the introductions, your first question will be: “Think you can get me off?”  Let’s assume you are innocent etc., his answer will be: “Yes, I feel pretty confident I can.”  Your next question is: “How much?”  Your question was NOT: “How much time will you have to put into it and how much do you charge per hour?”  You do not care how busy he is or isn’t going to be with your case.  In fact, you prefer that he can solve it in the next ten minutes versus the next 100 hours.  When the issue is time in jail versus no time in jail, you care much more about the value your attorney will provide than the time he takes to provide it.

If this example makes sense in the extreme (that is, a Michael Jackson scenario), why wouldn’t it make sense in the everyday (for example, when you hire an attorney to draw-up a contract)?  If it makes sense when hiring an attorney, why wouldn’t it make sense when hiring an architect or a PR firm or an accountant or consultant?  In fact, it does make sense to pay for value versus time, especially when you are buying the most important differentiators of the Knowledge Economy: expertise, experience, commitment to excellence, and focus on achieving goals rather than on the time to do that.

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It seems these days the second a great UI designer comes up with a new feature on the site that makes the experience “better” (ie. more usable, engaging, etc) venture capital pours money fast into modularizing the feature set and monetizing the feature set. More often times then not through some advertising model.

Here we go again. A pretty interesting company launched today called PredictAd. Predict ad has simplified the ability to add a powerful Search Suggestion feature set to your site. Just like yahoo suggest. They offer a compelling revenue split model and I feel for sites that monetize their site traffic this looks very cool to consider. Some associations use Google AdWords, this feels like a natural extension….but who knows, Google is probably negotiating to buy them (ie “the feature set”) and integrate it into their enormous company.