A few weeks ago I was genuinely thunderstruck. My co-editor atP&G Signal (thanks Stan!) introduced me to a new company – one that promised to give consumers control over their personal data in new and innovative ways. At first I was skeptical – I’d seen quite a few “personal data lockers” come and go over the past decade or so. I even invested in one way back in 2012. Alas, that didn’t work out.
For as long as I can remember, I’ve been writing –over andover andover – about how the Internet’s central problem is the lack of leverage that consumers have over the data they co-create with the hundreds of apps, sites, and platforms they use. But data lockers never got any traction – most were confusing to install and run, and they all suffered from a lack of tangible consumer benefits. Sure, having a copy of all my personal data sounds great, but in the end, what can it do for me? Up till now, the answer was not much.
It was with all those caveats – and honestly pretty low expectations – that I took a meeting with Sumit Agarwal and his team at Palo Alto, CA-basedGather, an early stage startup still in its first year of operation. Fifteen minutes later I was hooked – here was a company that was addressing the “what can my data do for me” problem by building out a generative AI agent that just might spark the kind of personal data revolution I’ve been writing about for more than a decade. And this was no fly-by-night startup – the company’s founders, team, and investors are all deeply experienced in AI, Internet security, scaled engineering, product design, marketing, and much more.
Before diving in, a caveat: Gather is still at a very early stage, as is the overheated AI ecosystem in which Gather’s products will eventually live. Agarwal told me he’s not even sure if his company will be called Gather by the time its first product becomes available later this year. In addition, the company faces fearsome obstacles to success – including entrenched platform players like Google, Amazon, and Apple, whose business interests do not align with the concept of a newly empowered consumer base. While I usually like to write about companies and products that readers can use immediately, I’m breaking that rule for Gather. No matter the business you’re in, it will pay to understand the shift in consumer behavior that tools like Gather could unlock. And as I said before, this company is the first I’ve seen that has assembled the team, vision, and execution chops to pull it off.
Timing Is Everything
With startups, timing is everything. There’s only so much you can control – what you make, how you spend your investors’ money, the people you hire. But nearly everything else is driven by externalities you must navigate. Is the technology ecosystem capable of supporting your vision, or is your product ahead of its time? Netflix, for instance, had to wait until broadband was pervasive enough to launch its streaming service. Are consumers ready for your idea, or is it out of sync with their expectations? Uber and Airbnb faced this challenge in their early years. Will huge competitors copy your idea, or change their policies and make it impossible for you to thrive? Ask Yelp how it feels about Google’s review summaries, or ask Epic Games about Apple’s 30 percent tax in the app store.
Gather faces all these timing challenges and more, but the company does have one huge tailwind: AI is hot, and investors can’t get enough of it. This past month alone,VCs poured more than $11 billion into AI startups, up 86 percent from a year ago. But while AI funding tipped into a frenzy with OpenAI’s launch of ChatGPT last November, Gather managed to raise an impressive seed round five months earlier, in June of 2022. Agarwal and several of his co-founders were already seasoned operators with a billion-dollar exit in the Internet security sector (Shape Security, sold to F5 three years ago). Gather’s $9 million round was led by general partners at respected firms Bain, Floodgate, and Wing Ventures, with participation from experienced Valley angels like Gokul Rajaram – an investor and director at The Trade Desk, Pinterest, and Coinbase, among many others – and Vivek Sharma, the co-founder and CEO of Movable Ink.
“I’ve known Sumit for about 15 years,” said Gaurav Garg, founder of Wing Venture Capital and early investor and board member at Gather. “He has a deep background in consumer and enterprise products used by hundreds of millions of people, as well as exposure to government policy, across technology areas including security, identity, privacy, and e-commerce.” Garg also noted that Sumit has the attributes of a great founder – drive, persuasiveness, perspective, and a learning mindset – crucial when you’re looking to reimagine something as big as how consumers will interact with AI and the Internet.
“The team are all exceptional founders,” added Bain Capital Venture’s Ajay Agarwal, who’s known and worked with several of the Gather team over the past 25 years. He added a key observation: The tech ecosystem is at an inflection point – mainstream devices like phones and computers can now power distributed platforms like Gather, large language models have evolved to conversational levels, and there’s even just the right amount of government regulation to create conditions for a sea change in how consumers control their data. We’ll get into all of that, but first, the product.
First, Gather The Data
My Amazon data in an early beta version of Gather. Who knew I bought that back in 2006?!
Gather acts as your trusted and secure agent, logging into various data-hoarding services like Google (think Maps, Search, Mail, Android Play, YouTube), Amazon, Uber, Strava, and many more. At your direction, Gather then downloads copies of your data to your local device from each service – a right codified into law by the 2018European General Data Protection Regulation (GDPR) and adopted, in broad strokes, by several states in the US –California chief among them. Till Gather came along, no one had built a service that automates what is otherwise a tedious and frankly pretty pointless process – almost no one actually downloads copies of their data from online services, because, as we’ve already established, there was simply no use case for doing so.
But once you have a critical mass of that data, and it’s organized in a way where questions can be asked of it, a whole new world opens up. Gather added me to a pre-release version of its platform, and it was magical to watch the service engage with Amazon, Uber, Google, Twitter, Venmo, Strava, and many others. Within minutes, copies of my data were presented and organized in my Gather app. And that’s when things start to get interesting. As Gather marketing lead Niki Aggarwal pointed out, now that I had the data in my control, I could start to ask it questions. What kind of bias, if any, might be evident in the stories I was reading from Google News? How much did I spend on Amazon each month, and would I have saved money if I had bought those same items at Walmart? Was there an optimal time of day to get a personal best when riding on Strava?
Of course, this is only the tip of the proverbial iceberg when it comes to what’s possible with data sets like these. Sure, it’s cool to have a copy on my own device, in my control. But the real fun will start when you add a personalized AI agent capable of instantaneously answering those initial questions, as well as conjuring up ones you’ve not thought to ask. Even more exciting, imagine that same agent as a trusted confidant, leveraging your data as it interacts with the rest of the online world. Now that’s a consumer benefit – a personal agent that knows my preferences and can, say, plan a complicated business trip, or negotiate for the best price for an item I want to buy online. The time savings alone make the idea compelling. I’ve come to call such agents “genies” – because they work only for you, and they can produce all kinds of magic (and as a bonus, they aren’t limited to three wishes!).
Where Genies Play
Gather hasn’t released its “genie” yet, but it’s working on it. Codenamed “Sidekick,” the product will consist of several elements. First is your personal datastore, which lives on your own device and remains under your control at all times. Second is the Sidekick agent, which Agarwal describes as “an AI product that proactively and intuitively helps you.” He continues: “We are trying to get away from ‘blinking cursor in an empty text box’ and get to ‘intelligent character that thinks about your needs, intuits your desires, [and] acts on your behalf.'” Gather’s third element is a platform that manages how outside organizations interact and create value with your data.
Agarwal offers an example of how Sidekick might work: “You visit Amazon Music, and there’s an offer for six months of free service if you upload your Spotify play history. Your Gather Sidekick allows you to upload with a single click. Your data moves to an external service (Amazon Music) and you get value. You can think of the same example in many contexts – food/dieting, fitness, other entertainment apps, medical apps, etc. The concept is simply that a specific – and sometimes complex – “slice” of your data needs to move somewhere in order for you to receive some value (economic or otherwise).” (This example calls to mind my 2018 piece, in which I imaginedhow Walmart might compete with Amazon online by leveraging a consumer’s Amazon purchase history.)
Agarwal’s second example envisions an instance where you don’t necessarily trust the service that wants to leverage your data. Imagine, for example, that a third-party developer has created “the ultimate music recommendation app.” It sounds appealing, but you’re wary of uploading your Spotify or Apple Music data to a service that has yet to prove it’s trustworthy. In this case, Gather becomes a secure platform that runs on your device. “With Gather,” Agarwal explains, “that recommendation app can run locally in your environment. This is a win for you because you have no data sharing concerns, so you can comfortably let the app engage with your data to get the very best recommendations. The Gather platform keeps your data local but publishes the schema so developers know how to interact with the platform – without seeing your data.”
I think of Gather’s platform as like Apple’s app store or Google Play, but with one critical difference: The power to decide who gets access to the platform resides not with a massive corporation, but with you, the consumer. This seemingly small distinction is in fact a massive shift in power, agency, and value from the centralized model of Web 2 toward a decentralized vision more aligned with the original architecture of the Internet –pushing intelligence and control to the edge of the network.
The Iceberg Metaphor
Over the course of many emails, calls and Zoom meetings with Agarwal and his co-founders Sudhir Kandula and Mengmeng Chen, both colleagues with Agarwal at Shape Security, we touched on topics as varied as security and privacy, Internet history, and information theory. Gather emerged from its founders’ dissatisfaction with what author and Internet OG Cory Doctorow calls the Internet’s “ensh*ttification.” As large companies have consolidated control of our online lives, our experiences have begun to degrade. This is why so many technology observers are excited by Microsoft’s integration of ChatGPT into its Bing search service. Google search is so clogged up with low-quality results and ads, Microsoft’s “conversational search” promises a better, clutter-free user experience. But Agarwal sees many more use cases beyond search – and to understand how it might work, it’s worth a dive into what he calls “the iceberg metaphor,” a visualization of how humans might best communicate with infinitely capable AIs.
As we know, 90 percent of an iceberg is underwater. At its tip – the 10 percent – is human interaction with AI – the prompts we type, or soon, the words we utter. That interaction is limited by our ability to speak or type – which compared to machines, is very low bandwidth, about 50 words per minute. But human speech is richly nuanced, and informed by executive function – this is where decision making occurs.
It’s in the 90 percent underwater where AI can excel. Machines can speak to other machines at mind bending speeds – one AI genie speaking to countless others, negotiating information demands, price comparisons, complex, multi-step transactions like scheduling a meeting or building a travel itinerary. “Underneath the water the GPT is listening, watching, reading, and comprehending on your behalf,” Agarwal says. “It’s unconstrained by our puny 50 word-per-minute input.”
The key to the iceberg model is that ten percent – no substantive decisions are taken, no meaningful action, until the human in charge says so. Good genies will surface questions and clarifications at the speed of human language, then dive back below the surface to negotiate next steps in the underwater world of machine-to-machine communication.
Will Tech Giants Let It Happen? The Plaid Example.
For Gather to scale, it needs hundreds of thousands, if not millions, of people to engage with its platform. Agarwal is reserved when pressed on the use cases that might drive that engagement, but it’s not hard to imagine any number of “killer apps” that could get the startup to its first million users. But as challenging as scaling an initial user base may be, Gather faces an even larger threat:The data use policies of big platforms like Amazon and Google. Regulations like GDPR guarantee a user’s right to access and download their own data, but most big tech platforms have “terms of service” policies that prohibit automated retrieval of user data. These policies are ostensibly in place to counter malicious actors who are spoofing real user’s accounts, but they could also be employed to stymie Gather’s work on behalf of its user base.
This is where the Gather team’s experience at Shape Security comes into play. Shape’s core business was to help large financial institutions fight automated attacks against the banking industry’s consumer portals. Agarwal and his colleagues spent years understanding and perfecting defenses against sophisticated “attack vectors” in a sector where the stakes are high – people do not like to lose their money. For much of their time at Shape, one of their most vexing opponents was a company called Plaid – then a startup, but now a $15 billion industry leader that offers consumers a platform to retrieve, manage, and gain value from their personal financial data across a majority of banking institutions online. If you’ve ever used RobinHood, or moved money from your bank to Venmo, you’ve used Plaid. Like Gather, Plaid works as an agent on behalf of its individual customers. For years big banks fought against the idea of their own consumers taking control of their data, and Shape Security was one of their most potent weapons. While Shape was able to win at the tactical level – stopping Plaid from accessing data on behalf of clients like Capital One –Plaid managed to win the overall war, because its ardent users pressured their financial institutions (and regulators) to allow them access to their own data.
The Plaid example can’t but be front and center in the Gather team’s minds as they embark on the next phase of their journey. Agarwal, a former Network Warfare Officer with the United States Air Force, often uses military terminology when describing the state of consumer data rights. “In the military there’s a term called preparing the battlefield – months and months of preparatory work before you commit,” Agarwal says. “As soon as we finished up at our acquirer, we started brainstorming about how to protect more users in more profound ways.” The idea for Gather, he said, hit him “like a lightning bolt” and work on Gather began almost immediately afterward.
What’s In It For Brands?
Agarwal is committed to making Gather free for its users, a tactic that will certainly help the company garner its initial user base. Once a critical mass of consumers are on the platform, he envisions charging enterprises API fees when they reach out to consumers and request consumer data, with the consumer’s permission, of course. As Agarwal imagines it, brands might want to offer promotions much like the example he mentioned above – where Amazon Music offers six months free in exchange for a user’s Spotify data. Walmart might do the same in a bid to lure away Amazon customers. But the examples can get even more granular – McDonald’s might offer otherwise hard to reach consumers in a certain zip code free delivery via DoorDash, or a company like P&G might pilot a Pampers subscription service based on a user’s past purchase data. The possibilities are infinite – if Gather gets to scale.
Should he succeed, Agarwal and team are hoping to jumpstart an entirely new value equation for consumer-driven data, one that just might force all businesses to abandon today’s dominant model of hoarding data and steering consumers into a limited set of choices. “Today, our data is so siloed, but it’s so valuable,” Agarwal told me. “We can change the power balance from the platform back to the user.”
Long time readers know how I feel about Agarwal’s sentiment – I believe unleashing the consumer data economy could drive a huge increase in economic innovation and flourishing. Agarwal will be presenting his vision for Gather at P&G Signal this coming July 12th. You can register for the event here.
It’s peak Signal season here at Signal360 headquarters, with planning in full stride for the 12th annual edition of P&G’s Signal Summit this July 12th. We have a great program planned and you are welcome to join!
Even after organizing many Signal events, every year feels like a new adventure. Our job is to create a program that is relevant and impactful for everyone who attends – and last year, you numbered more than 5,000! Context is important and constantly changing, which makes planning Signal so interesting. There are always new topics to explore and speakers to bring to the stage. Our June Signal Conversation provides a peek into this year’s event and how we designed the program.
Our theme for this year is “Reset the Bar for Superior Performance and Irresistible Innovation,” striking a balance between navigating today’s business challenges and innovating for the future. Artificial intelligence will be a prominent topic for many sessions. But so will supply chain innovation, employee experience, and sustainability – all critical elements of a successful business today and tomorrow.
A critical thread throughout the 12th Annual Signal Summit will be how to deliver superior performance across business fundamentals. This requires consistent consumer focus and operational excellence, combined with agility and adaptability. In turn, companies create a culture where people challenge themselves and others to redefine what success looks like.
For Signal 2023 we have a line-up of great speakers who will inspire and educate us on how to reset the bar:
Sumit Agarwal CEO & Co-founder · Gather / John Battelle Author, Entrepreneur, & Host / Linda Boff CMO · GE / Jodi Caden Co-founder and CEO · Proof / Luis Carrillo VP, Business Development · FEMSA / Yael Cosset CIO & Chief Digital Officer · Kroger / Morgan Flatley CMO · McDonald’s / Jeremi Gorman President, Worldwide Advertising · Netflix / Candice Matthews Brackeen Founder & CEO · Lightship Foundation / Nicola Mendelsohn VP, Global Business Group · Meta / Jon Moeller Chairman of the Board, President & CEO · P&G / Matias Muchnick Founder & CEO · NotCo / Javier Pita CEO · NaviLens / Marc Pritchard Chief Brand Officer · P&G / Arthur Sadoun CEO · Publicis Global / Jo Shoesmith Chief Creative Officer · Amazon/ Evan Spiegel CEO · SNAP / Julie Sweet CEO · Accenture / Colin Walsh CEO · OUAI Haircare
Signal registration for P&G employees and external partners is now open. If you are interested in joining Signal but did not receive registration information, please submit a registration request here. We will reach out with details when your request is accepted.
Until next month, when we will take a closer look at some of the Signal 2023 topics and speakers.
Stan Joosten & John Battelle, Editors-In-Chief, Signal360 / Co-founders, Signal P&G
OpenAI’s large language model (LLM) AI-based chatbot known as ChatGPT shattered multiple records when its monthly active users count hit 100 million just two months after its initial release. ChatGPT’s adoption numbers continue to soar as the chatbot rapidly evolves with a growing list of plugins and a mounting number of third-party distributions.
Despite its overwhelming popularity and adoption rates, figuring out how to employ tools like ChatGPT for corporate use cases remains both a challenge and an opportunity.
Vendors have been quick to pounce by incorporating ChatGPT in existing enterprise-level technologies, including a spread of Microsoft embeds ranging from Bing to Dynamics 365, and a recently released enterprise-packaged version in Azure OpenAI Service.
Here then are six ways companies are already using LLM models, and how experts believe generative AI such as ChatGPT could fold into enterprise needs moving forward.
1 – Finding insight in seconds
Financial services companies are eagerly tapping into generative AI. American Express is looking to put LLMs to work approving transactions around a customer’s spending habits, and even approving new cards and lines of credits. For example, financial data company Bloomberg recently launched BloombergGPT, a customized AI model trained on financial data. Bloomberg’s customers can gain insights into financial scenarios by simply asking the AI a question in their own language. And Bloomberg is looking to build new products and services on top of Bloomberg GPT to create new revenue streams and other business lines.
“For all the reasons generative LLMs are attractive – few-shot learning, text generation, conversational systems, etc. – we see tremendous value in having developed the first LLM focused on the financial domain,” says Shawn Edwards, Bloomberg’s Chief Technology Officer in a release in March. “BloombergGPT will enable us to tackle many new types of applications, while it delivers much higher performance out-of-the-box than custom models for each application, at a faster time-to-market.”
Even as quickly as Bloomberg is moving forward with its AI model, it came two weeks behind a similar move by financial services company Morgan Stanley, currently OpenAI’s only strategic client in wealth management. Morgan Stanley says its Wealth Management division is developing an internal-facing GPT-based AI service to “deliver relevant content and insights into the hands of financial advisors in seconds.”
“The work we are with [OpenAI] will allow us to bring out expansive intellectual capital into the hands of our financial advisors in seconds – it will be like having our Chief Investment Strategist, Chief Global Economist, and Global Equities Strategist on call for every financial advisor 24/7,” Jeff McMillan, Head of Analytics, Data & Innovation for Morgan Stanley Wealth Management said in a release in March.
Courtesy of Bloomreach and Boden
2 – Tailoring marketing and ads
AI has also had its hands in developing marketing and advertising campaigns for brands — and has for some time. A 60-second TV spot for Lexus, which the company claimed was written entirely by AI, aired all the way back in 2018. Now, advertising giant WPP and Nvidia are building an advertising engine designed to give generative AI tools to creatives, tapping into Getty Images and other resources, the two announced in May.
AI tools can develop and serve marketing at the micro level too, creating merchandise displays or personalized options honed to a customer’s unique interests and their location. Bloomreach, for example, partnered with British clothing retailer Boden to deliver online clients clothes tailored to their preferences, and in combinations that worked together as an outfit. The AI also tapped into where a buyer lived, serving up clothes that made sense for their climate.
New launches from Google and Meta will put AI tools into even more hands. With Google’s newly launched AI-based Product Studio, sellers can design entire photoshoots online, changing out backgrounds, creating seasonal layouts and boost resolution. Meta unveiled its own AI-driven advertising tool in May, while Snap is piloting sponsored ads generated by AI based on chatbot conversations with customers.
“The way we think about e-commerce 10 years from now may be entirely different than how we’ve thought about it these past 10 years,” says Raj De Datta, the co-founder and CEO at Bloomreach.
It is widely predicted ChatGPT will become a personalized shopper, suggesting specific goods to people based on their preferences and needs such as activities, interests, and sizes – rather than customers searching different websites to see what products are available. Already AutoGPT produces AI agents that can seek out and deliver user-specific products and services that best fit specifications from quality to price, size to color.
“E-commerce is soon going to change in seismic ways, and that is incredibly exciting for businesses and shoppers alike,” says De Datta.
Courtesy of Instacart
3 – Engaging directly with customers
ChatGPT and other AI tools are also working their way into the enterprise space to converse directly with consumers. Instacart is launching an add-on with ChatGPT to help customers dream up meal ideas from their grocery list, and Salesforce’s Einstein GPT is powered by OpenAI and designed to work with the company’s client base.
