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The One Question That Will Determine Marketing’s Future

Posted on  11 June 13  by 

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Interested in the future of the marketing function? Please take a moment to take our survey.

“How do I make sense of the data flood?”

“Which emerging touch points should I bet on?”

“How do I create enough content to engage consumers?”

These questions – and a dozen others – are the queries we hear every day from B2C CMOs who are struggling in this time of rapid change.  Marketing is facing unprecedented disruptions that are impacting how work gets done. Increased consumer access to information and choice, advancements in technology, and an explosion of data are upending the B2C Marketing landscape.

All these questions got us thinking.  What if the way Marketing actually creates economic value is undergoing a dramatic shift?  The more we dug into this hypothesis, the more we were convinced that CMOs need to be thinking very differently.  For example, the old model of Marketing largely relies on generating demand for mass produced goods.  Consumers are willing to accept products and services that are kind of a crude match for their needs because the convenience and cost savings they get in exchange is significant ($100 for Kenneth Cole loafers at the mall vs. $500 or even $8,000 for bespoke shoes from a cobbler). But that trade-off is getting less and less necessary.  With new go-to-market models and advancements in manufacturing consumers are more able to have their micro-needs met at reasonable prices.  As one member put it, Marketing’s role is becoming less about making people want things and more about making things people want.  The way Marketing creates value in the future is going to be different.

There are a number of implications of shifts like these.  For one, it means Marketing is going to need some new capabilities and changes in process, structure, and talent differently.  For example, to sense consumers’ microneeds, Marketing is going to need to be able to analyze and interpret of a lot more information about consumers and the market and balance data with judgment.  And it is going to need to be able to quickly and decisively act on those learnings to make near real-time adjustments to its offerings, communications, touch-point mix, social interactions, and more.

We have a lot of ideas about how Marketing’s role in creating value might change and the new capabilities Marketing will need to deliver this new value.  We’d love to get your opinion on them.  Click here to take our 10 minute “Future of Marketing” survey to share your thoughts on the B2C Marketing function of tomorrow.

We’ll be digging into the ideas probed by this survey in our member executive retreat for Heads of Marketing, “Navigating the Changes Disrupting Marketing.”  The first meeting is just two months away.  Don’t miss it!

The Marketing function of the past simply isn’t going to work for the future.  Are you ready to make the change?

The Power of Collaboration

Feel like you have more on your plate at work?  Chances are that you aren’t alone, as 80% of employees have experienced an increase in workload over the past three years (as found by one of our sister programs, the HR-Learning and Development Leadership Council).  For marketers, much of this increase in workload may be attributed to an ever-increasing number of channels and touchpoints that you have to learn to use and maximize, and changing consumer behaviors so you can no longer get by with relying on an understanding of the basic funnel.

These trends won’t change soon and probably are forcing you to rely more heavily on your co-workers, both within and outside Marketing to get your work done.  More touchpoints means that you probably need to integrate more channels and work more with your Marketing co-workers to create integrated campaigns, as well as with IT to develop the technical capabilities to use these new platforms.  In addition, Marketing has started to work more with Strategy, increasing the need of having partnerships with coworkers in this department.

Greater reliance on others throughout the firm increases the need for collaboration.  Our 2012 research found that nearly a quarter (23%) of B2C marketers’ high performance can be attributed to working in a supportive environment (defined as having a manager who listens to staff, a safe environment for sharing ideas, and team members who take turns during meetings).  This safe environment allows Marketers to collaborate better and discover and apply innovative ways to market and more efficiently accomplish their tasks.  Better collaboration will improve the quality of your work.  Our research colleagues in our L&D sister program, the HR-Learning and Development Leadership Council, found that 49% of knowledge workers’ performance is driven by network performance.  Network performance allows you to learn from both the formal and informal information sources around your organization, as you build relationships with both your teammates as well as colleagues from around your organization.  The top elements of network performance are:

  • Navigating the organization – Understanding how both formal and informal structures operate to anticipate how your actions impact the actions around you and vice versa is a key part of your ability to drive network performance.  Being good at this has two main benefits: it makes you 11% more likely to transfer great ideas from other parts of the organization, and 10% more effective at providing useful work-related information to coworkers.
  • Leverage relationships – Understanding the reciprocal relationships that improve your own work and the work of others you encounter will also help you improve your network performance.  If you do this, you are 19% more likely to provide high-quality inputs to others’ work, and 15% more likely to create better-working methods or tools across the organization.
  • Improve operational excellence – Designing innovative systems and processes that are situated in the context of the larger business unit or organization is the third element of network performance.  Being a top-performer at this makes you 24% more effective at improving work procedures for coworkers and 10% more effective at creating useful innovations to improve organization processes or products.

