December 04, 2007

Complex Ecosystem

My favorite paragraph from this op-ed piece in the New York Times is this one:

"This time, market players seem truly horrified — because they’ve suddenly realized that they don’t understand the complex financial system they created."

Those words apply to the multichannel world we live in. Especially for those of us who spent our formative years in catalog.

The internet has at least four components. It is part direct marketing, part retail marketing, part social media, and part something we haven't quite figured out yet.

The last two components are frightening. Listen to the pundits as they tell you to dive into Facebook, only to have Facebook Beacon publicly broadcast what you purchased to the rest of the world. I mean, look at the list of companies that jumped in to this mess. Clearly, these companies would not have signed-up if they understood the complex environment they participated in.

Most confusing is the fact that we've been trained to read the world in a "linear" or "additive" manner. We were trained to analyze one catalog at a time. Now, we're supposed to understand the complex interaction of mailing catalogs, delivering e-mails, executing a dizzying array of online marketing techniques, social media, search marketing, and traditional advertising.

So we decompose these activities, believing we can assign "value" to each activity individually. The customer, however, using the ecosystem we created, uses combinations of marketing activities to ultimately get to the exact same place she got back in 1994, pre-internet.

We created a complex ecosystem, full of interactions. We'll need to stop viewing the world in an additive, linear manner if we want to succeed.

3 comments:

  1. Anonymous11:43 AM

    In my view it is not [financial] innovation (about the NYT article). Just call it ordinary fraud like it is. Selling mortgages that you know were handed out to people that cannot repay, and pretending they were the ultimate in safe investments (AAA rating) equals lying and cheating. And just about everybody in the financial system is implicated.

    In his classic, A Short History of Financial Euphoria, John Kenneth Galbraith makes the point that every few years a new generation of Wall Street wunderkind come into their own. Knowing nothing of financial history they suddenly believe that they have discovered a magical, risk free way of leveraging debt to provide unending profits.They are always, of course, wrong. It's a kind of financial perpetual motion machine: many believe, but are always disappointed. They just want you to think they don't understand it.

    I think your example of Internet interactions is insightful but the analogy to the current financial crisis is poor.

    I personally don't see anything wroth with seeing world linearly and operting additively as long as I am aware of the constraints of interpreting pure noise to be something of paramount importance.

    The main lesson we can take from history is that long-range future is not predetermined. The rules of world-historical market-economical game change from decade to decade. All our fashionable worries and all our understanding or market interactions will probably be obsolete in few years.

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  2. Anonymous11:45 AM

    Edit: (Beginning of he penultimate paragraph) I personally don't see anything wrong ...

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  3. Anonymous10:29 AM

    I interpreted the tie-in to be more the general gist of the sentence itself, not the specific situation that the NYT was referring to. Change the word 'financial' to 'marketing', and you have an apt observation.

    There is an emerging realization that a complex system has been created among marketers who have been charging ahead in their respective channels without fully understanding the environment that we now operate in.

    The truth is that organizations don't usually take the time to understand the bigger picture. They're too busy trying to beat their competitors to the next techno-fad marketing scheme (e.g., facebook). From mathematics to sculpting, linear is easy and comfortable. The real challenge (and profit) is in growing beyond this paradigm.

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