General Motors, already in partnership with Microsoft to make driverless cars, is exploring several ChatGPT projects centered on making these vehicles more appealing and useful to customers.
“ChatGPT is going to be in everything,” said Scott Miller, General Motors vice president, to Reuters. “The chatbot could be used to access information on how to use vehicle features normally found in an owner’s manual, program functions such as garage door code or integrate schedules from a calendar.”
4 – Implementing real-time error controls
In manufacturing, Retrocausal, a provider of AI-powered augmentation systems, recently released its proprietary LeanGPT series, including its first application called Kaizen Copilot.
The product integrates Lean Six Sigma, a method of improving manufacturing processes by gathering information on assembly lines as it’s happening, and offering corrective signals to workers. It also taps into Toyota Production Systems (TPS), an operations system that helps Industrial Engineers (IE) design and improves industrial assembly processes more efficiently.
Retrocausal has unveiled joint projects, including one with Honda Innovations, that observes workers’ actions on a production line, record errors, and use an audible tone to notify workers if they perform a process step incorrectly. The company also teamed with Siemens Digital Industries to similarly manage live manual assembly processes via AI video-based analytics and real-time task guidance for workers on the line.
Audi is also using AI to find small production line errors, such as welding imperfections or spying cracks in metal that come off the press line. And the carmaker is eager to put AI into practice in other parts of the production process, including helping to “increase the output or performance of processes or machines,” says Audi’s AI expert Rüdiger Eck.
5 – Finding and fixing production issues
Ford Autosan, Ford’s manufacturing company in Turkey, uses AI to find weakness along its line, propose ways to optimize their output, and even run virtual mockups or “digital twins” of the suggested changes.
Semiconductor maker Analog Devices uses AI to monitor production lines for “wander,” and can also automate repairs to keep manufacturing schedules running. Concerns are sent to engineers that oversee specific products so they can be studied further.
Retrocausal helps companies locate and catalog issues, and share them with stakeholders to “…compress tasks that used to take weeks into minutes and hours,” says Zeeshan Zia, the company’s CEO.
6 – Delivering rapid prototyping.
Generative AI has helped to spur innovation, generate ideas, identify design flaws, calculate production costs, and rapidly produce blueprints and instructions. For example, NASA turned to AI to craft elements for telescopes and scanners designed to travel into space. But prototyping isn’t limited to manufacturing.
The method can also create consumer products or services, such as specialty AI bots, computer codes, mobile apps, computer gaming, blog and website designs. As with prompt generators already available online, consumers can find online manuals on how to direct AI to craft a customer-facing support bot, for example, or a meal-planning app.
With ChatGPT and other GPT model applications already at work at the enterprise level in marketing, manufacturing, and beyond, companies that haven’t begun to consider how generative AI will augment how they run their business should start now. It’s clear their competitors already have.
“The significance of what we’re on the precipice of with AI really can’t be understated,” says De Datta.
To create movie special effects in the past, editors would splice film frames together and run them at the same time. Today, virtual tools like VR and generative AI not only make illusions seem real — they put us in the middle of them too. On the Signal stage in 2019, Loren Hammonds, director of special programming for the Tribeca Film Festival, showed us how virtual tools, like virtual reality, were transforming narrative, giving viewers a chance to nurse a baby elephant to health or follow the pathway of Syrian migrants.
Today, AI is the darling of the media world, reshaping the entire creative experience from the way we tell stories to how we experience them. But even as storytelling tools change, “….all of this means nothing without compelling content,” said Hammonds.
As the curtain raises on the 21st Tribeca Festival, you can hear more from Hammonds or read our lightly-edited transcript below.
Transcript:
Loren Hammonds
My name is Loren Hammonds, and I am the Senior Programmer of Film and Immersive at Tribeca Film Festival in New York City. So we’re a festival that enjoys a wonderful partnership with P&G. And I’m so thrilled to be able to join you all today to talk a little bit about our festival, and also about the future of immersive storytelling. Before I really get into it too far, I just want to thank Mark Pritchard for the invitation to contribute to Signal this year. Also so many thanks to the amazing team here, including Stan Joosten, John Battelle, Stacy Foreman for all of the assistance on the road to today.
I think it’s often most effective to look back at our origins to explain how we’ve gotten to the current shape of our festival as it stands now. Tribeca Film Festival was founded in 2002, as a direct response to the events of 9/11. Our founders, Jane Rosenthal, and Robert De Niro had already been operating a successful arts organization and film center in Tribeca at the time. In the wake of that terrible day, they decided to organize an event that could bring some joy back to the city. They recognized the fact that art has a unique ability to heal the spirit. That’s how Tribeca Film Festival was born. In the years since we have evolved to become much more than just a film festival. We’ve let storytelling become the backbone of every decision that we make at Tribeca.
Great storytellers are often not bound by a particular medium. In recognizing that we’ve continually expanded to include new elements of the festival to reflect this. At this point, we’re currently celebrating not just film, but also television, new online work, musicians and multi-disciplinarians that use storytelling within their work, and the reason why I’m here today, immersive storytelling.
In 2013, we showcased our first section of interactive and immersive storytelling, which is known as Storyscapes. That year, we included our first official selection of VR, virtual reality that was made by the woman who you see here. Her name is Nonny de la Peńa, and Nonny is a pioneer in the field. She’s often called the godmother of VR. She’s an Annenberg Fellow and an immersive journalist. She created a brilliant piece called “Use of Force.” What she did in that piece was she used actual audio of a deadly confrontation at the US Mexico border, to reconstruct the events within a game engine, and then give you the opportunity to actually stand in the shoes of a bystander there. Now, mind you, this groundbreaking piece of work was made on a homemade headset, it was presented on a homemade headset.I think spit and bubblegum were involved somewhere there. There was no commercial hardware available at that time. This was the only VR project that we exhibited that year.
I’d like to take a second to contrast that with this year’s 2019 festival, in which we showcase 32 VR projects, some of which included live actors motion capture performers, volumetric filmmaking, and more. This doesn’t even mention the various mixed reality and augmented reality and AI-powered storytelling that we also included as part of the festival. Tribeca has evolved in a few short years to become one of the leading showcases of immersive work in the world. Following the opening of this year’s exhibition, Forbes even called us the world’s most important XR festival.
A lot of our success does have to do with consumer experience. VR is by nature, a fairly difficult medium to exhibit. So audiences have the opportunity to experience amazing, transformative work. But throughput is an issue in a medium where the majority of projects require a minimum of 10 square feet, per viewer. In New York City, that kind of square footage is not as easy to come by as we’d like. So at Tribeca what we do is we allow groups of about 100 audience members or consumers to come into our Virtual Arcade for each three-hour session. We encourage everyone to explore and experience as many of the various projects on display as they can during their given time slot. There are a lot of factors to take into consideration when programming and curating a festival like ours. We have to think about the number of projects that we can accept, the number of headsets that we can present each of the projects on, the length of the projects themselves, space requirements, and more.
With this inherent challenge, as we started showcasing VR all those years ago, we wondered very quickly, what can the rest of the audience do while they’re waiting to have these experiences? We didn’t want lines, because no one wants lines, right, because who wants to wait in a line. So we implemented a virtual queuing system in which consumers would simply sign up for an experience with their cell phone. So they sign up for each experience, and then they get a text back when it was their turn. This freed our audience to walk about, and really just explore some of the more visual treats that our exhibition could present. So the natural solution for us was to create an entirely immersive space for the exhibition, one in which audiences became totally immersed as soon as they enter the arcade. They have hints of storytelling before they even put on a headset. So you’re seeing some of these examples here on the slide behind me right now.
Once we hit upon this idea, creators more than rose to the occasion. We suddenly had theatrical set design, we had decompression rooms after experiences, and even more added to the space. It really took off for everyone involved, but especially it was beneficial for the audience. We take the responsibility of showcasing the medium of VR very seriously. Because if you deliver a bad or mediocre experience to someone trying VR, for the first time, it’s not just Tribeca that sunk, it’s the entire medium. Because it’s very hard to get someone to give VR a shot for a second time if the first time wasn’t up to par.
What we recognized also was that unfortunately, VR headsets haven’t been widely adopted for home usage. How many of you have a VR headset at home? This is pretty wide adoption. Yes, Signal. They haven’t been totally permeating the market. So it’s really important for festivals like ours, and other location-based experiences to play a crucial part in the ecosystem of VR as a whole. But of course, all of this means nothing without compelling content.
For me, it’s always inspirational to look back at a seminal year in VR and a seminal year for our festival. 2014, that was a year in which hardware manufacturers had started giving creators access to their development kits. It allowed for more experimentation and a real richness in the storytelling started to emerge. The implications of putting an audience within a story, as opposed to merely watching it, really hit home. That year, we showed a piece called “Clouds Over Sidra,” which these are some images from, and it’s made by digital pioneer Chris Milk, along with Gabo Arora, who was a documentarian, who was working at the UN at the time. The piece followed a young girl living in a refugee camp in Syria. It did what VR does best, it transported you to a place that most rarely get to visit, and put you face-to-face with someone that you rarely get to meet.
There’s a moment in that experience where a line of children walk past you, the viewer or the visitor, and they seemingly look you directly in the eye. In that moment, you can see their curiosity. You can also see their fear, and their hopes and their dreams, and most importantly, you feel their presence. That year at the festival, this experience was set up in our registration area. I stood by and watched as unsuspecting festival visitors, most of them having their first ever VR experience, you know, put the headset on with dry eyes, and almost without fail to get off with tears. The power of the medium was undeniable. That was the point where we really started focusing on expanding the festival further to really focus on virtual reality. That’s when we introduced the Virtual Arcade. To truly highlight just how much that experience meant to people beyond even the Tribeca footprint, that piece was also showcased that year at Davos, and another fundraiser. After seeing the piece, some of the decision makers there ended up pledging $3.8 billion in relief funds for Syrian refugees.
The same year, we hosted the world premiere of “Invasion!,” and in “Invasion!” the fluffy little bunny on screen here becomes an unsuspecting hero, as he helps us save the world from an alien invasion. This piece was made from Baobab Studios. Eric Darnell, who’s creator of the “Madagascar” franchise, and his CEO, Maureen Fan saw VR as an opportunity to truly change the connection with audiences through narrative storytelling in the medium. This piece was wildly successful, and it became one of the most ubiquitous projects across the board. It was one that many people, including myself, often used to show first-timers as a way of explaining presence in narrative.
Interactivity in the space was also key. As technology continued to leap forward, further interactivity also became possible in the work itself. So I’m lucky enough to have Chris Campkin, Vision3, to share an example of what I mean.
This is related to something that we showed last year. So in 2018, we featured a project called, “My Africa,” which is a beautifully beautifully filmed 360-degree experience, narrated by Academy Award winner Lupita Nyong’o, was created by Chris and his team at Vision3in the UK, in conjunction with the amazing organization Conservation International. The experience follows a teenage girl in Kenya, as she is working and going through her routine of living on land that is shared with an elephant preserve. It’s really moving, and it’s gorgeous to watch, and it’s interactive in its own right. But what Chris and Vision3 were able to do at the festival was to take it even further and really enhance the experience of our audience. Because in the 360 piece, you do meet a baby elephant named Dudu, and after that 360 experience, they invited people to come and enjoy a room scale experience in which you actually got a chance to interact with a virtual version of the baby elephant. So Chris, can you tell us a little bit about that?
Chris Campkin
I’ll talk you through this, and I’ll give you a bit of a virtual live guide of what the experience actually is. The reason we made this experience was because talking with our partners, Conservation International, they had sort of found that through watching 360 films that people that watched them were getting an increased level of funding coming through from them. They’re becoming more immersed in it and feeling like they were there and then wanting to donate money through it. We thought, “Okay, well, we’re making a 360 film for them, we thought, how can we take that a step further, really increase that level of immersion.” If we increase that level of interactivity, we will boost that immersion level there. I’ll then put the headset on and show you guys, if we can get up on the screen. Loren you’re gonna have to guide me if it isn’t on the screen.
What we have here is an actual scene called Reteti Elephant Sanctuary. One of the big things that we’re trying to do here was make sure that it was as realistic as possible, as the technology would allow. So every post that you see, the beams in the ceiling, and even down to the sand on the floor was exactly as it was when it was there.
Hammonds
You had to take thousands of photographs.
Campkin
We took about 4,000 photos of this to recreate it and stitch it back. But what it did was open up that 360 world, it allowed us to now step from this fixed point to be able to move around and walk around a bit. We actually showed this to the carpenter and made this building and he’d put it on, and he burst into tears, because he said, It just took him straight back, which is a really, nice thing.
The story goes where we have to actually look after Dudu. She has been rescued, but now she needs nursing back to health. So we’re gonna have to do things like wet the area down. One of the things we’re doing is we’re using real-world tract objects has another level of bringing that immersion to people. People kind of freak out when they reach out and grab a sponge.
Hammonds
It’s actually such a weird feel to be in that world.
Campkin
You’ve got a stethoscope here, which you guys see as a weird plastic object, which is the tracker. But in my world, I’m feeling I’m hanging on to this stethoscope. So we can check for heart rates and see how she’s doing. If you go over the stomach you can hear her stomach gurgling.
Hammonds
I don’t think we’re gonna have time to truly revive Dudu.
Campkin
I think I think you’re right. I think you have to take some time, and if you do take your time and look after Dudu, then you’re able to bring it back to life. You can even feed her with this plastic bottle. But maybe you guys can give her a bit more attention than I have and bring her back to life.
Hammonds
Thank you so much, Chris. Before we before we wrap up, I just want to let you know that this experience along with “My Africa” is available upstairs at the Signal Immersive Experience on the second floor. And we’re also showing what’s see Yeah, we’re also showing “Bonfire,” which is by Eric Darnell, which is who I mentioned before, and I’ll just leave you with this. At Tribeca we continue to strive for new and innovative ways to showcase the groundbreaking work of XR creators across the globe. This medium continues to evolve and in response, so will we. Thanks so much for listening.
The 12th Annual Signal Summit opens July 12. P&G’s annual conference examines the leaders, companies, and few start-ups at the intersection of innovation and action. The Signal Summit has always attracted some of the more transformative companies and figures to its stage, from Walmart’s CEO Doug McMillon to Instacart’s CEO Fidji Simo. Attendees can expect more of the same whether they’re coming to Cincinnati or tuning in virtually, to hear from Jeremy Gorman, president of advertising with Netflix, Kroger’s CIO Yael Cosset, Accenture’s Chair and CEO Julie Sweet along with other exciting founders, leaders, and brands.
Signal360 Managing editor Lauren Barack caught up with co-founders Stan Joosten and John Battelle to ask them about the stories we can expect to hear on stage, and some insight behind this year’s theme, Reset the Bar.
You can hear more from Battelle and Joosten in the conversation, sign up for additional details about the 12th Annual Signal Summit below, or read our lightly-edited transcript.
Transcript:
Lauren Barack
Welcome to our Signal360 Conversation for June 2023. I’m Lauren Barack, the managing editor of signal 360. And I’m here with co-founders and co-editors in Chief John Battelle and Stan Joosten. Welcome to you both. Every year, the editorial team comes up with an underlying theme that we develop from the content. We start with you, John, can you tell us about this year’s theme “Reset the Bar?
John Battelle
It’s interesting. We set the theme every year, towards the end of the year before, right after the Signal event the year before. We finalize it early in the year. So it’s been a three or four months. But “Reset the Bar” was something that bubbled up from conversations amongst all of us, as well as with various folks at P&G. There’s a sense that because of everything that’s just happened in the last three years, of course the pandemic, but also just incredible amount of economic turbulence, huge shifts in ways of working, big changes in technology, and in the way businesses are going to market or manufacturing in supply chain, and all the big parts of our focus at Signal that it’s just not enough to “Raise the Bar,” which is a theme we had several years ago. We really have to rethink the benchmarks for how we conduct business. We have to question everything, and reset the bar.” So that was what we drafted up and then sent around, and it got the thumbs up from everybody involved. We’re excited about the theme.
Stan Joosten
It came with a subtitle. Because we set the bar for superior performance and irresistible innovation. That’s to balance today and tomorrow. We always have a forward looking view at Signal. But a lot of it also applies to today. We don’t want to forget about the superior performance of how to get the best out of what we have today, by bringing in the thought leaders who are trying to navigate very turbulent times, from whom we can all learn a lot.
Lauren
So that’s interesting. There’s so many different directions you can take this theme into. Over the last few years, we’ve had a focus on four key areas that our editorial coverage also mirrors at Signal360. I’m hoping you guys can break a little bit of that down for us. Those four areas, just to sort go through them, again, is digital acumen, sustainability, supply chain network, and the employee value equation, that future of work. So can you talk a little bit about that?
Stan
First of all, it’s very grounded in P&G strategy at this time. That helps make the conference relevant for the company. That’s one of the reasons we do it to bring the outside in, so that people can learn around these areas. But those areas are not just relevant for P&G, they’re relevant much broader. The digital world is still accelerating in many ways. As you can imagine, generative AI will play a prominent role throughout all this. But I have to say there’s more to AI than generative AI. So that we will cover as well. AI has been around for a long time. It’s just now that it starts to become really visible to everybody.
Sustainability, always been on our agenda. But also there, the practicality of how to make this happen versus a nice to have bolt-on, is becoming more urgent. We see that around us. So we all have a role to play in that. Supply chain is probably one of the most sexy, non-sexy topic areas that we’ve had. I think after the last three years, we all know what it takes to get goods from A to B. And there’s more innovation going on in that world than anybody would have imagined. All we would have thought is like we see a truck go by on the expressway, that’s supply chain. No, it’s a whole lot more than that. And then employee value equation, employee experience? My gosh, what a turbulence we’re going through. Last year, everybody was, who applied or scrambling to come up with this. People are still trying to find a balance, the job market is getting a little tighter, the dynamics are changing. But overall, I don’t think anybody disputes that value of providing great employee experiences, to attract and retain the very best people, to help us get ready for the future. So that’s where it’s grounded. It’s just part of the company strategy on our end, and it makes for really interesting topics and conversations.
John
The way we program is we keep each of those four, we call them pillars, programming or editorial pillars for the day we’re putting together at Signal which I’d say is about 98% baked. And I don’t know, Stan it feels like we had a whole program together a little earlier than we did for the last few years and the tumult of the pandemic. Not only that, almost everyone, if not everyone, is going to be on stage in person, which creates a really unique energy that even if you’re watching it on the platform from wherever you happen to be in the world, you can feel that energy and sense that energy. I’m excited about that. But every single speaker that’s on that stage, ladders to one of those, if not all of those, editorial pillars that Stan just talked about.
Lauren
Let’s jump into those speakers. Let’s hear a little bit about the topics and the actual people we’re going to hear from at the event. Are there any topics or speakers that you guys are particularly excited about? I know you don’t want to have favorites, because everyone’s going to be fantastic. But maybe a couple that you are sort of looking forward to in particular.
Stan
I’m actually excited about having Kroger on stage and not in the least because that’s where I do most of my shopping. That’s my experience with digital commerce, which happens to be my personal focus area these days. They’re very progressive. Yael Cosset, who is the CIO will attend. He actually started a company before called at 84.51, a data company that’s attached to Kroger. Now he runs digital and is the CIO for Kroger. So there’s a real revolution going on in the retail industry in the grocery industry, that Kroger is going to represent there.
The other one is, we do speaker prep calls. This week, we had one with Julie Sweet from Accenture. That was almost the interview as I would have liked it on stage. It was just fascinating. It was hard to leave after 30 minutes, that call actually lasted close to 45. There was a lot in that call also, because she sees across and her organization sees across, so many industries, that she can really help pinpoint where the things are changing, where the opportunities are, and the challenges. She spoke a lot about, surprisingly to me at least, employee experiences and transformation that’s tied to change. So that will be a very, very interesting session.
John
I would have picked Julie as well, Stan, because I thought that was a great pre-call. I’m glad we’re giving people who are watching a little bit of insight into how much work we put into making sure the stuff on stage that they see is good because we really do sweat it. But beyond that, there are a couple that I’m excited about. First of all, while we have our focus on really interesting things like the impact of AI, or the digitization of the supply chain, we started as as an event that focused on the go-to market piece, the communications piece, the marketing piece. We have so many speakers in that swim lane.