Marketers, is there a time when collaboration has been especially useful for you?  Tell us in the comment section below.

Why Business Value Messaging Doesn’t Win

Posted on  4 June 13  by 

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If you’ve been following the B2B work of CEB Marketing (or CEB Sales) even remotely over the past couple of years, you’ll know our most popular statistic: the B2B customer has, on average, completed 57% of the purchase process before they contact Sales.  Our recent annual research topics have focused on how Marketing can help fill the no-man’s-land that traditionally belonged to Sales.  The key term for success here: commercial insight.

But in the past few months, we on the B2B research team have been wondering: is commercial insight enough?  As customer organizations started facing the effects of the economic slowdown, their buying decisions faced every more scrutiny.  Consequently, more independent research was being conducted, and buying groups became larger.  And despite suppliers’ successes at convincing customers of their business value, most of them are still struggling to close deals.

So does that mean that teaching the customer something new about their business does NOT drive their willingness to buy?  Well, that’s not true either.

We recently conducted a joint quantitative research project with Motista and Google, surveying 1000 buyers currently involved in a large B2B purchase.  The study assessed the importance of about 100 sentiments  those customers felt towards a specific supplier in driving forward the purchase process.  About half of those variables were business value related (e.g., “X provides the functionality we need”, “X will improve the effectiveness of our business.”), while the other half were softer elements (e.g., “Having X will make me a better leader”, “X makes our business more exciting”).  The results were eye-opening, to say the least.

The first major finding was that proving business value is now table stakes – and only table stakes – for driving purchase.  When we plotted those 100 elements against outcome variables (e.g., willingness to consider, recommend, buy), we found that convincing buyers of business values only created a 30% lift over base buyer preference.  Intuitively, this makes sense.  Over the past few years, marketers have been surprisingly nimble in their shift from product-selling to solution- and insight-selling.  And because they’ve been quick in the uptake, the margin for differentiation here has decreased.

The bigger driver of preference was much more surprising.  Conveying personal value generated TWICE the lift that business value did.  That’s right: the emotional and social benefits that a supplier or product could offer created a 65% lift over base buyer preference.  All this time, marketers were insisting that larger purchase groups meant more rational, business-oriented purchases, when in reality, that’s not the case at all (our most loyal readers will already know that academic research has already shown otherwise).

But with all the safeguards that buying organizations put into place (think: Procurement matrices, intricate RFP processes), how does personal value still dominate?  We hypothesize that this has something to do with the growing number of influencers and decision-makers in a buying group.  As more people get involved, more opinions have to be shared in front of more (important) people.  Consequently, more political risk begins to be felt by each individual involved, particularly those who influence but don’t actually make the final decision.

Worry not – we’ve got the data to back this up too!  Keep an eye out for an upcoming blog post that dives deeper on this issue.  In the meantime, we’d love to hear your thoughts, especially if your marketing organization has already begun tackling these issues!

Why Economies of Scale Matter in Marketing

Posted on  4 June 13  by 

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We all have grown up with the idea that bigger is better.  Whether it was more ice cream as a kid or sales volume as a marketer, we want more.  But what if going big is no longer valuable?

My last post  explored the disruptions that have impacted external economies of scale for marketing and highlighted how one traditional source of scale advantage (consumer consumption of media) has eroded as a result of changes in technology and consumer viewing habits.  In response to that post, some have asked why it is important that this particular scale advantage is under attack.  They argue that there are lots of other sources of scale, and have even asked if this source of advantage is shrinking, isn’t it still good to be big?

Unfortunately for Marketers, the focus of the first post – fragmentation of consumer media consumption – was chosen because it is the primary external source of scale economies for marketers.  However, it sounds like a more thorough analysis is requested, which requires a review of the standard framework for sources of economies of scale.

For those interested in the early research on scale economies in marketing, I strongly recommend Arndt and Simon’s seminal 1983 paper in the Journal of Industrial Economics.  In that work, the authors established a framework for thinking about scale that I will borrow to highlight the problems faced by Marketers today.

Framework for Economies of Scale

Sources of economies of scale can either be real (advantages in some portion of the value chain that result from scale) or pecuniary (advantages in pricing power).  In my last post, I focused on the real advantages and subdivided those real advantages between internal and external.  Let’s review Arndt and Simon’s four real sources of economies of scale and analyze the opportunities for marketing to realize external advantages:

1)      Specialization/Division of labor – Adam Smith’s pin making or Henry Ford’s assembly line

2)      Indivisibility of inputs/Value chain components – reduces excess capacity/waste

3)      Better/cheaper administration – management is relatively more cost effective if cost is spread over broader base

4)      Less uncertainty – risk is reduced through diversification

#1 Specialization/Division of labor and #3 Better/cheaper administration do not have customer components and are exclusively internal.  #4 Less uncertainty may be the source of some scale advantages for larger brands to survive short term market disruptions, but I have not heard Marketers point to this as a primary scale advantage and is a secondary source of advantage at best.

This leaves #2, Indivisibility of inputs/value chain components as the primary source of external real economies of scale.  For customers, this is largely an advantage in traditional mass communication channels, which had been largely indivisible. Running a 30 second spot was more cost effective if a greater percentage of the audience were potential customers. Unfortunately, with the fragmentation of consumer attention across media today, this advantage has eroded.  But before we explore the internal sources of scale economies, we should also review the other external source of advantage – pecuniary scale – that marketers can still leverage.

Purchasing Power

With the tremendous increase in customer access to price information, it is hard to make the case that big brands have substantial advantages in customer pricing.  However, there may still be pricing power with other suppliers.  Among marketing spend, this would be most beneficial if the spend on marketing communications was significantly impacted by scale advantages.  In traditional ad buys, volume discounting gave large brands scale advantage, but agencies and media buyers have long reduced the purchasing advantages of large brands by providing for the ability to obtain externally scale advantages.  Compounding the problem is the shift of marketing spend to digital channels (and latest reports are that over 20% of total marketing ad budgets are now spent on digital).  In digital, the benefit of volume discounting is lessened as in areas like adword auctions for SEO, bulk purchasing does not provide the same pricing advantage.

This means that if there are still advantages to being big, they are going to need to be internal.  Our next post on this topic will explore what is happening to internal advantages driving economies of scale.  Without giving away too much, I have to warn you that the picture is not pretty.

How to Do Social Media Well

Posted on  4 June 13  by 

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Social media serves many functions in our lives.  It’s a way to share all things digital, connect with people, express ourselves, communicate, and filter information, among many other things.  It can be a way to broadcast information or interact and have a conversation.  The network effects of social media are mind boggling…so powerful in fact that French police have stopped searching for missing persons that are not minors or in eminent danger and suggest people use social networks to find them.  It’s no wonder Marketing sees social media as a potentially powerful tool.

In an ongoing poll we asked marketers about what they view social media capabilities in Marketing.  More than 750 B2C marketers ranked the following five aspects of social media as most important (ordered by highest average score on importance to Marketing capabilities).

  1. Listening – Capturing insights and feedback from target customers
  2. Talking – Sharing information with target customers
  3. Animating – Sparking advocacy and driving positive word of mouth
  4. Support – Improving the service experience and helping customers get greater value from interactions
  5. Absorbing – Enlisting consumers into co-creation of product/service creation

Obviously Marketing can leverage all of these roles to create value, and certainly listening will always be vital to Marketing because if you don’t listen, you don’t know what’s happening with consumers.  However, support seems to be growing more important for consumers.  They not only expect to get responses when they ask a question or post a complaint on social media, but they expect them quickly.  Nearly half of respondents use social media for customer service requests, according to Nielsen’s  2012 Social Media Report, and the number of questions directed at brands on Facebook increased 58 percent in the year ending Q1 2013, according to a Socialbakers survey.  In addition to the dramatic increase in queries, more than 80 percent of Twitter users and over half of Facebook users expect a same-day responses, according a 2012 survey conducted by Oracle.