One that I’m really excited about is Jeremi Gorman, from Netflix, president of advertising there. This is a new thing. Netflix did not have an advertising business last year. So to hear about that, and the state of streaming generally is going to be exciting. But there’s also a startup I wanted to highlight, that is called Gather. I think they’re gonna blow people’s minds. They’re working in the field of both artificial intelligence, generative AI, as well as personal data. So the idea of being able to have a personal AI agent, or agents that work only for you, that live on your device, your phone and or your machine, maybe even soon enough, your gaming console, that look at everything you’re doing, and are very smart about taking data from what you’re doing, and answering interesting questions and creating interesting opportunities for you in a very safe environment. I think the model that they’re going to talk about of how this changes the consumer behaviors will be really interesting to people at P&G.
Stan
So Lauren, you’ve seen the list. Any ideas which you might want to see?
Lauren
I’m really excited to hear from Candice Matthews Brackeen, and Lightship Foundation, because of her focus, which is on marginalized groups that have statistically been left out of venture. She’s already raising her second round. So I’m really excited to hear how that’s going, and also how she is seeing that work she’s doing, how she’s finding innovative founders, and how she’s changing the way they’re getting funded, but not just funded, but how they’re being found. Because I think that’s been a big focus for her. So I’m really excited to hear her session.
I’m also really interested in hearing about NaviLens, it’s going to be Javier Pita. I want to hear a lot about that technology, which is focused on supporting the visually impaired and they’re working with consumer packaging companies and in transportation fields, I think subways they’re partnering with and airports. But I’m curious to see how that technology might be kind of working its way into supporting other groups as well, and how they’re going to be expanding the technology. So those two sessions, I’ve already starred for myself.
So we’re going into our 12th year, that’s a long time, really successful, for an annual event. I’m curious to hear from the both of you how you go about keeping these conferences fresh every year, because it’s not the same thing. It’s not cookie cutter. So what kind of tactics and strategies are you employing to make the feel of it different, exciting, fresh and new?
Stan
I always tell people organizing events is a bit of a masochistic exercise. But there’s great fun attached to that. So I want to start with that. Without that, nothing happens and it is short lifespan. The other one is just relevance. If you bring people useful and interesting topics that they can do something with, they will show up. And the context always changes. Yet what we keep constant is how to bring out the information for people in a way that is engaging. We keep the formats to either interviews or short presentations in a high pace. There’s always something for everybody. You might not like all the speakers, they it might not always be relevant, but there will at least be a handful out of the 20 that you say I’ll remember those. That I think is the secret ingredient. I think it starts with just all of the team, the editorial side, for sure, has endless curiosity. So we dig into the topics that we think are going to be relevant. For me, that is what keeps me going. And there might even be a 13th edition next year.
John
I think we already have dates, Stan.
Stan
That’s true.
John
We also keep some things constant, like the approach to the programming, short, impactful sessions. But we have been changing a lot over the years. We added the Signal360 and you Lauren, which allows us to keep the drumbeat of focus on this story all year long, which just makes the event itself better, because it means we’re thinking about this editorially all year long. Also we added a robust platform in 2020, three years ago, when the pandemic hit that brought this event to 10,000 people. That changes how you think about programming, where programming comes from. When we started this the first few years, I don’t think we were paying attention to what percentage of speakers were from outside the United States. Now it’s I think, above 40% of speakers are from somewhere else besides the US. We are really focused on diversity. We always make sure we are at least at gender parity, and that we have diverse voices from not only all over the world, but also from all walks of life. So that keeps it fresh as well, because you do have to do the work to find those unique voices, and those unique voices make the program fresh.
Lauren
So now we’ve got to get the most important question, how can people attend? And what do you both hope people are going to walk away with from the experience? Either one of you.
Stan
Let me talk about the registration process, and John can talk about what the hopes we hope that people walk away with. So registration is relatively simple for P&G people. There’s a company-wide email that went out in a couple of reminders. I always declare myself around this time of year to spam king at P&G, it has my name on it. So there’s a link in there and all the information. Externally, the people who’ve previously attended will get a similar email. For people who are new to this, we would welcome that. But we do ask that you, we have some room, that you fill in a little form that will go with this article, this video. I will put it in some other things as well, and wave your hand with interest. Hopefully we can send you a ticket to access if you’re not in the P&G partner ecosystem. But you’re still welcome to join, we just have one extra step that we want to get you back on the way you want to attend. For P&G partners, there’s all kinds of communication channels that they will hear how they can log into the Hopin platform virtually. It’s relatively simple. If any questions, send me an email.
John
To the second part of the question. First of all, I would defer to Jon Moeller, who will be our first on-stage interview. I’m going to ask that very question of him on stage. But from past experience, I know that the most important thing from these events, beyond information, or inspiration, what Stan calls activation, which is, both getting the permission to go do new things, and the inspiration to figure out what those might be. We really are thinking every single minute of the day, how is this going to spark some fresh thinking and fresh action on the part of those of you who are in the audience, whether in the room or on the platform. That’s really the goal, to take it past ‘Wow, I listened to some really smart people and had some really interesting topics,’ to ‘How does this apply to what I do every day?’ So that’s the goal, to activate.
Lauren
Well, thank you, Stan and John, for the sneak peek on what we can expect on July 12, at the 12th annual Signal Summit. And to everyone watching, we hope we will see you guys in Cincinnati too or at least, virtually on the Signal stage. So thanks for joining us.
Marc Randolph and Reed Hastings went through several carpool rides and many bad ideas (custom dog food anyone?) before landing on a subscription service that mailed movies to people at home. They tossed it out. In the era of VHS, the two couldn’t imagine how to cheaply and safely get the tapes to customers.
Randolph, the co-founder of Netflix and its first CEO, tells the story of how all ideas start as bad ones, and the work needed to turn a concept into a proven winner — including the work that led to Netflix.
“If you can’t tell a good idea from a bad idea in advance, the one way to figure it out is to do it,” says Randolph.
You can hear more from Randolph and the Netflix origin story as he talks with Dorion Positano on P&G’s podcast, “More Than Soap”from the MP3 below, or read our lightly-edited transcript. Are you a P&G employee? Feel free to also sign up for future episodes of “More Than Soap,” or reach out to Dorion Positano by email at positano.d – at – pg.com.
Transcript:
Dorion Positano
Hi everyone, this is Dorion Positano. Hello, and welcome to the “More Than Soap” podcast. For those who are new to the podcast, we launched More Than Soap as an innovative internal communications platform in 2021 to educate and inspire P&G employees around the globe. The guests that we have on provoke introspection, stimulate creativity, and encourage all functions to embrace possibility and big ideas.
In each episode, I sit down with an external expert guest followed by a post interview with a P&G executive. We also produce a bi weekly scripted series called improbable history with our P&G historian to educate employees about P&G’s most salient successes and failures that can be applied to today’s business challenges. We’ve done over 80 episodes now with VIP guests like Matthew McConaughey, Malcolm Gladwell, Edward Norton, founders, CEOs, neuroscientists, professors, leadership experts, psychologists and even meditation coaches as a commercial leader in P&G Ventures.
In my day job, I explore the development of new brands in new categories where P&G doesn’t play today. But beyond that, the company has given me the space to host this podcast, which has become successful, I think, because people are increasingly interested in getting outside of the dotted lines. So if you’re a P&G employee, go to get more than soap.com. That’s www.getmorethansoap.com to hear all 80 episodes and counting, and also to hear the post interview that we did with Gary Coombe, the CEO of grooming in response to this interview with Mark Randolph.
So today, you’ll be hearing from Mark Randolph, and although he’s best known as the co-founder and first CEO of Netflix, his career as an entrepreneur spans more than four decades, he’s founded or co founded half a dozen other successful startups, including Looker Data Sciences, which he sold to Google in 2019. For a cool $2.6 billion. He mentors a handful of other early stage companies and advises hundreds of other entrepreneurs. He is also an active seed investor in startups all over the world. He’s an author of an internationally best selling memoir, and host of the podcast that will never work, where he dispenses advice, encouragement and tough love to struggling entrepreneurs when he’s not surfing, mountain biking, or backcountry skiing.
Mark is a frequent speaker at industry events, works extensively with young entrepreneur programs, sits on the board of the environmental advocacy group 1% for the Planet, and chairs, the National Outdoor Leadership Schools Board of Trustees. Now this episode is for innovators, leaders, entrepreneurs and those just looking to shake things up. So without further ado, here’s my discussion with Mark Randolph. Hope you enjoy. Mark Randolph, welcome to the More Than Soap podcast.
Marc Rudolph
Well, it’s a pleasure to be with you. Thanks for having me on.
Dorion
So Mark, I know you’ve told the Netflix origin story about a million times now. But I think I’d be fired as host of this podcast if I didn’t ask you to tell it once again, for our audience here. So give us the story of how you met Reed Hastings. And ultimately, what led to your idea of renting DVDs by mail?
Marc
Well, like most companies, this one started driven by external forces, as they say. And in my case, it was the company that I was working for a company which happened to have been found that was being run by another gentleman named Reed Hastings was being acquired. And both Reed and I were going to lose their jobs. But we were losing them in that great Silicon Valley way where basically you have six months while two large companies go through their merger dance, where you have to come to work every day, but you don’t have much to do. I was at this point in my mid to late 30s. And I had already done five startups and so for me it was self evident that I would use this perfect six month window while I was getting paid, but I had nothing to do during the day to start my next company. And Reed, Reed he was sort of in a similar boat but he didn’t want to start another company. He was going to go become an educational philanthropist. He’s going to go back to school. We all get a higher degree of education wanted to keep his hands in. So we kind of came up with this plan, that I’d start a company that he would be my angel investor, he’d be the chair of my board, and off we’d go. But we needed an idea.
An important thing to know about this time is that I wasn’t a video guy. And neither was Reed. This isn’t like the two of us were driving to work together every morning debating who the best French directors were or debating who should get the Academy Award for cinematography. I had three kids under 10. So my video tastes were much more focused on Lion King and all the things I kept my kids entertained all the time. But we needed an idea, and I would spend this time commuting to work because Reed and I used to carpool together, I would pitch ideas for this new business to read. They were all over the place.
A lot of them were packaged goods, ideas, and here you go. I’ll pitch it to you here. Personalized shampoo by mail. Okay. I mean, picture this picture this, you cut off a lock of your hair, you mail it to us, my team of ace hair, scientists formulate a custom blend just for you.
Dorion
That sounds wonderful.
Marc
Yes. Great idea. Unfortunately, Reed didn’t quite see it that way. A couple days later, Reed, how about this one, custom dog food, we formulate a blend just for your pet for its age, its activity level, its gender, climate, whatever. And you subscribe to it. And he didn’t like that either. Okay, so no problem, I got more. Then a few days later, with pitched video rental by mail $8 billion category, entrenched market leader who everyone hates, there’s got to be a way to do this better. The thing that shot that down was that this was back in 1997. This was when video came on VHS, cassette, right. And it didn’t take a lot of research for me to figure out that I couldn’t make this work. It was too expensive. They were too heavy, they were too fragile. So that ended up in a big pile on the side of the road along the dog food and the shampoo. If there was any kind of breakthrough, if there was, as they say, and screenwriter speak, an inciting moment, it was one morning when Reed mentioned they’d heard about this new technology called a DVD that was thin and light and like a music CD, it helped movies. It made us realize that it might be the key to dusting off that old idea we’d abandoned a month or so previously, that we could maybe mail the movies to people using the US mail.
Here’s the key thing that happened and which is I think a key component to any innovation is that rather than taking this insight, and saying quick, let’s get to the office and begin working on a business plan. Rather than okay, we need to do a pitch deck and begin raising money. We immediately said let’s begin, let’s just collide this idea with some type of reality check. And so mid commute, we turn that car around, drove back down to where we lived and tried to buy a DVD, which of course was in test market, there weren’t any. So we settled on a used music CD, what that they went a few doors down and bought a little pink gift envelope like you’d put a greeting card in. We mailed the CD to Reed’s house. The very next morning, when he came to pick me up, he didn’t even need to say anything. He just kind of held up this little pink envelope with an unbroken CD and that had gotten to his house in less than 24 hours for the price of a stamp. And I think that’s kind of when we looked at each other and said, Wow, this actually might work.
Dorion
So DVDs come around, you validate the idea with a music CD, you and Reed, look at each other and see the potential. Something tells me there were still a few skeptics. So tell us, we’re people still insisting that will never work?
Marc
That was just the beginning. Because then of course I come charging back home that evening and lay it out to my wife how excited I am about this great idea for doing video rental by mail. And, her exact words were, “That’ll never work.” Thank you. But listen, I heard that 1000 times and I heard it 1000 times previously and everybody who has a new idea is going to hear that’ll never work. It’s just the nature of ideas.Certainly with Netflix, it was no different. I heard it from investors, I heard it from potential employees. I heard it from partners. It’s the truth. Nobody really knows if it’s a good idea or a bad idea. The fundamental reality is, if you can’t tell a good idea from a bad idea in advance, the only way to figure out if it’s a good idea or not, is actually to do it. And we realized, after a bit of research that the only way to figure out what this crazy idea was going to work was to try it. Reed, bless his heart, wrote a check for $1.9 million, got a small office, hired a dozen people spent six months building a this simple e-commerce website, which you could write put together in an afternoon now. And we actually opened Netflix for business.
Dorion
Wow. So what you just described reminds me of something else you’ve said, which is that, there’s no such thing really, as a good idea. Only bad ideas that turn good. So tell me, how do I explain that to a manager at P&G, who really doesn’t like my ideas?
Marc
The first thing is, I pity you. Thank you. What a challenge that’s going to be, and especially, uh, pardon me, I don’t want to disparage P&G, who we will have tremendous respect for, but I’m going to guess that the count is probably getting close to the millions of the number of times someone has gotten in front of a conference room full of people and said, “No.”
Okay, here are the rules. There’s no such thing as a bad idea. I fact, I think what I’ve learned in my 40-year career as an entrepreneur is that there’s no such thing as a good idea. There is no idea, which is going to work perfectly fully formed out of the box. All ideas have flaws. All ideas are bad ideas. It’s our job to collide those deals with reality one way or another, and begin figuring out why it’s not a good idea, begin finding those glimmers of truth about where we might begin to look for the good idea. It’s such a path, it’s a starting point. But every successful innovation that I’ve seen, almost never is the one that was originally conceived of.
So what I would tell to the people, these product managers who are set in their ways about rejecting all your great ideas, is that it’s a matter of practice. You can’t take the big bet, as the first bet. You have to become comfortable with the idea that you can try things and see what happens, it goes on. And you want perhaps the best analogy, if I could expand that for two seconds here. I’m gonna borrow from Jeff Bezos, who put it really well, which is that he always said there was kind of two types of tests, two types of decisions. He called them one-way door and two-way door decisions.
One-way door decisions are where you want to try something and you step through the door, and the door swings shut behind you and locks, and you can’t get back. Before you step through that door, you had better think it through, you’d better ask a lot of people, you better do your research, you better have your bases covered.
But there’s also two-way door decisions. Those you step through, and if you don’t like what you see, it’s no big deal. You just turn around and step back. Ehat happens is, over time, as companies begin to calcify, they start getting good at one-way door decisions. Then they begin treating every decision as a one-way door decision. The reality is when you’re trying to do things differently when you’re trying to innovate, when you’re trying to disrupt that almost all are two-way door decisions. Your danger is if you are making every decision the same way. Listen, if you’re a financier, if you’re a healthcare, if you’re a farmer, yes, you’ve got to be careful, but not with every decision. In reality, the great majority of innovations can be done in a way that they’re small, iterative. And if you don’t like what you see, you just turn around and step right back.
Dorion
But tell me, was there a point in time that you made a decision to really commit to something that led to Netflix’s success, which was renting DVDs versus selling. Can you can you talk to us about that and the life and death nature of that decision? Would you would you classify that as a one-way door?
Marc
I hadn’t thought about it that way before but perhaps, but for a different reason. What we’re referring to is right now people know Netflix as a very different beast than it was when we started it 23 years ago. Back then it was DVD rental by mail and we had set this goal we’re going to have a copy of every single DVD available at the time all 970 different movies.
As an afterthought, we said, we spent all this time making sure we could source every single DVD available, let’s begin selling them. So we began selling and renting. And lo and behold, an amazing thing happened we had this $100,000 month in month two, so a million dollar run rate. But the downside is that almost all that revenue is from selling DVDs. Nobody was renting. It was a downside. Because selling is a commodity business. And it’s just a matter of time before Amazon does it, and Walmart does it and P&G does it. And pretty soon, everyone is selling DVDs, and we’re out of business.
So we realized, we’re gonna have to focus because the reality is that doing both at the same time, was making it less likely we get either of them, right? It was confusing to customers, so they rented or they sell, the order process was complicated, inventory management was complicated. And analytics was always being argued about because there was so much arbitrariness to it. So we’ve got to pick one. And if we pick sales, that’s great. It’s 98% of our revenue, but eventually, we’re out of business. Now, rental, potentially could be huge, but there’s really no visible signs of it working at this point. And obviously it’s no mystery what we did. But we decided better to take this long shot at a potentially big success, then take a safe route, which little by little, is going to go under.
In one single day, we pulled the plug, walked away from selling DVDs, dropped our revenue by down to 2% of its previous level, and said all right, now we’re committed.
Dorion
That sounds like a pretty intense decision that you had to make at that point in time. And I know, you’ve said that your relationship with Reed was generally intense, to say the least. And I’ve heard you talk about your passionate shouting matches about various ideas, this may have been one of them. So tell me about your relationship with Reed. I want to know, if you think that we’re missing out on something at P&G, given that that type of working relationship, with shouting out matches and all, are often considered to be inappropriate.
Marc
So I need to set the stage, I don’t want people thinking shouting matches and imagining people storming out red in the face, throwing things at each other. Reed and I, from almost the moment we met each other, realized we shared a really important cultural value, which is honesty. Both of us are people who believe there’s really no time and no value in shading the truth. There’s no time or value in having ulterior motive, that the most best possible thing you could do is tell someone exactly what you’re thinking, including if you think their ideas ridiculous. Then you owe it to them to then begin to make a very logical, informed argument about why you think what they’re doing is wrong and why you think this other approach is right. All I can say to help you understand that as it’s egoless, right?
Because you eventually come to this realization that your fundamental premise was incorrect, in fact that what this other person is saying is absolutely right. Then instantly, it’s forgotten whose idea was who’s, who was taking a position. And now you’re both excited about the fact that you’ve used this process to come up with a right answer. So the shouting matches were just Reed and I basically being passionate about our belief. There’s a behavioral psychologist named Adam Grant, who I think said it, but I’ll get I’ll give him the attribution anyway. He said, basically argue like, you’re right, and listen, like you’re wrong. I think that’s what we were doing. That honesty pervades everything besides just decision making. It pervades the entire culture. They call it radical honesty, because you’re right, it is very rare. And there is a way to be honest with people without it being brutal without it being rude,
Dorion
Or without people, hopefully taking it personally.
Marc
Correct. What you find is that being honest with someone is the highest form of respect you can show them. So that’s what was going on here. So if people each contributing something, some piece of background, some insights, some observation, some piece of data, that all went into helping us determine, “What should we try? How should we measure what was successful? What should we do with the data that we’ve captured from this experiment?”
Dorion
Has that radical honesty approach to life ever backfired on you?
Marc
(Laughs) I guess you can tell from my long silence that. I don’t want to say no, because that’s a little too, categorically. But I can’t think of a time when it backfired. And I’m not saying it’s not hard. Yeah. And it’s not not painful. I’ve certainly cried at times when I’ve had to be honest with someone. Startup is so intense. You’re with a handful of people, and you are working incredible hours, and you’re missing out on other aspects of your life, and you’re in the trenches with people fighting against almost insurmountable odds. If you’re successful, you all of a sudden begin to need different things.Sometimes it requires you to sit someone down and explain to them that you have been an amazing contributor to this, we could not be here without you. And I know you’ve given everything, but unfortunately, you’re not the right person for the next phase of our journey. If you think that kind of honesty isn’t hard. Or someone’s not working out. And there is this thing, called a performance improvement plan, called PIPS or something. Oh my god, that that’s like the Spanish Inquisition. It’s really hard to imagine anything more we’re cruel and unusual, then this Kabuki theater of, “I know that I’m going to fire you, and you actually know that I’m going to fire you. But instead, we’re going to go through this three-month charade, where I lay all out. So now I can document all the reasons I’m going to fire you.” That’s not respect. Respect is going, “Listen, it’s obvious that you’re not doing well here, you can tell it, I can tell. The rest of the team can tell it’s not you. This is not a good match. Let me help you find a great place someplace else, either in the organization or elsewhere, where your talents will fit with what’s required here.” And I’m not saying people walk out and go “Gee, that’s great. Mark.” Yeah, that hurts. But it’s honest. Yeah. And fundamentally afterwards, people go, “Thank you.” Sometimes.
But listen, what really happens here, when you when you shade the truth is two extremely damaging things happen. They’re both equally bad. One is, someone’s not doing a good job. And you’re going to going through this charade, of letting things go while you work. And this person’s working with are coming to one of two conclusions. They’re going, Oh, my gosh, Mark doesn’t see what’s going on here. He’s stupid. Or they go, Mark sees what’s going on here. But he won’t do anything about it. He’s weak. And neither of those are good.
Dorion
What else do you see when you look at Fortune 500 companies that have been around for 150 to 200 years like P&G, and think to yourself, “Geez, I can’t believe they did that. It just so bizarre to me to see.”
Marc
So first of all, and I’m completely sincere, I have tremendous respect for P&G, that would have been my dream job when I was coming out of college. In fact, I was desperate to be a brand manager, I thought that would be the coolest job in the world. Of course, if you’re going to be a brand manager, that’s the place. But anyway, what companies do, and I don’t think P&G is a big exception, if you take a look at what the fortune 500 looks like today, and then go back and look at what it looked like 20-30 years ago, I think you’d be shocked at how different those lists are. And what happens is there is this, I’m gonna have to call it a spade a spade, it’s a lack of courage. Companies are filled with bright people who see which way the future is going, but are locked into an existing business model, and don’t have the courage to walk away from it to do what’s needed to do for the future. That is what I see over and over and over again.
I do a lot of work with large companies. And it’s the same problem. They’re looking for some magic bullet that allows one to have their cake and eat it too. I’ll just give you one quick example here. I’ll try and disguise the companies, but I’ll give some hints. So they were a multi-level, they had their manufacturing company and they used multi-level distribution. So they sold to the distributors, the distributors sold to the retailers and retailers sold to the customer. It was a great product, making money hand over fist, everyone’s happy Then lo and behold, someone else comes out with a similar product, but their business model is direct to consumer. And there’s some inherent advantages there. The big one being it’s not being stepped on a bunch of times. Also the information flows a lot faster, because they’re talking directly to their end user. Little by little, they’re starting to eat into market share, the big manufacturer, and the CEO of the company is not dumb. He sees this happening and his ideas is, “Great. I’m set up a division that will begin selling direct, and we’ll use our product prowess and our marketing power, and we’ll nip this in the bud. That was great idea, until of course, your salesperson comes in and goes, “I can’t believe you’re gonna make my job harder. You’re gonna start competing with your big distributors, I’m out of here.” And these three distributors are going too, and retailers are going, “What you’re going to start competing with us?” And so all of a sudden, that plan is scotched, and we’ll just wait it out there. And little by little, this little direct to consumer gets more and more and more and more strength, until finally it’s too late.
The lesson is that if you can’t figure out how to disrupt yourself, you just leave your business wide open for someone else to disrupt it for you. It’s not like it’s going to be easy. It’s not like we’re just going to have, let’s have our annual meeting theme be innovation and voila. No, it’s going to mean making extremely hard decisions, it’s going to mean doing the equivalent of walking away from 90% of your revenue, to make sure you put all of your resources on the thing, which is the future. Not many companies are willing, or have the courage, or the strength or the discipline. To do that.
Dorion
You’ve said many times that William Goldman talked about how nobody knows anything. And when it comes to this idea of stepping outside the status quo. And perhaps we’re in the midst of an evolution of the CPG industry that may require us to take that hit that you’re talking about in order to future proof our business, I don’t know. But tell me how to explain to my team or management that I don’t have a fully fleshed out plan here. And I can’t produce that before diving in and trying to disrupt our business in that way.
Marc
Yes, correct. But listen, you’ve got to focus on your core business, you got to maintain your core business, and you do a great job at that. The question is, if you don’t think there’s seven or 8000 startups coming after each and every one of your products, you’re crazy. There are. And some of them are doing so in a patently inferior way. But I guarantee you’ve got essentially the 100,000 monkeys on 100,000 typewriters. Someone’s going to figure out a way to do what you do better than you do. One of your categories or multiple your categories, eventually in all your categories, and you want that to be you, not somebody else. The only way that is you is if you’re content with 99,000 of the manuscripts being garbage.
That’s what happens. The criteria for trying something new is so high, that success criteria is so high that you don’t try anything unless you’re pretty sure it’s going to work. Believe me, all those startups out there do not have that criteria. The VCs backing those companies do not have that criteria. They are totally content with very low hit rates. If you’re not willing to put in place a way for yourself to try different approaches, that is similarly innovative, someone else is going to beat you to it. And then that case, maybe you can put in place some way to say we’re going to be a fast follower. But I don’t like that as being a corporate strategy. I’d rather say I have the best marketing people in the world working for us. I have incredible brand power. And I’ve got huge resources. Why can’t I figure out a way that I’m the first person to come up with these innovations, and I’m the one who disrupts my own business.
Dorion
So Marc, let’s revert back to the Netflix story for a little bit since I think there are some important lessons there that I want to make sure we get to tell us about when you learned that the easiest way around is through.
Marc
Well the story of my life is, the book that won’t ever work, the podcast is, that will never work, my life is, that will never work and Netflix was, that will never work, right. And what a surprise, it didn’t work. So it was a terrible idea until it worked. But it took us a year and a half of flailing, to try and figure out what worked. We tried hundreds of hundreds of things. I explained earlier about this methodology of good, and eventually getting really fast at testing. But eventually we stumbled on something that worked. And it was a ridiculous idea. Totally out of the box. And it was basically no due dates, no late fees. It was make a list. So we can automatically send you movies. You’re not sure what order they’re going to come in. And even more dramatic, it’s a subscription, you can rent as much as you want for one low monthly price, was my marketing talk coming in.
Because it was so weird and counterintuitive, I had toa talk Reed into doing the first month free. So here we have the subscription program with the first month free, which is phenomenally successful. I mean, orders are flooding in, people are loving it. And that’s great, because recurring revenue programs are incredibly great business models, because once you found the customer, they keep paying you little by little, month after month for hopefully many, many, many years. The downside is you have to pay all of your acquisition costs up front. And that acquisition cost is especially expensive when it’s a first month free. So the irony here is that the more successful you are, the more expensive it is, the more cash it takes. And that wasn’t necessarily a problem, when we finally launched this program, which was the fall of 1999. Because that was just about the peak of the.com frothiness, where getting money was as easy as waving a flag at your window and the money truck just dumped in the driveway.
Unfortunately, about six months later, we had the.com bubble burst. And now all of a sudden, there was no money, and it was especially bad if you had a.com on your name. And so here we were with this phenomenally successful program, which was hemorrhaging cash, because it was so successful, and our success was going to bankrupt us. And we could see no way out other than selling the company. But we had a specific target, which was Blockbuster, they were the obvious candidate. We knew that a blended model would be the Netflix killer. In other words, a program where you could either go to a store to pick up your movie or have it mailed to you, when you’re done, you could drop it off at a store or drop it back in the mailbox. We were terrified that Blockbuster would do this. So we knew that when we went and pitched it to them, it would be immediately compelling.
We finally got this meeting and went to Dallas and up to the 27th floor of this huge skyscraper into this football field-sized conference room and pitched and they were nodding and going great until it got to the how much part of it, how much were they going to pay for us. We were about $50 million in capital raised at that point. So we thought it’d be nice and neat to sell it for $50 million. Because that would pay back our invested equity. And off we go. Unfortunately, Blockbuster didn’t see it quite so clearly, and laughed at us and sent us on our way.
As you were mentioning, it was a really sobering moment. Because I thought, once we got this meeting, that this blended model was so compelling that our problems are over, or at least they were someone else’s problems. And when they said no, and they sent us packing, it was in one way depressing but another way terrifying because now not only were they not going to save us, they were going to compete with us. We realized that there was no way out. No magic way out no end run. No trick. That the only way that we were going to make this happen was by turning around and facing them head on. My father used to always say sometimes when things appeared intractable. That sometimes the only way out is through. You just have to have to do it.
Dorion
I absolutely love that story. And it begs a few questions for me. I mean, obviously, in retrospect, Blockbuster buying Netflix for $50 million would have been somewhat of a steal. What didn’t they see that they ought to have seen, that caused them to laugh you out of the room, as you say,
Marc
They didn’t buy into the ability of the Internet to transform their business. They were bricks and mortar. To them, this was just a would have been a sideline, it would have been a content website. They never saw it as a way to transform the way they actually did business. To some degree, they saw it, just like the manufacturer I referenced earlier saw it, that their franchisees will be up in arms. If Blockbuster began doing a direct business, they had a double whammy. I mean, usually, executives see it coming and they just go on, boxed in here. They didn’t even see it coming. And worse for their sake, great for our sake, once they did begin to realize that this was actually an existential threat to them, they didn’t even respond it and even worse way, they didn’t put their a team on it. They said, Great, let’s put some people on this e-commerce website direct thing. But I’m not going to put my best people on it. My best people are on my $8 billion, my $6 billion core business. Right? I’m not going to put my best people on this little $5 million side hustle.” And every time we saw that happen, we just smiled and thanked our stars.
Dorion
Speaking of companies with significant market caps, I’ve got to ask you, Marc, just because it’s clear, the ins and outs of Netflix, you built the company from the ground up, and you stepped down as CEO in I think it was 1999. You left the company four years after its IPO. I’m curious, what was going through your mind at that time? Why did you decide to step down and eventually leave just as the business was really starting to take off?
Marc
There are two different things really. The first, the stepping down as CEO, was driven by an interesting realization pointed out to me, of course, by Reed, which is that maybe I didn’t have the skills to lead the company into the next stage.We spoke earlier in our conversation about radical honesty at Netflix, and especially about radical honesty between Reed and I. And when he poked his head in one day and said, We got to talk, and began laying out some of the concerns he had about my leadership at the time. I knew this was not some ulterior motive, this was him genuinely concerned. And I needed to think this through. Quite frankly, reflecting back at it at the time I was really startled, I was a little concerned I was getting fired or something he had more stock than I did. But what Reed was actually pitching was something different, which was that he said, I should join the company full time, because he was not. He was a student at the time. And that we should run the company together, he should be CEO, I should be president, and do it together. It required me kind of taking this dream I had of being CEO of a big successful company, and recognizing it was actually two different dreams. That there was the dream of being the CEO. And there was also the dream of the big successful company. And that more importantly, that dream of the big successful company was no longer just mine, that it was now being shared by the employees, by the investors, by the customers in some degree. I kind of realized that if I really wanted this to be a big successful company, I would have to separate those two things and say, “What could I do that enhances the likelihood?” And it was hard to argue that having Reed full-time in the company, as opposed to not, wouldn’t be stronger?
I’m not saying that was an easy call for me. But I eventually took a few late evenings on the porch with some bottles of wine, and my wife, to come to the realization that Reed was right that it would be a stronger company. And I did come in full time. And we did run the company together and in many ways that next few years were the renaissance at Netflix. So many of these amazing innovations that transformed the company took place then. The second piece though, was different. Netflix was my sixth startup and I’ve long had this definition for success, which is perhaps different than what most people think and entrepreneurs definite success as, and it’s not going to be rich or famous or any of that ridiculous things. It was am I doing what I’m good at? Am I spending my time doing what I enjoy? And I was lucky enough early on to realize that the answer to both of those two questions is the same thing. It’s early stage companies, I love doing that. And I’m quite modestly pretty good at it.
In 2000, to 2003, Netflix was crushing it. We had gotten through the IPO, we had hired amazing people, we had the financial resources. And even though of course, I love the company, I began to realize I didn’t necessarily love what I was doing. And that, if I really was going to be successful, it was this opportunity to do the things that I enjoyed, and was good at, which was getting back to doing real estate stuff. And over a period of time, I gradually worked myself out, in completely a great manner. I’m still a big friend of the company, Reed and I are still very good friends. Reed os still running the company, having the time of his life, I am still getting a chance to work with early stage entrepreneurs. I mentor them. I wrote the book, I do the podcast for early stage entrepreneurs. We’re both getting exactly what we want. And I’m the luckiest guy you’re gonna meet.
Dorion
Seems like it and I commend you. And obviously, you’ve had significant economic success, but you don’t strike me as someone whose core motivator has been money. As you said, and I’ve even heard you talk about how you’ve encouraged your son who’s into music to really follow his passions. And I want to ask, what’s your advice to people who maybe are older than your son and may have more responsibilities, mortgage, family, car payments, who sometimes feel like they have to put their passions on hold?
Marc
I’m not saying there’s some panacea, go start a company. I recognize that’s not. It’s just something not feasible. But I guess I’m a believer in something that is going to sound all new agey, so I’m really sorry for it. But if you, if you don’t have a clear idea where you’re trying to go, the odds you get there pretty slim. You’re right, I’ve never been motivated by the economic success. It’s not with what drove me, I was fortunate enough to start doing this before that was a thing. Now entrepreneurships are glorified. I was just into it for solving problems.
I’ll give you a different analogy, which I think is the one that people could take away, who do have mortgages and car payments and kids in private school, and that they can’t just dream about stuff. So many people growing up that I knew they wanted to be actors or actresses. When you begin to talk about it, you kind of realize they want to be an actor or an actress, because they want to be rich and famous. I hate to break it to you, extremely unlikely. One in a million, not going to happen, you’re leading yourself up for life a disappointment. But if the reason that you want to be an actor and actress is because you enjoy creating characters you enjoy building emotion, the people who are watching, all those reasons, then you are doing it for exactly the right reason. But then you don’t need to go to Hollywood, you can do it in your community theater, you can do it after work. And entrepreneurship and innovation is the same thing. You don’t need to start companies, you can take this idea you have in your department in your job, and you’re sitting there driving home going, God, why can’t we just try this. The advice I give is the exact same advice that I give to people who were doing entrepreneurial businesses, which is just do it. It’s a two-way door. Figure out some way that you can test something or try something or build something or make something. And the emotional satisfaction that comes from doing something that hasn’t been done before is so strong. I that’s something that’s attractive to you, that you feel it resonate with you, there is absolutely no reason why you can’t be doing it in your exact same circumstances now. If you are developing lab tests, maybe you gotta be more careful. But 99% of us don’t have jobs like that. There’s always things we can experiment with. And you’ve got to start small.
You don’t convince management to take on a new $100 million dollar initiative. You say, let’s try a new way of communicating with these 10 customers and see what happens. And there’s a thrill there. And you begin to gain all the skills the innovators get, which is this confidence that no one knows anything, which is the thing that you can do things that are reversible, that there are ways to conceive of ways to test things and try things that are low impact that allow you to do lots of them. That if you have this desire to be an innovator to be creative to be an entrepreneur, that the only thing stopping you is you. I have heard every single excuse in the book, and the ones I hear, I need to graduate, I need to raise money. I need a technical co founder, I need to quit my job. Give me a break. Yeah, just start. And that’s where that’s where it begins. And that’s how you eventually make things happen.
Dorion
I love that. I will say one objection you hear around the walls of P&G often is, well, I need a budget. I’ll tell you, I’ve been working for P&G for, like 10 years now. And I will say frankly, by and large, I can’t spend a penny without getting approval from at least one person. I’m curious to hear how that differs from Netflix now, and when you were at Netflix, and what we can learn about finding sort of the balance between avoiding chaos, or I guess, in some cases, fraud, and allowing for the dispersion of decision-making authority.
Marc
Yeah, that this is something that would take a long, long time to cover. We’ll have to love to have you back on to talk about the cultural aspects of innovation this way. And the other answer is, I don’t work at Netflix anymore. So I just don’t know how they manage that piece of it. But I do know, they push tremendous budget responsibility very, very deep in the organization.They greenlight 100 million dollar productions all day long, and they’re not greenlit by Reed Hastings or not by Ted Sarandos, who’s runs the content for them, not not even by their lieutenants. It’s pushed down with tremendous decision making authority down to people very low in the organization who are closest to the customer. So if the organization is locked into we don’t allow any experimentation, and one way we lock it down is by saying we’re not going to free up a penny. Well, that’s gonna be a tough one. Don’t give up. I say the true sign of an innovator is not how good their ideas are, but how well they’re able to come up with ways to test their ideas that are quick, cheap, and easy.
Dorion
I only have a few more questions for you. And I know we’re running low on time here. I’m curious before I dive into mine, is there anything we’ve missed in our conversation that you think might be relevant are worthwhile to discuss for the P&G audience?
Marc
The only thing is I will do and I apologize for this verges on shameless self promotion. But it’s so easy when you’re doing a discussion like this to say things like, just figure out a quick, cheap and easy way to, and then someone goes, Oh, I like how that sounds. But I have no idea how to put that in practice. I’ll just point out that on the “That Will Never Work” podcast, what I’m doing is actually trying to take these concepts which make good sound bites, but letting people listen in as I actively coach people through how do you take that idea which you thought required an expensive app or expensive training and say, how do we figure out how to quickly and easily test this? And I think it’s interesting. It’s the auxiliary material, the supplemental material, to today’s course, if you will.
Dorion
I’ve listened to your podcast, I think it’s fantastic. Everyone should go listen to that one as well after they listened to mine. One thing you said is, if an idea is obvious, there’s something you’re missing. It seems to me, though, that the most obvious and simple ideas seem to be the ones that work. So I was wondering if you could explain a bit more about what you meant by that.
Marc
I’m not saying don’t do them. But the problem is someone comes to me with an idea, which is fairly obvious. The first question I have to ask is I go, do you think you’re the first person who ever thought about this? And they go, Well, maybe not. And I go, do you think the first person has actually tried it? Well, maybe not. And I said, Well, let’s ask ourselves a couple of questions. Why doesn’t it exist now? And if you don’t know the answer to that question, you’re in trouble. Because you need to understand what has been tried before to solve that problem. That didn’t work. You have to understand why it didn’t work. You have to make sure you don’t fall into the holes that entrepreneurs have dug before you. So I love the idea of taking on obvious problems, even with obvious solutions. But everything is execution. If you don’t understand the efforts that have taken place before you and what what’s worked and what hasn’t worked, you’re just destined to repeat them.
Dorion
So Marc, I know you mentioned that culture would probably take another two or three hour discussion if we wanted to dive into what drives organizational culture. But maybe I’ll just take one piece of that. Before we conclude here. How did you manage work life balance as you were building Netflix? And what role did that play in sort of driving the culture as the company was building,
Marc
It played the same role in driving culture that everything does. And driving culture, which is observational culture is not what you say, as anyone who has children knows, it is not what you say, it’s what you do. Culture springs forth from the behavior of the founders, from the behavior of the executives, it is modeled. And it doesn’t make a difference what you put in your culture deck, or what you post in the break room, or what you put in your HR materials, or what you carve in the corner from your building. It’s entirely what you do. For years, I’ve recognized that my big objective in life was always balance. I certainly love being an entrepreneur, and I love business, I love starting businesses. But I love my wife too. And I would like to keep her. I have three kids, and I’d like to know them and have them know me. I vowed early on that those two things, we’re not going to be mutually exclusive. And in fact, I’ll complicate it.