The interactive nature of consumer expectations for brands in social media is challenging and unpredictable, but it’s an opportunity to drive value if you do it well.  The US Airforce has a simple decision tree on responding, and Telstra has great guidelines on interacting with consumers in general via social media.  Some companies like Cisco are pushing the envelope to listen more effectively to consumers and quickly respond.  This probably only serves to reinforce consumer expectations for brands to always be on and respond to questions or complaints, making it more important that brands interact with consumers or risk falling out of favor with them.

MLC members, do you know how you are doing in social media? Talk to your account manager and take MLC’s Social Media Opportunity Diagnostic to find out how you rank against your peers and to identify your top social media priorities by pinpointing gaps between your social media opportunities and competencies in the five roles previously mentioned.  MLC’s Social Media resources can also help you plan a strategy to best leverage social media, develop tactics to execute your plan, and think about how to manage and govern your social media marketing activities so you can boost your ability to leverage all aspects of social media.

How to Grow in Digital Marketing

(Interested in another way you can grow as a marketer? Join us for a webinar on mentoring in marketing on June 18.)

Digital marketers, you already might get the sense that you’re a little different from most people.  You love the latest technology and the newest platforms, you are the first among your friends to be on new social channels like Vine, and you’re the one who knows about the freshest memes and internet trends.  Our 2013 survey of over 500 B2C marketers found that you’re also a very industrious bunch: You’re always looking for feedback, you seek opportunities to learn from others, you go the extra mile and put in extra effort, and you try to help your colleagues (even when you are busy).

But did you know that you’re also some of the marketers most likely to leave your company?  A survey by Nextmark shows that 62% digital media employees – including digital marketers – plan to leave their positions in the next 2 years.  There are many valid reasons to leave a company, such as not having a good career path, not being a good culture fit, or just plain not liking your job.  In addition, as a digital marketer, you may feel that you’ve been pigeonholed into a role you don’t want to have forever; if you’ve been designated a Pinterest or Facebook guru, but want to expand beyond that role, you may feel you need to move to a new company.

But many digital marketers are actually happy with their current companies, so it might not be time for you to jump ship just yet.  Even if you feel like you’re no longer growing in your role, there are many ways you can improve your skills and increase your responsibilities – without leaving your company.

Learn more about the IT side of marketing.  As consumers adopt an ever-growing number of high-tech channels and devices, many Marketing departments are working to be present in all of these channels; at the same time, Marketing can design systems to collect and analyze more data, allowing brands to better target and understand their customers.  But these new frontiers require skills that haven’t traditionally resided within Marketing.

That’s where you come in.  As a digital marketer, you already have some of these skills.  You already understand many of the new channels and platforms, and you are a curious learner when something new comes out.  To become an even stronger contributor, you can work to forge a better partnership between IT and Marketing at your company, by doing things like working with your IT colleagues to harness their processes to develop a more secure and stable system, or to use their vendor-selection criteria when deciding which new vendors to recommend.  CEB Marketing members, you can learn more about the Marketing-IT relationship here.

Develop more traditional marketing skills.  As a digital marketer, digital-specific skills and those related directly to your job (e.g., understanding Facebook if you work on your company’s Facebook page) will always be very important.  But if you’re already hitting all your MBOs and don’t see much room for improvement, consider honing your broader marketing skills.  Knowing more about traditional marketing areas like branding and customer understanding may be able to help you in your day job, and it may also help you contribute more to strategic (rather than tactical or executional) marketing efforts.

In our survey last year of over 500 B2C marketers, digital marketers underperformed the average marketer in many traditional subfields.  Some of these areas of underperformance, like shopper marketing, may not impact your job performance (depending on your role within digital marketing).  But improving at other areas where digital marketers underperform, like branding and project/campaign management, can help you both within your current role (being good at project management is always helpful to get work done on time!) and as you move up the ranks in your company’s marketing department.