There was a third piece that I was going to weave in, which is that I know that what makes me whole as a person, is the time I get to spend outside, the skiing, the surfing, the backcountry, hiking and climbing. And if I had to build a life, which could do all three of those things at once. And just to pick one, which was my relationship with my wife. From early on, I had this rule that every Tuesday at 5pm, I left and we did a date night. And you can imagine what that’s like for an entrepreneur starting a company. It’s really hard. There’s all kinds of crises. But I would say we’re gonna wrap this up by five. And if you absolutely have to talk to me, we’re going to talk on the way to the car. But here’s the interesting part that ties into culture, as you mentioned, which is, again culture is what you do, not what you say, and you can preach how important work life balances. But what does that mean if they see the CEO and the founder working all the time. And so, by me leaving every Tuesday at five o’clock, I was sending a very, very clear signal that it was okay. And even though I’d have to fight for the first few months, that I was serious about this, eventually, lo and behold, crises stopped happening at five o’clock on Tuesday, his people stopped calling meetings after five o’clock on Tuesdays, and then even better. other people began taking date nights with their significant others. It ended up I think, having a very, very positive outcome, certainly on my own life, but I think also on the company’s.
Dorion
Well, I’ve just made a note of that Tuesday night, date night. So we’ll be putting that in my calendar and anyone who disagrees will be sent to you.
Marc
Your partner will thank you and thank me.
Dorion
We’ll leave it on that one. Marc Randolph. Thanks for joining the “More Than Soap” podcast. It’s been a pleasure talking to you.
Marc
It’s been a pleasure as well and listen, good luck to everybody. Great company. I’m a customer.
Dorion
Awesome. Thanks, Marc.
Well, that’s it for this week’s episode with Marc Randolph. Remember, P&G employees can visit www.getmorethansoap.com to hear the rest of the Gary Kume interview. Thanks for tuning in. And then until next time, stay curious.
Last week I visited San Francisco. The mood in the global epicenter of tech innovation was very different from my last trip almost four years ago. The digital gold rush from the past few years has clearly ended, like an economic hangover after an all night party. Many people are affected by recent layoffs at tech giants like Facebook, Google, and Amazon. The demise of Silicon Valley Bank, the premier bank for startups, is felt widely. Investment funding is much harder to come by. But at the same time, green sprouts of a next innovation wave are emerging, riding on the rapid rise of generative artificial intelligence (AI) as an irresistible innovation.
What makes innovation irresistible? I asked ChatGPT the term: potentially game-changing, catching wide attention in a clear and compelling way. Once people experience this kind of innovation, they won’t go back to their previous habits.
Google Search, the iPhone, Netflix, and even TikTok are clear examples. Beyond tech this also includes innovations such as Swiffer, Impossible Meats, and even something like the Keurig coffee maker. The arrival of AI as a technology available for everyone to access will create a new era of innovation. But it will take time and effort to build this into transformative consumer propositions, especially when resources are scarce.
There is no better time to invest in innovation than in an economic downturn. The most predictable reaction when companies hit a rough patch is to focus all their resources on surviving today. But this comes with an unfortunate trade-off — others will use the time as an opportunity to build a competitive advantage through innovation. Finding the right balance between short term cost management and investing in a long view growth strategy is hard when trying to make reduced budgets work. But studies have proven that companies that invest in their growth strategy during a downturn are the most likely winners when better times return.
A downturn is also a good moment to take stock and sharpen focus on growth opportunities ahead. Moments of uncertainty (which seems to be a constant state now) help to create clarity on how the world around us is evolving. An experienced guide and provocateur like futurist Faith Popcorn stretches our view of the future. With a documented 95% accuracy of predictions since 1980 it’s a risk to dismiss her perspective. In her Signal360 conversation with John Battelle she challenges us to think of the wildest thing that could happen in the marketplace and then imagine what happens if your competition would be the first to introduce it.
Innovation requires rapid learning. Getting your product into the hands of people and seeing how they react is critical to learn. No idea is perfect right out of the gate, so rapid iteration to improve is a must. In a Signal360 guest column, Forrester retail analyst Sucharita Kodali argues that all CPG companies should invest in Direct-To-Consumer (DTC) capabilities. While DTC may not be a viable CPG business model by itself it is a helpful element to grow the overall business. But the option requires an investment in expertise, technology, and processes to do it with excellence.
Irresistible innovation can also come through partnerships in unexpected areas. In Signal360 we have highlighted the challenges we are facing with water around the world. Building a business that is sustainable requires involvement in how people use and take care of natural resources.
Shannon Quinn’s role as P&G’s Water Stewardship Leader is not only focused on reducing the use of water through products and production process but she’s also an active partner to assist with water restoration projects. As a Signal Trailblazer she sets an example how passion and partnerships drive remarkable innovation beyond products alone.
For businesses to stay leaders requires a balance between delivering superior performance today and investing in irresistible innovation for the future. Despite (or because of) the challenging environment, now is a good time to reset the bar for both. This sets the stage for the Signal 2023 summit, planned for Wednesday, July 12. We will share more in the next issues. Until then.
Stan Joosten & John Battelle,
Editors-In-Chief, Signal360 / Co-founders, Signal P&G
By Sucharita Kodali
Over the years, Consumer Packaged Goods (CPG) brands have told me the same two objections for why they don’t invest in direct-to-consumer (DTC) e-commerce websites: 1. Shoppers don’t want to buy directly from brands and 2. It’s too expensive for these companies to ship the items to consumers. I’m convinced that thinking is wrong and that they have much to gain from investing in DTC opportunities.
Breaking the myth
Let’s start with myth busting. While consumers do purchase in multi-item baskets at grocery stores and at mass merchants, it is also true they frequently go to multiple sites to purchase multiple items. Remember that consumers go to dozens of websites daily during the course of their Internet browsing; visiting another website is far less friction than visiting another store. Forrester’s recent research shows this finding: shoppers visit multiple sites during the course of product purchases, including when they’re buying everyday consumables. If there’s one lesson to be learned from Dollar Shave Club, it is that shoppers will purchase low-cost items directly from consumer goods manufacturers. In general, CPGs should embrace the halo their brand sites offer: 30% of consumers expect brand websites to offer more products for sale than mass market sites, and 19% think that brand websites help them avoid counterfeit products. However, brands often are their own worst enemy. In a survey of brands that Forrester conducted with Vorys eControl in 2023, only 26% of CPG brands with DTC websites offered an extended assortment and just 21% have brand protection teams for digital sales.
As for the unprofitability of CPG e-commerce, that is invariably the result of two things: bad fulfillment decisions (too many cardboard boxes with too few items and too much air going to home addresses) and overspending on digital marketing. Brands could partner with stores and other merchants to fill e-commerce orders as some alcohol brands are doing now. But the data again shows how brands don’t do what they should. According to this year’s survey, only 5% of consumer goods brands with consumer-facing websites use retail partners for fulfillment. And only 18% put their website URLs on their packaging, a marketing miss. Given that so few CPGs take advantage of-low hanging fruit, it shouldn’t be a surprise that direct-to-consumer sales are negligible. CPGs on average report 15% of their digital sales coming this way while the industry average is higher.
DTC Has Numerous Benefits for Brands
Now the business case for consumer sales sites. The benefits are numerous: brands can protect sales of items that are discontinued or from retailers that have shrunk their presence. They can develop an audience for long-tail merchandise, and they can capture a plethora of first party consumer insights that come from sales made directly to consumers, no doubt, the biggest benefit of all. While the DTC option has the potential to be at least as profitable as traditional wholesale (24% of CPGs with consumer-facing websites say it already is), the incremental value of shopper information should make it a no-brainer. With consumer information, brands can develop a shopper database for new product development and product sampling, they can improve their ever-growing digital marketing bucket with lookalike audiences, and they may even be able to help upsell and cross-sell other brands and SKUs within their portfolio to existing shoppers.
I am a big believer in DTC CPG brands selling right to the consumer, and believe brands should be too. But the DTC path needs some investment in decent websites, brand protection and strong business development people who will persuade grocers, all aggressively vying for an edge in online sales, to be the fulfillment partners for CPG website sales. Yes, there will be changes needed to order management systems, but the variable cost for labor in allowing another click and collect transaction driven by a CPG website is negligible compared to the variable cost of putting a tube of toothpaste in a box and shipping it to a shopper’s home. As online retail grows, brands would be foolish to not take advantage of the easy traffic they can generate to their websites by promoting their URLs more on their packages. And developing a database of the top 20% of your buyers over time just seems like an opportunity that is too good to pass up.
Doing DTC right is more than standing up a hasty Shopify website in a week (which is what some brands did during the pandemic). It requires organizational, technology and supply chain investments. But these investments are worth making and will have a positive return on investment (ROI) when done right.
Sucharita Kodali is the lead analyst for retail and brand manufacturers at Forrester, a technology research firm. Do you have questions or want to learn more about the datapoints in this piece? Reach out to Sucharita Kodali at skodali@forrester.com.
The corporate playbook during downturns is typically grim. In this time of inflation, rising interest rates and looming recession, many companies are reacting with layoffs, rescinded job offers and closing down whole business units. But not all companies react in this way. Some are able to make the most out of a slowdown by investing in people, technology, and even other companies at cut-rate prices, turning lemons into lemonade.
“The best companies are not just resilient, they are systematically resilient,” says Martin Reeves, chairman of the BCG Henderson Institute, which studied more than 5,000 US companies across the last five downturns. Although downturns are part of the regular business cycle, they are rare enough that companies are often ill-equipped when they occur. “We haven’t historically spent enough time in crises to be worthwhile developing a handbook and protocols for resilience,” he said.
In other words, companies get used to good times and don’t plan enough for bad times. That’s why, when faced with a crisis, companies tend to act reactively and prioritize short-term gains — like the savings gleaned from layoffs — over long-term investments that can grow a business.
The stakes are high during a downturn. Astudy by academics at Harvard Business School and Northwestern University’s Kellogg School of Management of 4,700 public companies over three recessions from 1980 through 2000 found 80% of companies that survive a downturn don’t return to pre-recession growth rates or sales three years after a recession. Only 9% of companies flourish after a downturn, doing better on key financial metrics and outperforming rivals. What distinguished the post-recession winners: the ability to find the balance between cutting costs to survive during a downturn with investing in future growth.
Investing in innovation
Like the ants and the grasshopper in Aesop’s tale, companies that plan ahead – and create a financial stockpile – are in a better position to weather uncertain times like what we’re seeing today.
Large companies are in a better position in no small part because of their deep pockets. This played out during the mother of all downturns, the Great Depression.Studying decades of patent data, Tania Babina, assistant professor of business at the Columbia Business School, along with her coauthors, found that the economic disruption of the Great Depression accelerated the shift of innovation from small, independent inventors to large enterprise firms.
Though the number of new patents dropped during the Depression, some companies continued to invest. In 1930, a DuPont research scientist discovered neoprene. Though DuPont sales fell by 15% that year, the company boosted R&D spending to develop the material for commercial use, taking advantage of market conditions to hire research scientists and the low price of raw materials. Neoprene was announced in 1931 and made available commercially in 1937, becoming one of the most significant inventions of the 20th century.
While some cost cuts may be necessary, company leaders also need to keep an eye on future growth engines and protect the budgets of businesses or locations that have attractive growth opportunities. “Companies with cash and resources had the means to buy talent and technology,” says Babina. It’s a pattern that’s repeated itself through many downturns. “If we were to relate what’s happening now versus Great Depression, this is an opportunity for big incumbent firms to go and find the best talent,” she says.
Looking for long-term initiatives
One of the many myths about what drives resilience is that crisis management is about what companies do during the acute part of a crisis, says Reeves. But managing crisis in fact has much longer timescale. Companies that thrive before, during and after a downturn have spent time in anticipation and preparation for adversity. And when market conditions improve, companies don’t just go back to “normal.” Instead, they reimagine their business based on a new reality.
“When everybody else is breathing a sigh of relief because things have turned back to normal, they’re the ones that actually do the post review and build a playbook for resilience,” he says.
One example from the 2007-08 global financial crisis was American Express, which was threatened by rising default rates and declining consumer demand. After cutting costs and divesting noncore businesses to stay viable during the downturn, the company turned its focus on long-term growth strategy by pursuing partnerships with banks and others as well as investing digital innovation such as data analytics and payments. In the decade following the downturn the company’s stock price rose by more than 1000%.
When the dot-com bust came in 1999-2000, competitors Staples and Office Depot took very different approaches. Faced with falling revenue, Office Depot cut about 6% of its workforce. Staples, on the other hand, grew their workforce strategically and found other ways to cut operational expenses. The company invested in a promising new line of business by hiring skilled people who could help the company sell high-margin products such as laptops. The move paid off. Staples’ sales doubled between 1997 to 2003, while Office Depot sales grew at half that place over the same period.
The decisions made during the downturn had repercussions years into the future. “That critical period created a winner…and they were winning because they made different types of decisions about how they manage their workforce,” says Ian Williamson, Dean at the UCI Paul Merage School of Business.
Being bold
Companies not only need to get through crises, but learn to thrive. “We’ve shown that crisis performance actually has a disproportionate impact on long term value generation,” he said. Companies can jump up in rankings much more easily during a crisis than during steady times, he adds.
Take General Motors and Ford during the Great Depression. The two were neck in neck before the crisis, but GM came out a clear winner. GM was quick to adapt to changing conditions in the 1930s, scaling back middle-market and high-end brands and finding efficiencies. It used the same engine and parts across various brands. Meanwhile, Ford had high fixed production costs and actually raised prices on cars during the Depression. Also unlike GM, which had purchased foreign auto manufacturers so it could produce cars in the country of sale, Ford manufactured parts in the U.S. to be shipped overseas for assembly, making it subject to high tariffs. Ford also failed to invest in innovation. When Chrysler came out with a new V6 engine, Ford reacted by rushing out a new model, but it was more expensive and less reliable. While GM posted profits every year during the Depression, Ford saw declining sales and a 12% loss in market share and opened the door for Chrysler, then a small startup, to become a top three automaker.
In order to come out of a downturn stronger than before, companies need to continue investing in the future. According to the study from Harvard Business School and Northwestern University’s Kellogg School of Management, enterprises that cut costs by focusing on efficiency while outspending rivals on marketing, R&D and assets are most likely to be post-recession winners. By contrast, those that focus on cutting costs aggressively do not. Finding that balance between cost cuts and growth is difficult, but key.
Learning to deal with crises now is particularly important for companies because, like it or not, they’re coming more frequently. “We’re no longer talking about a cyclical downturn every four years,” says Reeves. “What we’re talking about is a permanent state of uncertainty with multiple unfolding crises.”
Ask Faith Popcorn about the future, and she’s got an eye for robots: those that clean your house (sure) but also rolling machines that get the kids into pajamas, cook dinner and have a martini in hand when you walk through the door. Sound like The Jetsons? To the CEO ofFaith Popcorn’s Brain Reserve, that’s a scenario worth visiting. She says for companies that want a future in the packaged goods space, they need to start by imagining the wildest thing that could ever happen in the marketplace.
“Then say to yourself, ‘Suppose the competition comes up with that?”
Hear more of Popcorn’s future forecasts in this month’s conversation with Signal360’s John Battelle or read the lightly edited transcript below.
TRANSCRIPT
John Battelle I am very pleased that this month for our Signal Conversation we have a very special guest. The legendary Faith Popcorn is joining us. Faith is CEO of Faith Popcorn’s Brain Reserve, a future focused trend consultancy, and she applies her renowned foresight to reposition established brands and create the products and services of tomorrow. She’s a trusted adviser to the Fortune 500 including P&G, and the author of four best-selling books, including “The Legendary Popcorn Report.” Her predictions have a documented 95% accuracy rate and Faith, you may not know this, but I write predictions every single year. And we feature them in Signal. I think the best I’ve ever done is about 75%. So good on you, welcome.
Faith Popcorn
I didn’t give myself that number. I just want you to know. A lot of reporters, snarky people, various kinds, actually check the predictions. Because everything I’ve said, well, up until a while back, almost everything has been documented in either the books or something. And they couldn’t find that it was wrong. I mean, it’s right. But then you’ll say to me, I’ll just ask myself the questions and answer them for myself. Okay. Then you’ll say to me, “What hasn’t happened”
Well, that would be an interesting question. What did you get wrong?
My answer to that is, it just hasn’t happened yet.
I know the feeling.
I think robotic companions, although I didn’t put last year’s data on it. But things have not manifested in if I were running the world the way I would have had it come. But so far, we’ve not been like blatantly wrong.
That’s one of the reasons that you have such a successful career. You recently presented to P&G. And a lot of the people watching this work at P&G. You were focused on the future of the home and I review that presentation. You asked the audience to imagine what sort of the big consumer population, which of course, all consumers are P&Gs customers or potential customers, what that population might look like in what feels like the near future, 2040, Can you tell us a few things about what’s going to be different in 2040?
First of all, we have to understand that the human lifespan is going to be around 120. So that would lead us to a whole bunch of other questions. By 2050, the US population and 68% of the world’s population will live in urban areas. So the end of suburbia. And marriage rates are dropping at a 48% rate to a 50-year low. Marriage is not working. And we kind of knew that but the numbers are crashing. And birth rates, which is something that P&G, I mean, great that they they’re gonna go from Pampers to Depends, but I think they have to do more thinking than that. The birth rates is down 20% to 100-year low. Single households, you know how we don’t like to make anything small in packaging. Single households, doubled in the last 60 years. Multigenerational households quadrupled since ’71. So the whole household has changed what it means to be a family. People are living with friends, grandparents, somebody else’s grandparents. Really a mixie kind of environment that we are calling family.
All of these issues do portend significant changes to the big markets that companies like P&G plan. You mentioned quite a bit in this presentation. An issue that I know is a big issue for P&G that has to do with sustainability around water. What are your predictions about what happens with water?
I don’t even know what to say about this. Because if it wasn’t too late, we should probably be grabbing off our own water sources as people and companies. The other thing is being able to purify bad water, because when we say water using fresh water. Maybe turning bad water into good water, because 75% of the world faces drought by 2050. 2030, the global surface temperatures will rise above the earth baseline temperature by 1.5 degrees Celsius. So it’s getting it’s not your imagination, it is getting hotter and drier. Seeing that P&G has a lot of products Tide and all, washing machines still need water. Hopefully, we’ll have innovation there where they won’t need them, need them less or won’t need any at all, something between a washing machine and dry cleaning machine. The idea that you need water to make products. So that’s the other point.
I was looking through the your presentation, another thing I noticed was almost a sea change in how consumers interact with what the market calls consumables. CPG is consumer packaged goods. The package is critical. But you mentioned that maybe that needs to go away, the package itself, which seems to have pretty big implications for a whole market called CPG.
Would it be CG then?
Consumer goods? Yeah.
The demand for sustainable packaging is up 81%. It’s going to be like the vitamin C and orange juice. We want sustainable packaging, we don’t want to think about packaging. If it’s packaging that we could serve for dinner, that would be great. Something to reuse in a great way. Twenty-five percent of sustainable eco-friendly packaging is important to consumers when purchasing household cleaning products. Twenty-five percent sustainability or more. I honestly think we’re talking a lot about sustainability. But eventually we don’t want to talk about it. We just want it to be there.
Just built in.
Exactly. Just the higher prices for packaging energy raw material. The costs are up 25 to 30%, at least in cosmetics alone. And we’re passing that on to the consumer who’s facing higher food, inflation, health care. What’s irresistible sustainability? Sustainability that you don’t even think about. Sustainability that is just part of life.
I think that that’s a key off of one of the pillars of P&G, which is irresistible superiority. But irresistible sustainability would be exactly I guess that the brand, the brand is more valuable because it’s got sustainability built in.
Right.
I’m curious, getting back to the consumer. We’ve been talking about brands. Brands are the standard bearers of the CPG business. Those brands are made very real by the packaging that they’re on, that box of Tide, or that package of Pampers, or whatever it might be. Will there even be brands in the future? Do you see a future for brands and if you do, what do brands need to do differently to keep a relationship with the consumer?
What’s the future of brands? Will brands be there in the future? I don’t think brands as we know them will be there in the future. I think what will replace brands are relationships. So this is how it would work. Take out Walmart, or take out the middle person between P&G and the consumer. Because home delivery was taking over rapidly. I think it’s going to just grow and grow and grow and grow. So now we’re left with the company, P&G, and the consumer. So without that middle person, where’s the relationship? What happens is people migrate to something cheap or something hotter, something sexier? I think we have to begin to think about, and this face the pharma companies too when pharma companies had to start dealing with consumers, not just through doctors. That’s the whole pharma advertising and communication thing. How are we creating a relationship with the consumer now? How? And it will this lead to subscription products, which could be really nice. You don’t sign up for Tide. You know, each quarter or each time or, you know, with Amazon. You actually have a lifetime subscription is presented to you at a very decent price, and you get other benefits along with that. So maybe it pays for somebody’s college education down the line.
I know that P&G is piloting a number of these kinds of subscription services. But it’s a difficult transition for a large business dependent on the big customers that it’s had for decades, like Walmart or Kroger’s, or any of the retailers. That’s a difficult transition to go through, right?
For who?
Well, for for everyone, I mean, if if I’m Walmart, and I hear that, I’m just the middle person, and I’m going away. I’m worried about that and trying to figure out how I add value. How does Walmart add value?
Same answer, actually. We saw in COVID, what happens when you can’t go somewhere safely? Why do I love Walmart? Tell me, I’m this person. I’ve got three kids. Why do I love Walmart? I remember we were consulting with one of those big ones. I think somebody up management said, “Oh, women love to socialize in the supermarket.” He obviously never went to a supermarket. Because I mean, it was so condescending and so horrible. What’s so great about Walmart? Yeah, I can buy something less expensive. And I hear people that say, “I love supermarkets.” Interview those people. There are always people that go there for fun. They’re not people that have to go there because they got to put you know, dinner on the table and have a full time job. Not to see home delivery as the future and not to think you have to really find something extraordinary to deliver to that consumer is really sitting on your laurels and not wanting to see what’s coming.
Good point. Let me ask you, and I think we’ve touched on this already, but maybe you have some other thoughts on it. What does a company like P&G need to be worried about that’s coming in the future?
We said water, that’s one thing. Then as digital is coming. Let’s say we have an opportunity, let’s say the world’s just gets harder, more difficult, colder and warmer and more fraught with violence. More and more, we’re going to be living in these digital worlds, like the Metaverse without the Oculus. Will we need our home to be that sparkling clean? Or will our homes get smaller as our ability to cross the digital threshold get wider? You know, that’s one thing that I would be thinking about, certainly. And how can products be more personalized? I don’t find personalization, this Tide has this stuff in it. This is brighter.I mean, really personalized. “Mrs. G, I know that your third daughter has this incredible allergy.” Really personalized and this is a nightmare for a mass-produced company that makes mass-produced products, but it’s really what people want. Then I have a brainstorming about the wildest things that could happen even though people tend in brainstorms, “But that can never happen. No, we can’t do that.” Put that aside and say, what are all the things that could happen? Then say to yourself, suppose the competition comes up with that?
I want to ask one last question, because we’re almost out of time. This goes back to how we opened, which was your accuracy and predictions. There has to be maybe, and if there’s not, I have a follow-up question. There has to be a trend or something that you that you missed, or that you got wrong. Is there something over the past 30 or 40 years, I just didn’t see that coming. And what did you learn from that? If in fact, there was such a occurrence?
I didn’t see Covid coming. I did know about it maybe in November before the March hit, but we’ve always advised companies, like we repositioned Comcast and it actually turned out to be a Covid strategy to deliver for everything to the home education, medicine, security, all of it. They thought that was just brilliant when Covid hit but actually, we thought they should do that anyway.
I’ve been saying that robot companions, robots, robotization was coming. I’ve been talking about that for 30 years. It’s coming, slowly. We’re not talking about it. Robot replacement is going to be very big. And robotic companions, robotic nannies, home care people. When you think about homes, people are not going to have to clean their homes. The little vacuum cleaner, you know, on the floor is just a little bell. Your house is going to be cleaned by a robot.
And one that you can probably have a conversation with thanks to all the generated and generative AI that is broken out. That’s a big part of it.
And that lovely robot is going to greet you at the door and say, “Martini?” And have your martini perfectly mix your kids all in their PJs, everything going beautifully, dinner on the stove, everything ordered robotically because that robot doesn’t have to go to the supermarket. The other thing I’m a little surprised about is how quickly GPT4 has arrived. And how people are pouring out their souls to GPT4 not realizing somebody is owning this information. But high-tech people are asking for answers and various codes. Normal people are asking for solutions to just about everything, their personal lives, their sex lives, their family lives, careers, everything.
It is an extraordinary new chapter and an ongoing story. Faith Popcorn I wanted to say thank you so much for joining us for aSignal Conversation and for all your work you’ve done with P&G.
I love the company, I just want to say salute. A beautiful American company. Gorgeous. I know global but American.
Well, again, thank you so much. And we’ll do this again soon.
Blake Chandlee likes to call TikTok “the new kid on the block.” With 150 million active users in the U.S., it’s hard to imagine the video-sharing app as much of an upstart. But Chandlee relishes competition, believing TikTok is the more nimble, and more likely to succeed, as both Facebook and Instagram embrace short-form video, as he noted on the Signal 2022 stage.
“We think that the more competition and the more people focused on that will [bring] more value to brands in this room,” said the president, Global Business Solutions of ByteDance/TikTok. “If we have all three big players on that, it’ll make your jobs easier.”
You can hear more from this lively conversation between Chandlee and Signal360’s John Battelle in the video below, or read our lightly edited transcript.
John Battelle We’re very happy to have Blake Chandlee, the President, Global Business Solutions of ByteDance/TikTok. Please welcome Blake to the Signal Stage.
I’m good. How you doing? You sit here because you face everyone and they can see you. I just asked everybody. Let me ask you this. You may have it on your phone. But do you use it daily? How many people use it daily? All right, well, it’s a little fewer.
Blake Chandlee
How many people have have loaded it in the last year? How many people put on their phone just because I was gonna be here today.
Well, before we get started, you have a little video that I think you wanted to show that sort of sets things up in terms of what TikTok’s focus is now so why don’t we run that?
Video
Are you a forager? Do you love spooky season? Or perhaps you’re a big fan of a nice tidy home. Or your bride who loves a good bowl of soup and chasing UFOs in your custom van? Well, then, welcome to TikTok, a community for everyone. On TikTok people stand out from mainstream culture and develop their own norms, values and ways to express themselves. We call these groups CommunityToks, no matter who they are, what they love, how they spend their time and where they invest their creativity and attention. People can pull back the curtain and be their truest selves. Creators and fans with similar interests find each other on TikTok to celebrate moments that bring them joy. TikTok’s algorithm has made it easier than ever for people to turn their interests into real communities. Everyone can actively participate or be an engaged viewer. CommunityToks provide an opportunity for brands to connect with communities both large and small, and to co create alongside them.
One rule? Honor the unique way a CommunityTok creates and communicates. This chubby little terrier mix had a very messy booty, so it was straight to the tub for her. The pay off? Massive. TikTok is the only place where brands can meet active audiences as equals, rather than advertisers. This means brands get to be part of culture at the source, inspiring seriouss brand love. Welcome to the bass neighborhoods of CommunityToks. Stay a while.
And they do stay a while. As I understand it. What’s the average? TikTok session?
Depends a little bit where you are in the world. But it’s somewhere north of an hour a day.
It’s an hour a day, you know, eight to 12 to 20 seconds at a time.
You go down the rabbit hole quickly.
It’s a surprisingly clean rabbit hole. You know, by the standards of the internet.
I think that at the very base of everything, we try to inspire creativity and bring joy. So the kind of content you find on TikTok is different than we’ll find elsewhere.
I appreciate you being here. I think that that video is focused on community is really interesting. You and many others, as I noted with Matthew [Henick] are, alums of Facebook Meta? And there was a very public pivot to community at Meta. But there wasn’t the product payoff, in my estimation, that you see, that sort of naturally occurs on tyour platform. Is the community feature something that is broken out recently? Or is it something that was just endemic?
On TikTok?
Yeah.
It’s just it’s just endemic. It’s how people are communicating and how they’re sharing with each other the kind of communities and what we’ve built is different than maybe some other platforms. Because at the core, and we talked about this a lot is, we’re not a social platform, right? We’re an entertainment platform that’s driven by community. So the kind of content that you find and experience in your For You feed is going to be different. And that’s got different opportunities for brands and people around the world. Not to discount social platforms. I think they’re great. I still use Instagram still use Facebook. TikTok plays different role in my life. It’s replacing television versus some other behaviors.
I have this sort of unspoken policy and I’m going to make it spoken which is if there’s an elephant the room, I like to shoot it. And there’s a big one in the room. It’s just an invisible elephant that has to do with data use and the Chinese government. I’m not ambushing you with this question. I let you know that, that we talk about it. One thing,you’ve worked with brands, your whole career as far as I have. And we know one of the things that brands are very concerned about is safety. That’s a word that means a lot of things. But last year, or I should say, a year and a half, two years ago, TikTok was much in the news, because the current president decided to use it as a political punching bag, I would say. From that point forward, there’s been a lot of questions. Then a big article came out, saying that some data, in fact, was being shared with ByteDance in China. I want to give you an opportunity to address those stories and the fact that an FCC commissioner called for your app to be removed from app stores in the United States.
That’s the elephant in the room. It’s unfortunate when a story breaks, and it’s full of misinformation. It’s really important for, and I appreciate the question, by the way, I know it’s a hard question to ask.
It’s actually really easy to ask. It’s not easy to answer.
I’ve got my confidence in the answer. It’s not that hard of a question. If you think about us, from our perspective, the number one, two and three priorities in the company, are user safety, community safety, which includes the security of people’s data, right? We are one of the most, if not the most, at least in current times scrutinized company when it comes to the space we live in. One is we historically came from a younger audience. That’s changed. And we’ve seen over the last few years, that’s changed pretty dramatically as our audiences diversified in a pretty significant way, which we can talk about. But also to our heritage, especially in the last couple of years. So we know, we’re going to be under more scrutiny than anybody. I tried to allude to it and say, ‘Listen, we’re going to speak with our actions.’ And so a couple of things. Brand safety was a subject we talked a lot about with the teams here in this room and around the world. We feel like we built a tremendous suite of products and services around brand safety.
We talked about that, and and it’s been alluded to by some folks, and we’re actually leader now in that space, versus our competitors who have been around for 10 years. No disrespect to them. I think they’re great. It says we focused on in a different way. When we talk about measurability we focus a lot in the last two years around measurement. How do we make sure that brands are confident that when they spend money on TikTok, that that they’re getting the kind of ROI or whatever the measurement they need for them to go back and have confidence and continue to invest in us. And now, historical data, data security. So we’ve done a couple things that have been what I would call industry leading first and foremost, two years ago, we launched our transparency centers, which are physical locations that people can walk into anybody in this room can walk into with us. Governments walked in, regulators walked in to press walks in, and we share everything, we open up our entire platform to them to scrutinize. We brought in cybersecurity experts. We’ve we’ve spent really a lot of time these transparency centers. Never been done before. But we opened up our algorithms for everybody take a look at. The transparency reports, which were not new, were something that we felt really strongly about. We just evolved our transparency reports to include more and more information visa vie the industry.
Then we announced and the most important thing for the U.S. is we announced two things one, what we call USDS, which is the US Data Security Business Unit, which is a standalone business unit that is going to be governed by cybersecurity third party experts, managed by an entirely separate legal team, or management team within the company. That organization will house all U.S. user data. It’s in place today. It’s got leadership in place today. It’s a formal organization and then we went another step further and said we’re actually going to house all of our U.S. data off of our servers on Oracle servers.
This is not because we’re hiding from something this is because we need to build trust, especially with the U.S. government, U.S. audiences brands. Trust is our number one objective and so to do that, we will go above and beyond to says like say you wear a belt and suspenders to give people confidence in that and then be open and transparent about it. Not hide from it.
The number one thing around trust is our users. We want users to feel comfortable that as they’re creating and generate inspiration and joy for those around the world, they can be comfortable doing that. That’s really what we’re trying to do here.
I appreciate that. I just do have a follow up. You said that the articles, the article was a Buzzfeed piece that came out, there was misinformation in it but is it accurate? That information has traveled from the U.S. unit to the PRC?
So we’ve had systems and processes in place. We regulate us data, and we have it hosted in the U.S. and Singapore, and we have teams, legal teams who are responsible for anybody who wants access to that. So if I want access to it, I have to get approved by our legal team in order for regulation.
But what if the PRC wants access to it?
Absolutely not. We’ve never been asked for it. The data doesn’t sit in China.
But I mean, just to just to run a little hypothetical. And it happens all the time, the U.S. government asks for under the rule of law in the United States asks for data from all companies, including TikTok. And by the rule of law, you’ve got to give it. That rule of law exists also in China. So is it fair to say that that could happen? Should the Chinese government desire it to happen or for Tiktok?
Not for TikTik. We have business units, and you’re going to speak to one of my peers later tonight, in the Chinese session. Douyin is out big platform. It’s a sister app to TikTok sits in China, which your teams know well. We do a lot of work together. They fall under different regulation.
I’m just doing my belt and suspenders too, we can move on. We touched a little bit at the top on this, but I feel like I just need to ask. You said that to the extent that the algorithm is knowable, you have transparency around it. But it is kind of remarkable. Number one in how it works. It’s very entertaining. And number two, it’s sort of not creepy. You know what I mean? Sometimes you go down a rabbit hole in YouTube or something else, and you sort of left with a bad taste in your mouth. But what is it? Why does it work so well?
I love the sound bite not creepy.
Congratulations. It’s been 35 years of the internet. Finally, an algorithm that doesn’t creep us out. But why does it work so well?
I think it’s a combination of two things. One, I think it’s around the content that exists as being created. The reality of it is TikTok is just about authenticity. So the creators in our platform, or anybody, it’s not just big influencers.
And it’s a high percentage of creators compared to the sort of they used to be at 199, or 10-90 or 80-20 rule on the internet than most everyone was watching. And a tiny group of people were creating.
It’s definitely Democratized creativity. And there are big creators. You have the Charlie Damelios that go from being Connecticut school girls to renowned, famous influencers, with businesses and brands under themselves. But the vast majority of content consumed are just everyday people. And there are different stages of our traders, you’ll have people that are first-time traders, there are people that are just want to express themselves and inspire. Then there are people that are trying to start to build a career. We had to VidCon a couple of weeks ago, and Vanessa Pappas, who I work closely with, was the keynote speaker. Rather than talking, she’s brought creators on stage and let them tell their story. These stories are amazing. They’re emotional. These were people that were homeless, but all of a sudden bought their first house for their family. Because of what they’ve done on TikTok. It’s amazing to watch this creator community. So it starts with the creator community and what they’re creating,and then the algorithm the For You feed just picks up on what your interests are, and then feeds you this and then occasionally, it slips something in, a little bit of discovery. We know Blake likes to travel. We know he likes cooking, we know he likes fishing, and we know he likes puppies. And actually, I am a closet laundry guys. So it’s weird that way. But once a while they’ll slip something in. I didn’t know I’d like it. I’m watching something that I might not have any idea what I was interested.
I’ve noticed that. So what are your tips for effective marketing on TikTok? I think the video itself mentioned that the marketer is, and you said this as well, sort of appear, as it were. But what tips do you have for folks who want to succeed there as marketers?
So the number one tip is you have to use the product. I just can’t imagine it truly believe this. I spent 10 years at a different company from the very early stages. And back when people said, ‘I don’t have that app on my phone, that was for my kids or my partner or whatever, I don’t have it.’ And then over 10 years that changed. I fundamentally believe that TikTok is going to dramatically change the way businesses build value, connect with audiences at a global scale, with enough engagement, that you can fundamentally change user behavior. We’re seeing it over and over again. We’re seeing it with brands in this room, we’re measuring it, and we see it over and over again. The number one thing people who are using, those brand managers, those media management, or they are using the product. They understand the nuance, and what people expect from that platform.
Two, engage with the creative community. The creator community knows what works on TikTok better than we do. It’s one thing to want to control the brand, there’s another to bring that creator community early into a process, because they’ll have ideas around how we should think about things. What’s gonna appeal their audiences. And then not just find creators that have tens of millions of followers. This is not about, how many followers a creator has. It’s about the audience that creator has, and whether it’s relevant to the community you want to reach. Because we’ve seen amazing work coming out of creators that have 100,000 followers, that might be better than creators got 10 or 20 million followers, and anything can go viral anytime. So I think that creator community is really important. And then number two, measure, measure, measure measure. We’re not afraid to measure. We have lots of resources, internally measure online, offline, everything from top of funnel, attribution metrics all the way down through did we drive a product off shelf.
That just gave me a nice bridge to the next question, which is, everyone looks at the future of many of these super apps, if you will. And they say, the integration of commerce is obviously what’s next. I asked Vanessa [Pappas], about this last year, we did a virtual session a year ago. And the growth has been extraordinary in that year. Is that coming? Is the integration of commerce coming?
I know that P&G has significant business in East right, and there’s a whole session tonight on this, and you’ll hear from our CPG lead in Beijing around this. If you look to the east and see where the connection of community and commerce sets, it is clearly driving a significant business.
We’ve launched Tiktok show. we have Douyin shops and Douyin our e-commerce solution in China. We haveTikTok shops in Southeast Asia now. So in Indonesia, Malaysia, Thailand. We launched it in the UK. We have seen different behaviors in the UK than we’ve seen in some of the Eastern markets with regards to merchants and traders and users. It will be coming to the US. We think that this connection is not just something we want to do for business reasons. There’s this whole world discovery taking place on TikTok and users are finding out about brands they want to connect with. And we feel it’s our job to connect that in a really native and kind of efficient way. So TikTok shops is our version of that commerce application. I think it’s a big deal.
I’m sure it will be. On the flip side of that all of your colleagues in the industry have certainly noticed. Not only they noticed, they’ve copied you. There’s YouTube Shorts, there’s Instagram Reels. What advice would you give to marketers are saying, ‘This is awesome. ButI’ve worked really long, great relationships with all these other companies. We’re at scale with them. They have user data that you might not have. So I’ll see how Reel does.’ Which is taking off. ‘Or shorts. Why should I move a big amount of my budget over to TikTok?
Reels and Shorts are both very legitimate competitors. Their user numbers are growing, their consumption numbers are growing. To your point, they’re very good at monetizing their audiences. We’re still learning. We’re the new kid on the block. I think we’ve made huge progress. I think we innovate very, very fast. We’re still in a place where we can innovate very, very quickly. We’re not burdened down by some bigger decision making desk. We’re a pure play in this space. This is what we do. That’s not to say they won’t be successful. I think they both will be very successful. I think the broader trend to understand is how user behavior is changing to short form video. That’s the story here. It’s not TikTok versus Real versus Shorts. It’s there’s a fundamental change taking place in user behavior. We happen to have started that change. But that change is universal that’s what we’re saying. We think that the more competition and the more people focused on that will [bring] more value to brands in this room. If we have all three big players on that, it’ll make your jobs easier. So we want them to be successful. It makes us better that we have to innovate faster with big competitors, and we’ll continue to focus our story around that. But we actually embrace the competition.
Excellent. Well, I look forward to seeing how it develops. Thank you for enduring the hard question. I appreciate it. Blake. Please join me in thanking Blake for coming.
Shannon Quinn’s passion for the environment snakes to the name she gave her son — Rio, Spanish for river. As P&G’s Global Water Stewardship Leader, this focus means Quinn is dedicated to both reducing water use through manufacturing and consumer products and restoring natural waterways. A recent project with the Northwestern Band of the Shoshone Nation in Idaho and Utah hopes to return water to 500 acres of land.
“It is everyone’s responsibility to do something,” said Quinn, a Signal Trailblazer last year. “It’s not only our responsibility to help, but we also have the scale at which we can make a difference.”
Hear more from Quinn in the video below or read our lighted-edited transcript.
TRANSCRIPT
Shannon Quinn
If we do not help to address the problem, our consumers, the people that we serve, and our manufacturing facilities could potentially be at risk for not having the water that’s needed to thrive. My role right now is what I had envisioned doing when I was 12 years old, essentially, and wanting to do something that made a difference. And I believe that I’m doing that here. Each day is so different. But all of it comes back to really working to address the water challenge that the world is facing right now, and many parts of the world are facing it more dramatically.
I spent my childhood exploring forests, looking under rocks to see what kinds of animals and what life was like under, on even under the ground and through the streams and in water. As a family, I used to actually complain that we couldn’t go to Disney World. But where we spent our time was driving across the country to visit the beautiful natural areas that we have in the United States, including many national parks. And now I have a family, and actually named my son Rio, which is river in Spanish, in part because of that deep connection and the inspiration that I find in water. P&G’s water stewardship program is one of the most innovative in the space. We have water goals as part of our ambitious 2030 sustainability goals. And my day-to-day is figuring out first what those goals should be, and then how to achieve those goals. What P&G has committed to is helping to drive forward a water-positive future. That is making sure that there is enough good clean quality water for not only people but also the environment.