Digital marketers, how have you pushed yourself to grow beyond your formal objectives?

Are Big Data’s Days Numbered?

Posted on  28 May 13  by 

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As most savvy Internet users know, we are being watched.  Not just watched, but tracked, analyzed, and targeted.  As a consumer, it’s a little creepy that the exact pair of shoes I looked at on Zappos.com yesterday is featured in an ad next to an article I am reading on CNN.com today, but as a marketer, the ability to track, analyze, and target offers seemingly limitless opportunities.  But when does “a little creepy” cross the line into “gross violation of privacy”?  And when does that violation actually break the law?

Right now, the answer is, almost never.  Though several browsers come with “Do Not Track” options, all this setting does is to signal to websites that the consumer would like to opt out of third-party tracking.  Sites are not legally required to comply with the request.  In fact, soon after Microsoft announced that its browser Internet Explorer 10 (“IE 10”) would ship with the “Do Not Track” feature selected as the default, the Digital Advertising Alliance put out a statement to its members calling for them to ignore the signal.

The laws protecting consumer privacy are relatively toothless at the moment.  The White House has recently published a “Consumer Privacy Bill of Rights,” laying out the guidelines it believes should influence legal action on privacy protections.  There is a lot of skepticism about the likelihood of major change in privacy laws.  If the behavior of marketers is any indication, the enthusiastic embrace of more and more sophisticated tracking technology suggests they aren’t worried about losing their window into consumers’ lives any time soon.

But what if the laws did change?  Despite the glacial pace at which United States lawmakers accomplish anything, there is not a huge legal hurdle to overcome here.  Passage of one or two laws could severely curtail marketers’ ability to track consumers’ online activity.  Privacy laws in the European Union are already significantly stricter than they are in the US.  Among other protections, in Europe, users have to give explicit consent for tracking cookies to be placed on their machines (unlike in the US where a hidden disclaimer that states use of the website implies consent for tracking is sufficient).  Global companies are already adjusting their European strategies and figuring out how to be relevant without unfettered access to consumer data.

And even if sweeping legal change is unlikely, there are already grass roots movements afoot to help consumers reclaim their own data.  Among the most prominent is “Project VRM” – a research and development initiative at Harvard University’s Berkman Center for Internet & Society – created and championed by Doc Searls, co-author of The Cluetrain Manifesto and author of The Intention Economy.  “VRM” stands for “Vendor Relationship Management” and is conceived as the consumer-owned response to companies’ “CRM” or “Customer Relationship Management.”

There are a lot of thought-provoking ideas in Searls’ work, but the central theme is that consumers are not just a series of 1’s and 0’s to be tracked, analyzed and manipulated and that it is best for both consumers and companies if consumers have exclusive rights to how their data can be used.  As he puts it in The Intention Economy, “A free customer is more valuable than a captive one.”   Project VRM is not only researching this idea, but also fostering development of tools that consumers can use to take back control of their own data and share it with companies in a purposeful way when they determine that such sharing will benefit them.

Though some of the ideas and proposals put forth by these “Take Back the Data” movements seem a little extreme or futuristic, at their core are some really important themes that consumers could really rally around.  The Intention Economy lists about 60 projects and companies working on VRM research and tools.  In addition, despite the apparent ineffectiveness of IE 10’s “Do Not Track” option, other web browsers, with Mozilla leading the pack, are offering consumers more active and effective protection.  There are also a number of programs and tools (like Ghostery) that allow consumers to block third-party scripts and other tracking mechanisms.  Finally, additional legal restrictions are a real possibility, even if the US never achieves Europe-like privacy standards.

Marketers should take notice and start to think through the ways they might work with consumers to gain insight and information instead of investing so much to advance their Peeping Tom capabilities.  Look for musings on how this might take shape in a future post.

The Scariest B2B Story of 2013

Posted on  28 May 13  by 

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So far, at least.

I was traveling in Australia a couple weeks ago—meeting with our disarmingly hospitable members there, eating kangaroo sliders (tastes like…bison?), and dodging endangered bandicoots on bushwalks.

Here’s the anecdote, coming from one B2B marketing leader at a high tech company—I’ll paraphrase:

I’ve had conversations with other Aussie tech marketers lately, and across the past 18 months, we’ve collectively seen about 60% of our “opt-in” contact data base decide to opt out.

That’s right.  Sixty percent of the contact database—lovingly built and cultivated through educational programs, tradeshows and events, content marketing and the like—decided to actively opt out.

Poof.

Gone.

I don’t think this little story is apocryphal, either.  After I gathered my jaw from the floor, I asked a few incisive follow-up questions, like:

“You’ve got to be kidding me?”

“Sixty?  As in. Six. Zero.  Sixty.  Not sixteen?”

“This wasn’t a list that you bought from We Got That Techie List!!?”  (analogous to the mildly NSFW We Got That B Roll – worth a watch if you haven’t seen it)

Now, I very much doubt other markets or B2B spaces are seeing opt out numbers this high.  But what’s going on in the tech space in Australia that this could be happening?  And could it happen in your space in the future?

This particular member pointed to a few trends that could be contributing factors. First, in the tech space, the sheer volume of content, gated forms to get to that content, and therefore marketing automation-driven spam, is getting out of control. Combine that with customer’s business email inboxes, which are already getting deluged by communications from daily professional life, and you can start to see this come into focus.  Customers are getting Inbox Paralysis (just made that up)—the volume of email is sapping productivity, and it’s gone beyond the barely noticeable erosion at the edges.  Swathes of our days are getting swallowed up by email tending. (13 hours a week, by one estimate)  And crucially, it’s significantly reducing the number of uninterrupted blocks of focused work time.

Result? There’s an emerging industry focused on office productivity bubbling out there, poised for significant growth.  There are apps for managing your inbox.  There’s an association—NAPO, which is the National Association of Professional Organizers.  Not joking.

And of course, there are vendors and consultants, like Type A Professional Organizers or Eliminate Chaos, who will come into your business, do an audit of knowledge worker productivity, and then go through and set up inboxes to better filter, remove spam, folder-ize, unsubscribe from unnecessary email, put a time box on email use, and so on—all to return productive time back to knowledge workers.  One executive I’ve talked to who hired a service like this for her marketing team returned 8 hours per week in productivity, to EVERY person on her team!

Email inboxes have become what real postal mail boxes became in the mid to late 90s.  Vessels clogged with postal plaque that stole time from our busy days as we sorted through a flood of junk mail.

I won’t belabor it.  We’re all professionals ourselves.  We sense this to be true with our own work inboxes today.

optoutAnd from MLC research last year, we know that customers do indeed take a range of punitive actions against suppliers who over contact them (see graphic at left).  Many of those actions are undetectable by suppliers.  Relying on unsubscribe rates to indicate how healthy your contact strategy is, is like relying on melting ice caps to tell you the planet is getting hotter.  It works.  But talk about lagging indicators…

My intent is to raise a bright yellow cautionary flag for B2B marketers.  I see many CEB Marketing members racing to implement automated lead gen and nurturing systems that award more points for more content consumed or more emails opened or more clicks, without including stout guardrails on overcontact or irrelevant contact.  If we aren’t careful, we’ll all be gathering our jaws off the floor when our demand gen specialist tells us we lost 60% of our opt-in database over 18 months.

Enough said.  I’m hungry.  Let’s go get a ‘roo slider.

3 Reasons Videos Go Viral: YouTube’s Kevin Allocca at TEDYouth

Posted on  22 May 13  by 

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speakers

(Post courtesy of CEB Communications’ Mike Peterson. The post is adapted a bit for a Marketing audience. Thanks, Mike!)

At a recent TEDYouth event, Kevin Allocca, YouTube’s Trends Manager (i.e., he gets paid to watch and analyze YouTube videos) explained why, despite 48 hours of video being uploaded to YouTube every minute, certain videos go viral and often become cultural phenomenons (dare we remember Rebecca Black’s “Friday” or, more recently, PSY’s “Gangnam Style“?).