We’re focusing on helping first to reduce water use within manufacturing. We’ve been doing that for decades, but now we’re really continuing to build on that foundation of knowledge and expertise and water efficiency. Then we’re also helping consumers in their homes to reduce their water usage, by providing them with products that allow them to do that, sometimes without even thinking about it.
I spent two weeks going around the Western United States a couple months ago, to meet some of these partners, individuals and organizations that know what the water challenges are in the West. In some places, there’s not enough water to run through streams. And so fish are dying, and there’s not enough water to keep the wildlife alive or even to provide enough water for farmers or other uses.
I think it’s very innovative for a company to empower their employees to go and meet these people and see the actual impact that’s happening on the ground. And to see a stream go from dry, meaning dry as a bone, to just flowing with water and fish. The way that we find projects, we work with an organization called the Bonneville Environmental Foundation in the United States, who have a lot of great connections with small, medium and large nonprofit organizations that specialize in addressing water issues. Through them, we discovered that the Northwestern Band of the Shoshone Nation that’s located in Utah and Idaho have this vision and have had it for a long time to bring the sacred, culturally important and historically significant location of about 500 acres of land back to what it was when their people were massacred there.
It’s an amazing project that not only is going to help restore water into an important ecosystem, where it’s kind of disappeared. But it’s also helping to address a cultural need. It is everyone’s responsibility to do something. Water is life. Water gives us all life. It enables all of our businesses to function and enables life to function. It’s important for corporations like P&G to make these sustainability commitments because each of these companies touches so many individuals through our products. Let’s make a change in this product that helps reduce water in one person’s home. But multiply that over five billion individuals and suddenly you have a huge positive impact. It’s not only our responsibility to help, but we also have the scale at which we can make a difference.
Building a business is hard work. Making it last is even harder. In 2017 the average age of companies in the S&P 500 was 20 years, down from 60 years in the 1950s. For small businesses the average lifespan is even shorter. A sustainable business built to last requires not only great products, but also purpose and people.
With current economic headwinds business leaders are preparing for a downturn. The focus is on managing costs, often in a reactive way, while continuing to invest in future growth and innovation. Companies that do so are much better positioned to thrive once the downturn is over. This is also a good time to refocus on proven business fundamentals. Jay Sung, operating partner and CMO at private equity firm Brentwood Associates, emphasizes a balance between fundamentals and future opportunities when looking at investment opportunities ahead.
Innovation guided by purpose is a strong foundation for building a sustainable business. Take Good-Loop as an example. Founded in 2016 by Amy Williams its purpose is to provide effective advertising as a force for good by letting people who watch an ad make a free donation to a brand relevant charity. She not only designed her product but the full company around this purpose.
Large companies like P&G also use their purpose as a north star for innovation. For P&G, improving the lives of the world’s consumers includes investing in sustainability projects such as Holy Grail, a digital watermark for packaging to make the recycling process more efficient. The concept is easy to understand, but making it work requires a long-term commitment to invest and build partnerships across industries.
Kathy Abusow, president and CEO of the Sustainable Forestry Initiative, also has a purpose. She is on a mission to save forests, by having people buy more wood products. As it turns out sustainable forests thrive when older trees are replaced with new ones, as she explains in her Signal 2021 presentation.
The most critical part of any sustainable business are its people. The turbulence and uncertainty of the last few years have elevated the importance of mental well-being. Adding an economic downturn creates additional anxiety, focusing us even more on being productive in our work. In our first Signal360 guest column Arianna Huffington, founder and CEO of Thrive Global, argues that we’re more productive and more creative when we’re recharged. This starts with redefining success, working smarter and more sustainably by nurturing our health and well-being, our relationships, our capacity for wonder and joy andfor giving back.
We hope that this Signal360 issue will help you recharge with inspiration for building businesses that will make a difference for years to come. Until next month.
Stan Joosten & John Battelle, Editors-In-Chief, Signal360 / Co-founders, Signal P&G
Brentwood Associates’ Jay Sung is always on the hunt for the next great investment opportunity. Today, his attention is on companies with built-in communities, or what he calls “grassroots stickiness,” as well as those in the health and wellness space. Sung thinks consumers are less interested in buying new things and more focused on boosting their well-being.
“[Consumers] ….are pretty high up there in terms of, ‘I have a whole closet full of clothes. I’ve got three cars. What else do I need?’” he says. “It’s health, it’s wellness, it’s actualization.”
Hear more from this lively conversation with Signal360’s Stan Joosten in the video below, or read the lightly-edited transcript.
TRANSCRIPT
Stan Joosten Welcome to this month’s Signal Conversation. Today I have as my guest, Jay Sung, who is operating partner and CMO at Brentwood Associates, which is a private equity firm. Jay has substantive expertise in marketing, is an excellent person to ask about the future of marketing, and what he is seeing with all the technical and business landscape developments that we’re seeing around. Jay, you’re very welcome here. I wanted to ask you as a first question, can you tell us a little bit more about Brentwood Associates, and also what private equity is because not too many people might actually know what that does?
Jay Sung
Brentwood is a Los Angeles-based private equity firm. To your point, it’s what they call a mid-market private equity firm. We focus on companies that are between $50 and $200 million in revenue.What a private equity fund does basically is it gets investment investors, large pension funds is one of the larger sources of investors for private equity funds. We take the funds and put them to work by essentially buying companies. We have about 25 investment professionals at our firm, who are steeped in knowledge on all kinds of different aspects of business analysis. We go and buy companies, and on average we hold companies for 567 years, and then we go and hopefully grow them during that period of time, and sell them either to a larger private equity firm or in many cases to a larger firm like a P&G.
You’re a good person to ask what’s ahead. What trends or signposts are you seeing that might give us a glimpse of what the future of commerce would look like?
It’s tricky, Stan. We’re still trying to digest what’s happened over the last five years. What happened obviously during COVID was a huge push into digital, into e-commerce. A little bit of a sugar high, two steps forward and one step back. But the other bigger kind of trend over the last five years is trying to absorb this explosion or detonation of direct to consumer brands. What the heck happened? There is sort of a fizzy mix. Facebook was coming into its own, consumers are starting to shop through their mobile phone enabled through VC funding, low interest rates, and then the Shopify phenomenon. You smoosh all that together with Facebook, creating the really the greatest marketing machine of all time, because it pretty much sold out everyone’s privacy.What a great invention that is for marketing, kind of terrible from a consumer privacy standpoint. But what a great invention for marketing, like it could do no wrong. Facebook could profitably acquire a customer, no matter what, you could swing a dead cat, and you have a free customer, right?
This ecosystem spawned these gazillions of brands. What that’s given is now being taken away. Interest rates are up. I don’t think there’s too many smart VCs that are that are funding exclusively direct-to-consumer businesses anymore, because it’s not just about shoving dollars in the Facebook machine and driving the top line, and then going and exiting to somebody else. There are plenty of folks that were able to make it through that window. But that whole thing is starting to contract. So the future, it’s a little bit hazy as to what’s going to happen to all those different companies. But what what’s very clear is that what was there before it, some of these things are enduring. So omni channel retail for a long time that was saying, “Guys stop focusing on DTC.”The answer is retail, and it’s a hybrid of retail and DTC. It’s not one or the other. DTC allows you to get closer to customers and retail helps you leverage or amortize your brand investment so that you’re getting some more margin without having to pay quote, unquote, Facebook tax on every customer that comes through the door. It’s a hybrid of those two things.
In the grand scheme of things, a lot of the earlier brands that I see very early on in their game plan said, “We’ve got to get into retail, ASAP. Because otherwise, in a post iOS world, we cannot afford to just keep shoving money into the Facebook machine.” So that’s in the grand scheme of things as far as from a technology standpoint. One of my favorite expressions that always comes up is, “You know QVC-ification. You know of the web, right? When can we get into live selling? When can we have a more interactive commerce experience?” If you think about our websites, they haven’t really changed very much. Go over last 10 years, websites are still a category. There’s a navigation and there’s a cart. The only thing that’s really gotten a little better is is the checkout experience, because Shopify has made that kind of frictionless.
Barbara Kahn from Wharton, she’s a kind of a thought leader. She had a cool thing I read years ago, which I think still applies today. Like the four quadrants of e-commerce growth, she said, brand, value, experience, and frictionless. I like that framework. You pick something like Adidas for brand. The reason people buy Adidas is the brand. They don’t buy it, necessarily, because the product is fantastic. They don’t buy it because it’s cheap. They buy it because of the brand ethos. You think about frictionless, that box is for Amazon. I want to buy something in one click, Amazon fits into that box. On the value side, someone like T.J. Maxx can kind of generally do no wrong, because if it’s cheap enough, they’ll do it. Then last, but not least, is experience. So it’s the experience side that has been really sorely lacking on the web. You think about how the commerce experience, generally it isn’t fun at all. But recently, one of our brands that we exited last year, Saxx Underwear, launched a web experience, that’s all a little bit like a metaverse kind of experience. You don’t need goggles or any crazy thing. But it’s a three-dimensional shopping experience, like a little shopping mall. You can look at products and rotate them in three dimension. It’s a step in the right direction. You come to an apparel website, it’s pants, pants, pants, not very interesting.
The other thing that I think we’re going to see much more of is social commerce, which means different things to all kinds of different people. But if you think about it over here, we have all this cool stuff going on with TikTok and influencers and people glued to their phone on social media feeds all day long. They do that, and then maybe they click, or they search later and they go over the wall. It’s like in those old movies, everything was color, and then it goes into black and white. It’s just a very static web shopping experience. There’s a lot of friction because payment tools are not in there. It’s a different experience entirely. It’s not very fun. So I think TikTok is leading the way on creating shopping experience where they’re going to put that whole shopping experience into TikTok. Facebook’s tried it before. But I think Gen Z and Gen Alpha, like the TikTok-centricity of what they’re up to, and are really going to drive that experience part forward. I think the other vectors are pretty pretty well covered, but at the experience side it has really been sorely lacking.
That’s very interesting perspective that you just provided, Jay. I assume that you also reflect that in how you look at potential investments that are currently possible in the market. I know that the current interest rate conditions might not necessarily make it easy to put money on the table for new emerging companies. But where are you looking at in investing today? To put your money with an eye towards the future of commerce?
Great question. I always have to put a little disclaimer up here that I’m not speaking on the behalf of Brentwood at all. But I’ll tell you very broadly, when we think about what’s out there, we’ve never really liked companies that are purely direct to consumer. Because it’s always about when is the meat? When does the media spend stop scaling? It’s a data point that no amount of modeling can actually tell you. And we hold companies for 5, 6, 7 years. So there might be really impressive growth over the last two years driven by customer acquisition and that kind of thing. But we’re much more interested in the core fundamentals, which is around product market fit, around the power of the brand, looking for evidence that there’s kind of a community or some some sort of grassroots stickiness, if you will, that will allow it to power through whatever six or seven years. You have to get through a couple cycles of things. It means two or three years from now, who knows, like TikTok may not be here anymore. We don’t even know. We have to be able to push through those cycles. What’s fundamental is really the brand aspect.
As far as what we like, say very broadly there’s a reorienting of values out there from 20 years ago, from buying stuff, to buying experiences and making yourself better, self improvement. That’s a very broad theme. But if you look at Brentwood 10 years ago, we were acquiring a lot of apparel companies. Apparel companies are about going out and making an impression on people and collecting and buying things. I think that consumers, in the 2020s, if you will, are much more focused. They’ve climbed their hierarchy of needs, and they’re pretty high up there in terms of, “I have a whole closet full of clothes. I’ve got three cars. What else do I need?” It’s health, its wellness, its actualization. We own part of a company called HIMS, a publicly-traded telemedicine platform. All of the trends that happened during COVID, around transformation, and zooming our way through here, how can you apply technology to older technology to older consumer problems? The cherry on top is obviously this transformation around what’s most important to people in their heart of how they’re going to go spend their money, wellness and being able to be proactive on their health aided by technology. That’s that’s the kind of investment we couldn’t resist.
Do you have any other illustrations in your portfolio that you see a signposts of where the future’s headed?
I’m into health because you can see it. If you zoom all the way out and look at the consumer health vertical, whether that includes vitamins, minerals, and supplements, or it includes health and wellness and all the shakeups going on in the medical field around how you concierge medicine, it’s just a humongous growing field. We have an investment in a company called L-Nutra, which is a longevity platform. It was developed out of USC and its flagship project is called Proton. It’s a five-day kit and it uses the science of fasting to carefully coordinate your calories and your macronutrients over a five-day period to kind of choreograph your body into a very specific state of what they call cellular autophagy, which is a bio-mechanism. They’re just starting to really understand it as far as being good for longevity and for against chronic illness. So that’s a fascinating company. It violates one of our rules, which is not to invest in single product companies. But what we liked about it was its potential to expand beyond a product into a brand and then into a platform where it can be more than just a single product. You can be a lot of different things to a lot of different people in trying to maximize what they call their health span. We think the longevity market, it’s weird, because it’s not exactly a market. But it’s an evolving category, that we’re really very bullish about.
Jay, to wrap this up, one question to you, if you were 25 today, and you were stepping into the world of marketing and commerce, what advice would you give yourself? What one or two pieces of good parental advice would you give to your younger self?
I was always kind of a nerd. I’m a very curious person. I’ve accumulated a lot of information up in my head. But there’s nothing like learning, learning by doing. Increasingly, I’ve been really reflecting on this. In this day and age, it has never been easier to actually launch things. So I would probably tell my earlier self, “Hey, whatever your day job is, managing people strategically and doing all these different things, get your hands on a keyboard, and set up a Shopify site and upload some images yourself and run some Facebook campaigns, and use that sort of side hustle.” An overused term. The purpose of a side hustle is not exactly to go make a million dollars on this side. A side hustle is an important part of an educational strategy to really learning, but learning by doing. I think that’s what I would tell my 25 year old self.
Well, I’m glad that Signal360 is your side hustle today. I learned a lot. Thank you very much for your time. I look forward to talking again in the near future.
Terrific. Thanks very much.
In the world of marketing, Good-Loop has found a unique niche. The advertising firm designs ads that earn money for charities every time someone watches the spot. Since launching in 2016, Good-Loop has helped raise more than $7 million for charities by working with brands that include Bounty and Pantene. Because people can click the ads away, founder and CEO Amy Williams says the challenge is to “break through the noise and create advertising that is truly interesting.”
You can hear more from Williams in our video below or read the lightly-edited transcript.
TRANSCRIPT
Amy Williams
Good-Loop is a purpose-powered advertising platform. We help brands do good, profitably at scale. I started Good-Loop six and a half years ago. I was working in advertising, I was working at Ogilvy, and I loved it. I love advertising, I find it such a creative and interesting industry. I remember I was working on a brief it was for a fabric conditioner, ao it was very glamorous. I was a product that used one less bucket of water to rinse, the product was called One Rinse. So I was sat late at night with the planner, doing some back of the fact packet maths. We were thinking, one less bucket of water, per family. Maybe they’re going to do three loads of laundry a week, and use it this many days in a week and this many weeks in the year and this products is going out in Vietnam, Thailand, Indonesia, Singapore, Philippines. Suddenly, the amount of water that this one product was gonna save was just more water than I’ll use in my whole life. I think there were lots of little moments that made me want to run my own business and do my own thing. But that definitely was the moment that I decided I wanted to dedicate my career to helping big global businesses make tiny little changes that have ripples throughout the world.
Today Good-Loop is a team of 50 people. We have offices in Scotland, London, and New York. We work with some of the biggest brands in the world. How it works is super simple. Basically. Let’s say you’re on The New York Times, and you’re going to watch a video. Good-Loop will appear in the pre-roll before that video. So it’s skippable, you don’t have to watch, we will never force a view. But if you choose to give that advertiser a little bit of your precious time and attention, then you unlock a donation funded by that brand. So you the user get to do good for free just by giving a bit of your attention. And for the advertiser, you get increases in engagement, but also higher ad recall, is more memorable, right? Because you get to, you get to choose a charity, you get to get that dopamine hit, you get to do a little bit of good.
We recently did a really lovely campaign with Bounty. Obviously their platform is all around sort of less mess, more trees and sort of celebrating the sustainability that’s baked into the product and the brand. We had a fantastic piece of creative that was wrapped in our interactive ad format. When you watch the ad actually unlocked a donation to fund the Nature Conservancy, a charity that is a huge partner of the Bounty team and a charity that that’s really proud to be a part of this campaign. So because of that sort of really ethical incentive, the Bounty team saw a fantastic uplift in completed view rates, which of course is brilliant, because you want to get consumers engaging in that content and really earning some of their time. We also saw uplifts in consideration versus the competitor set, which I think is a lovely illustration of how sustainability is key to differentiation and category. Nicest of all, we planted tens of 1000s of trees across the United States that exists today because of that campaign. That’s a really lovely result.
So to date, we have raised just over $7 million for amazing charities around the world. It really is such a broad range. We’ve funded turtle nesting mapping projects, human rights campaigns and everything in between. Remember, that’s media dollars, that’s not CSR budgets, that’s money that would have otherwise gone to Google or Facebook or the same old players. But instead, we’re using media money to drive engagement to earn attention and in exchange make these amazing donations. I think that transparency about how much we raise and how the money flows, I think is a really, really important part of the business overall. Transparency is kind of rare in our industry. It’s so important for an advertiser to have visibility over how the money is being spent, and how much of the dollars are actually ending up with the publishers and ending up going through the system. So we really operate a radical transparency framework. We also are a B Corp. So that means that you as a board member and as an owner of the company, if Good-Loop were a regular business, then my only legal responsibility would be to make money for my shareholders. But because we’re a B Corp, we’ve actually changed our articles of association. So that I legally am entitled to make this visions that sacrifice profit in the interest of purpose. I know that the positioning of good growth and making sure that you don’t sacrifice profit and purpose and the two can work together. I know that that’s a really big part of the P&G business. And it’s something I really believe in. But there are moments where I need to be able to be empowered as a leader to make those decisions. And that transparency I have with my team and with my customers is really important. So it’s something that we’re proud of.
It’s amazing that we’ve raised a lot of money for charity, it gets me out of bed in the morning. But at the end of the day, we’re a business. And so Good-Loop is a profit making company. Every brand we work with is a profit making company. And we have business results that we need to deliver against. So it’s really important when I’m working with my salespeople, when I’m talking to our clients, when we’re going out to market, we have to focus on how we deliver ROI. So from a business perspective, the way that Good-Loop works is we charge on a cost per success model. So if you skip the ad, if you don’t swipe up, if you don’t engage, if you don’t scan, whatever it is whatever the engagement metric is, if you choose not to give that advertiser your time, you don’t pay a cent. But when consumers lean in, and they choose to give that time or attention, then they unlock the donation and we charge the advertiser. So we charge on a cost per success model. And really, the way we make money is that we increase the success of the inventory, we increase the value of the inventory we buy. That arbitrage between the CPM and the CPCV or whatever the buying model is, that’s how we can afford to make the donation.
From an advertiser’s perspective, we give 50% of every dollar to a good cause, which is of course money that is working media. That’s money that you need to spend wisely. But when you consider that every consumer knows the value of their time, we’re increasingly aware of our value as consumers, especially online. It isn’t just a donation, it is also how you earn the right to a consumers’ eyeballs, and how you break through the noise and create advertising that is truly interesting.
We’ve done quite a bit of research into how the consumer reacts to the ads. One thing we’ve really found is the power of a countdown. We all love a countdown timer. It’s something inherent in human nature, there’s a curiosity of what will happen at the end. So in many of our ad units we’ll have a countdown mechanic, often very close to the skip button. So it’s really clear that if you don’t press skip, and you get to the end of the countdown, then you’re going to unlock some reward. The other thing that we find really interesting is the charity choice. So often will feature a couple of different causes. We ran a campaign with Pantene in the UK. All the money went to Gendered Intelligence, which is this fantastic charity that support trans and gender non-binary people in the beauty industry. But the consumer got to choose which project Pantene funded, whether it was their work in schools and youth programs, or their helpline or their counseling and therapy sessions. So the consumer was very involved and interactive in that experience. That gives us really interesting insight. So we worked with a brand recently. They featured three charities, one of which was the WWF, the World Wildlife Foundation, not the wrestling. We found that the WWF got over 70% of the consumer vote. So it was a really interesting piece of feedback and insight to the brand about which charity is resonating most with their target audience. So there’s some really nice interactivity and insight that you can get from how consumers respond to the advertising.