While his talk focused primarily on videos that HR would prefer we watch outside of work, the trends he explores are very much relevant to the videos that communicators are being asked to create and/or publish more and more frequently.  In particular, he notes that the majority of videos that spread like wildfire among a given audience possess at least one of three traits: Read More »

The Limits of Crowdsourced Innovation

Posted on  22 May 13  by 

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Michael Schrage has an interesting piece up at the HBR blog, arguing that existing corporate innovation processes are almost certainly doomed to failure. Why?

[O]ne inherent challenge — flaw? — in the overwhelming majority of the innovation initiatives I’ve seen is how intrinsically compartmentalized, segregated and silo-ized they become. They’re creative and/or innovative efforts appealing to creatives and innovators. They’re not designed to appeal to the organization — let alone its ecosystem! — at large. [...] Moreover, funding for innovation overwhelmingly comes from “budgets” rather than any discretionary funds held by individuals or small teams. “Impulse patronage” looks and feels like impossibility to anyone who isn’t a manager with a cash-flow-positive P&L and the courage to take a chance.

In other words – innovation just becomes one more department, one more silo, and since individual innovations are dependent on manager funding and approval, the innovation process as a whole is subject to the same kinds of limits as other corporate decision-making processes.

But Schrage has an interesting antidote: Kickstarter! Why not, he says, dedicate a bit of peoples’ compensation towards “Kickstarter-esque discretionary financing”? In essence, give employees a bit of money to invest in a marketplace of internal ideas, modeled after the popular crowdfunding site.

To be fair, I don’t think there’s anything necessarily wrong with an approach like this, as long as it’s an input into innovation processes and not the determinant of what gets developed and what doesn’t. Lots of companies have instituted the basic framework of employee-submitted ideas and an element of crowdsourced approval, and there’s some anecdotal evidence that it produces good, if marginal, returns.

But what obvious benefits does “Kickstarterizing” corporate innovation – earmarking a bit of money for employees to invest in internal innovation markets – provide over simple employee submission and voting platforms? Crowdsourced efforts – including massive ones, like markets – are subject to significant social biases. Employee networks are subject to the same kinds of patronage effects that manager networks are; employees are subject (and maybe even more subject) to the kinds of groupthink that infects managerial decision-making processes.

Beyond this, though, there are significant problems with importing the Kickstarter model into businesses. First and foremost, successful Kickstarter projects usually promise some kind of direct reward, if not a finished product or a copy of the project itself. Kickstarter funders own something – at a minimum, psychic rewards – as the result of their investment. But are companies really prepared to give employees an ownership stake or direct rewards for successful innovation investments they make? And is there really an equivalence in psychic payoff between helping bring a cool product to market and helping your company make more money?

Second, take a look at the most successful Kickstarter efforts. In Design, it’s Pebble and Elevation; in Food, it’s a cheap sous vide machine and a vertical gardening device; in Technology, it’s a 3D printer and a video game headset. What do these things have in common? They help people do things they actually care about, in their non-work life. Hobbies and passions, in other words. People contribute to Kickstarter projects because they want to enjoy their leisure time more; in the absence of actual rewards and ownership stakes from the corporate investments they’d fund, what’s the compelling reason for giving some of your compensation back to your company to fund innovation projects? (unless you work somewhere awesome, like Lego)

But the biggest reason of all is one that has plagued Kickstarter itself: the crowd has, time and again, shown that it is not capable of seriously judging the chances that a product will actually make it to market (Felix Salmon’s piece on Lifx, a smart lightbulb that has so far proven to be vaporware, is insightful here). Kickstarter investments are a useful measure of excitement and hype, but they cannot be described as a collective informed judgment on things like corporate structure, the credentials of the innovators, and the regulatory environment. And while employees might be marginally more informed about the chances for success of a given innovation within the environment they work in, the idea that they’d have more insight into those factors than managers is pretty questionable.

I don’t mean to pick on Schrage in particular, here. I’m all for the democratization of corporate processes to the extent feasible and possible, both in normative terms (employees should have more voice!) and as a pure efficiency play (employees know things managers don’t!). But it’s important to make sure we’re not expecting things of crowdsourcing that aren’t really possible.