I’ve kind of watched purpose evolve. In 2014 there were these early studies that suggested sustainable brands, and were also faster growing, and that brands had started dipping their toe. And then there’s “Throw like a girl,” these really iconic purpose moments. Now today, it’s grown arms and legs. There are so many different ways advertisers have to show up in society. I think thinking of consumers as citizens and thinking of our responsibility, and our citizenship as brands is a really helpful way of framing it. So Good-Loops vision is to be the one stop shop for brands to show up in the world responsibly. That is their sustainability, their net zero targets. They’re the funding of climate journalism, they’re planting trees, all of the work they’re doing to protect and preserve the planet. It’s their DNI initiatives. Every big business has to be taking this seriously, both internally, but also externally, how you talk to consumers, how you represent those consumers. I love the Widen The Screen initiative and some of the work that you’re doing to lean in here. How can we make sure we’re funding those publishers? How can we make sure we’re funding those communities?
Then the final pillar is the social impact piece. What are the causes that are really specifically aligned to our brands and our businesses? Whether it’s Pampers, supporting the National Diaper Bank Network, there’s so many lovely ways that brands can shape a tiny piece of the world, their corner of the world and make it better. So I want Good-Loop to be the platform that helps them plan, execute and measure their social responsibility and advertising.
Kathy Abusow is on a mission to save forests by having people use more wood. While that sounds counterintuitive, her argument at Signal 2021 was clear: when people buy goods made from sustainably harvested wood, more trees get planted to replace those removed, with more carbon captured by the saplings. Sustainable forests are less susceptible to explosive forest fires and less vulnerable to insects and disease, says the president and CEO of the Sustainable Forestry Initiative. Plus, SFI-certified forests store 235 million metric tons of carbon — equal to taking 50 million gas-powered cars off the road a year.
You can hear more from Abusow’s Signal 2021 talk in the video below, or you can read the lightly-edited transcript.
TRANSCRIPT:
John Battelle Sustainability has been a core focus of Signal this year. And I learned a lot from listening to Kathy Abusow, the President and CEO of Sustainable Forestry Initiative. So Kathy, the floor is yours.
Kathy Abusow
Thanks so much, John. And thanks so much to P&G for including me in this amazing opportunity to speak today. I’m calling in from the traditional unceded territory of the Algonquin Anishinaabe People. I’m here with you today because I love forests. In fact, they literally saved my life. My love for forests started as a child, but my appreciation for their life-saving qualities struck me as a young adult.
During a thunderstorm in the middle of the night, lightning struck my home, just feet from my bed. I still remember the flash and the smell of that lightning strike. I still remember my shock the next day when the electrician surveyed the damage and said my husband should have been dead, that that lightning should have jumped to our steel frame bed. But I knew I didn’t die. My father made that bed. He was a carpenter. That bed was made of wood. It saved my life.
Today, I still love forests, and forests are my life’s work. I’m president and CEO of the Sustainable Forestry Initiative, and SFI’s mission is to advance sustainability through forest focused collaborations. We’re an independent nonprofit charitable organization that sets sustainable forest management standards, promotes responsible procurement, advances conservation collaboration, community engagement, and we help a diversity of youth engage in forest literacy and skills to to pursue green jobs through Project Learning Tree. In other words, we’re focused on making better choices for people and the planet.
I’ve dedicated my entire career to forests, so you might think to call me a tree hugger. But in fact, I’m a forest hugger. A tree hugger generally doesn’t want to see a tree harvested. Whereas a forest hugger sees trees being harvested, as part of a larger set of life saving, and life sustaining values. Forests purify the air we breathe, they clean the water that we drink, they provide habitat for animals, and they sustain communities. They provide products from a renewable resource for a circular economy.
I’m pleased at how much we as a society have collectively come to care about our forests, responsible and efficient use of forest products and recycling. We increasingly understand the values of forests, and that caring for the planet and our natural resources impacts current and future generations. We have initiatives like 1T.org to plant a trillion trees. But we’re also in a unique time. What a year and a half we’ve had with COVID, we more than ever understand that the choices we make every single day make a difference to our shared existence. We better understand the notion of belonging together on a shared planet with finite resources. Another thing we learned during COVID is that our health and well being depend on connection with others, and connection with nature. People have found sanctuary and for us and to spend time safely with family and friends to destress and to unplug. People care so much about forests yet they might not realize that caring for forests includes responsible harvesting, that can keep forests healthy, while providing us with products that improve our quality of life. Beautiful wood decks, books or, or tissue products. Remember how important they were to all of us during the pandemic. And remember the boxes that appear at our front doors with products that we depend on every single day for our quality of life delivered to us in a safe way. Let’s not forget the forest based PPE, including masks and gowns, that protected protected all of us during this pandemic. There’s a reason why the forest sector was deemed to be a critical or essential infrastructure during COVID in Canada and the US. Forest products are key to our survival.
I hear it all the time “I saved a tree I didn’t print this,” or “I saved the tree I read an e-book instead of an actual book.” There’s nothing wrong with doing those things. But it’s just important to know that you didn’t save a forest doing those things. Forests are a renewable resource. And if they are not valued as a renewable resource, then they might get converted to something else that isn’t renewable.
So how do we move from feeling guilty about the use of forest products to feeling proud about using a product from a renewable resource that is sustainably managed using recycled and often recyclable products, all the while contributing to a circular economy? It usually begins when people understand the distinction between deforestation, the permanent loss of forests, and responsible forestry, this sustainable cycle of harvesting and regeneration while sustaining other values as well and communities. It’s an important distinction to understand because many large corporations are making zero deforestation commitments. And if they think that avoiding Forest products is part of the solution, there could be unintended consequences of that. The consequence could be the conversion of forest to non-forest uses that do not have those renewable and life saving qualities. They could be overlooked as a viable solution to solving for climate change. They could be overlooked for an alternative solution to solving non-biodegradable ocean plastics and other non-renewable products.
Since we can’t be all together for this P&G Signal event, I’m going to ask each of you to use your imagination. Pretend we’re in a room with 1000 people, each representing a tree in a forest, and 10 of you get up to leave for a coffee. Now while we’re sad to see you go, we know that 10 people can come in and take your place, and even more will come in for standing room only at the back. That is the cycle of responsible forestry, for every tree harvested another tree replaces it and sometimes even more trees are planted or regenerated than harvested. In fact, SFI-certified organizations according to audit reports reforest 38% more trees than what they harvested. In other words, for every 100 Trees harvested by SFI-certified organizations in 2020, 138 trees were replanted or naturally regenerated. On land certified to the standard, less than 1% of the trees in that forest are harvested each year. Contrast that with nearly 3% of trees that are lost to insect, forest fires and disease.
But it’s not just about replacing as many or even more trees in the forest than we’ve harvested, it’s about managing it sustainably for a variety of important values so that they are maintained over the long term. Managed forests can store massive amounts of carbon, they can filter water, clean the air and provide animals, like birds, safe habitat, and also sustain communities. And they provide green jobs. Third-party forest certification helps people know where a product is sourced from, and that it comes from a sustainably managed forests. That’s why buying certified products actually matter. Forest certification standards, like SFI, have measures in place to avoid deforestation illegal logging, but that’s a low bar. More importantly, these standards promote more good things, helping address climate change, how to recover species, and they promote sustainable communities and a circular economy.
Now for a moment, imagine 1000 people again, each representing a tree in a forest. But this time, everyone was forced to leave. Perhaps some of you lost your seats if they were turned into a strip mall. Others a strip mine, others a cattle ranch and others to a big black box store with rows and rows of cars instead of rows and rows of trees, asphalt as the last rotation. That is deforestation. That is the total and permanent loss of forests. And that is a great, great concern. Now why does this happen? It can happen because the forest isn’t valued. Everyone was so busy saving a tree they forgot they could lose the forest. If the forest isn’t valued, and an institution and investor, an organization or individual that owns or manages that forest, may want to get a return on that investment and be able to sell some of that wood. But if they can’t do that, and they find an alternative use that they deem has a higher return on investment that isn’t renewable and doesn’t necessarily have those life saving qualities, we can lose our forests and we can lose the clean air clean water, sustainable communities and green jobs in a renewable resource that goes along with them.
I asked you has anyone ever thought to save a farm by not buying a farmer’s produce? No. That’s a surefire way to lose the farm and all the food it provides. The same applies to forests. If you want to save a forest and think not buying sustainably-sourced wood products does that you’re inviting another use or a non-renewable resource to take its place?
While we all hope for robust ecosystem services markets to provide additional forms of revenue for forest owners, that isn’t nearly enough revenue to sustain a forest, not to mention harvesting forests, keeping forests thriving and healthy. That has many other benefits, like reducing the likelihood of catastrophic wildfire, insect and disease infestation.
Harvesting forests, and ultimately managing them sustainably is a solution to climate change. That’s why in the last revision to our SFI standards, we’ve indicated climate smart forestry objectives. I remember years ago listening to Richard Branson, CEO of Virgin at Fortune Brainstorm Green, and he said, “I’m gonna give $25 million to the individual organization that develops this huge carbon sucking machine and takes all of that carbon out of the atmosphere.” And I thought to myself, “I should win that prize. I know what that innovation is. It’s the forest that is the huge carbon sucking machine, as well as the products that come from them, those solid wood products that store carbon.” When a tree is harvested, carbon continues to be stored in that solid wood product. So by planting and growing trees, you’re sequestering carbon in the forest. By harvesting your product, more carbon is sequestered in that product. By the way, pulp and paper and packaging products come from recycled fiber and the efficient use of the whole tree, often from chips and other residuals that are left after saw milling a big solid wood product, or from thinning or harvesting of forests to keep it healthy. These products are important part and they’re part of the circular economy. They are recycled and recyclable. In fact, two thirds of the paper used in the US is recycled, and it’s used to make sustainable paper and packaging products people use every day.
But some of the folks leading innovative solutions to climate change are architects and builders. They understand very well that building with wood is a sustainable solution in a carbon intensive building industry as well. Mass timber is a prefabricated large, solid engineered wood product, and it’s as strong as traditional building materials such as steel and concrete. Yet these wood products store carbon and are renewable. When you walk into a beautiful wood building, you are getting the benefits of bringing nature indoors, including reducing stress, improving cognitive function, and creativity. You’re accelerating healing and fostering an overall sense of well being, you are also interacting with a large carbon storage device. Sustainably managed forests and the products made from them store almost 15% of all annual US carbon dioxide emissions. SFI-certified forests alone store 235 million metric tons of carbon, the equivalent of taking 50 million gas-powered cars off the road any year.
Sustainable Forest Management can include the careful use of harvesting and prescribed and natural fire to keep a forest healthy. Unmanaged forests can have an incredible amount of dead dying and decaying trees and unharvested forests can be a tinderbox with loads of dead wood and fuel on the ground, waiting for catastrophe to strike, with hotter weather, with climate change. One of the most evident impacts of climate change is the increase in the intensity of catastrophic wildfire. In 2020, about 10 million acres burned in the US, about the size of Maryland. Catastrophic wildfire generates negative environmental and economic impacts, ranging from greenhouse gas emissions to lost economic value. It’s also important to know that professionally managed forests are more climate and fire resilient and produce multiple benefits that are simply less likely to go up in smoke and greenhouse gas emissions. That’s why we’ve created a fire resiliency and awareness requirement in our standard.
Forest fires also negatively affect water quality. Sustainably managed forests also maintain and purify our clean water sources. If we took all the streams on SFI-certified lands in the United in the United States, they could wrap around the Earth ten times. So if you buy a forest product, we still have forests, we are hugging a forest we are keeping the watersheds that are so critical to treat clean drinking water supplies, and to fish habitat, recreation and to sustaining communities. Strip mines and strip malls and urban sprawl do not provide the natural green infrastructure benefits that forest provide. What you buy and sell matters. It’s not just the Sustainable Forestry Initiative that does great work. There are many other forest certification standards around the world like PFC, SFP, SFI and the Forest Stewardship Council. By looking for a label that that forest product is certified, you are choosing products from a responsibly managed forests. That’s a precious gift. So by looking for a forest certification label, you know you’re making a sound choice. Just don’t forget to reuse and recycle. Saying yes to well-managed forests and the products derived from them means you are making better choices for people on the planet. You are a forest hugger. Thank you.
For all its potential to help heal the earth, unfortunately, recycling is broken. One of the biggest bottlenecks in the system happens in a place most of us don’t spend much time thinking about: The recycling and reclaiming center.
Every year we generate billions of tons of waste, and only a very small percentage is recycled. Just 6% of the 40 million tons of plastic waste made it through the recycling process in the U.S. in 2021. Our current systemfaces numerous challenges, including the fact that recycling centers don’t have the proper technology to sort materials that are recyclable from those that are not. According to a recent Greenpeace report, plastic is “virtually impossible to sort for recycling.”
And if that plastic can’t be sorted, it can’t be recycled.
For P&G, “impossible” is just a good challenge. The company has ambitious ESG goals that require that 100% of the company’s consumer packaging will be designed to be recyclable or reusable.
Enter Holy Grail 2.0. This P&G collaborative project has been in development since 2016, and focuses on improving efficiency in the recycling process by embedding a unique digital watermark onto each product. This watermark is around the size of a postage stamp and applied directly on the packaging’s label or embossed into the plastic itself. Invisible to the eye, the mark can be detected by high-resolution cameras which will allow for better tracking and sorting of plastic packaging, making it easier to identify which materials are recyclable and which are not. The joint project is a significant part of P&G’s ESG goals around climate and waste.
Recycling through the Holy Grail scanner Credit: AIM/European Brands Association
Sorting out the problem
Gian De Belder founded the Holy Grail program in 2016 out of a personal frustration with the way sorting systems worked. “I basically found out that a lot of our packaging wasn’t going in the right direction,” says De Belder, Procter & Gamble’s technical director for the company’s R&D Packaging Sustainability group. That’s when he discovered that even if we’ve dropped our used packaging into the right bin, those materials won’t get back into the system unless they’ve been properly sorted and processed.
“If we can crack this bottleneck then obviously we do have much more [effective recycling] and higher recycling rates in general,” he says.
It’s not quite as easy as it sounds. “One big problem is deciphering between the different types of plastic,” says Rachel Zipperian, who leads sustainability and citizenship at P&G. “If you have polypropylene or if you have polyethylene, they have to be separated before they can go to different reclaimers, and different recycling processes.”
When this process fails, our waste isn’t being recycled, or at least not in the most efficient and environmentally responsible way it could be.
The other significant challenge is that recycling centers operate independently with different standards and technologies. “Some places are more invested in technology than others. There are optical sorters and other different things that exist, but [digital watermarking] is a way to get the sorting done in a more precise way,” she says.
A concept of the Holy Grail digital watermarking Credit: AIM/European Brands Association
Making the sorting process more uniform will require systemic change, says De Belder. What we’ve been doing for the last 30 to 50 years no longer works. “In general, the waste industry is still very analog. It’s not really digitalized at all. And that’s the key.”
How digital watermarking works
Digital watermarks are unique digital identifiers for plastics and other recyclables that can be as small as a postage stamp and are embedded in the design of the packaging. The watermark contains information about the type of plastic used in the packaging, as well as any other relevant data that can help with the sorting process. These watermarks are like QR codes that allow the materials to be tracked throughout the entire recycling process by a camera-based sorting system. Cameras and other sorting devices can then be programmed to pick up these watermarks to sort waste correctly and simplify the process.
Essentially, these digital watermarks are there to tell us a story—what the product is made of, whether it’s plastic or some other material. If it is plastic, what kind of plastic? What kind of colorants does it contain? Can items with these colorants be recycled or not? And can they be recycled with other recyclable materials or do they need to be separated? If all this information were contained in a digital watermark that could be read by a sensor at a sorting center, the results would eventually lead to higher recycling rates.
“If nothing happens in terms of digitalization of the waste industry, the best estimate in terms of recycling rates for household packaging is that we’re going to reach 45% by 2030,” De Belder warns. But, he argues, the successful implementation of digital watermarking could increase that number by a factor of 10-14 percentage points.
How’s it going?
As the world continues to face growing environmental challenges, it’s becoming increasingly important to find innovative solutions to these problems, and digital watermarking is one such solution that has the potential to make a real difference in the fight against waste and pollution. But it’s a long road.
At the end of 2021 Holy Grail 2.0 had developed a functional prototype able to detect and separate packaging from packaging waste and allowed for category-specific sorting. By the end of 2022, the prototype was tested for speed, accuracy, and detection efficiency.
The project is currently in its third phase which involves deploying the prototype ina large-scale pilot in a commercial sorting or recycling facility, first in France and then later in Germany. In this phase, consumers will be able to buy on-shelf products with digitally watermarked packaging, which will enter the waste stream after consumption. The plan is to go live with this project within the calendar year 2024.
A joint effort
In order for the project to be successful, all companies need to be committed to using digital watermarking on packaging. While the cost for a manufacturer to be part of the Holy Grail 2.0 project is not publicly disclosed, it has been a collaborative effort from the start, involving P&G,, recycling industry stakeholders, research organizations, and other consumer goods companies, including Nestle, PepsiCo, and Unilever.
“Collaboration is key,” says Tracey Long, Director of Scientific Communications at P&G. She acknowledges the challenges in partnering with all the various stakeholders across the value chain, but also acknowledges the necessity of the project to fix our broken recycling system. “That’s the critical difference on this one,” she says. “This is not something that we do just for us…It’s a team sport.”
By Arianna Huffington
Welcome to the Human Energy Revolution. We’re in a period of profound transformation. Everything about the way we work, and the place of work in our lives, is being questioned, challenged and redefined. As old norms and assumptions fall away, the Human Energy Revolution has the potential to be just as consequential as the potential to be just as consequential as the Scientific Revolution of the 16th and 17th centuries.
Since the second century, Ptolemy’s theory that the sun revolves around the earth had been dominant. Then, in 1543, Copernicus published his revolutionary theory that the earth actually revolves around the sun. Today the Human Energy Revolution is replacing a model of life and work that dates back to the Industrial Revolution when we assumed that life revolved around work.The goal was to minimize downtime. All time not spent sleeping — and in fact, much of the time that should have been spent sleeping — was just more time to be monetized and colonized. It was a way of working that didn’t just result in burnout, it celebrated burnout. And it was a precursor to our own modern version of hustle culture.” But our lives are not meant to revolve around work.
The Human Energy Revolution is about acknowledging the truth that life should be centered around our full humanity, which includes work but also includes nurturing our health and well-being, our relationships, our capacity for wonder and joy andfor giving back. When our lives revolve around our full humanity, we’re able to fulfill our fundamental need to connect not just to ourselves but to something larger than ourselves.
We can see the breakdowns of the era we’re leaving behind in the Great Resignation, in the trend of Quiet Quitting, and in the fact that, according to Gallup, seven out ten people globally are struggling with mental health issues. While the breakdowns are all around us, the breakthroughs are less obvious. But in times of enormous cultural transformation, they seldom are. People living through the Renaissance weren’t exactly going around patting each other on the back saying, “wow, isn’t it amazing to be living through the Renaissance?”
In the same way Hemingway wrote in The Sun Also Rises that bankruptcy happens “gradually, then suddenly,” the work-centric model of life was gradually breaking down before the pandemic but the full rejection of a burnout-fueled work culture suddenly took off during the pandemic. When so much about our daily lives and routines changed, we also got a glimpse of a life that could be more aligned with our humanity.
But rejecting hustle culture and burnout are just the first steps. We can’t just toss out an old, outdated theory. We have to adopt a new way of living that affirms our full humanity and what we need to thrive.Much of the conversation around Quiet Quitting has been reduced to a false binary — the idea that our only two choices are a lack of engagement in our jobs or burnout. There’s a third alternative,based on the truth that we can be engaged by our work without being defined by it. We need a science-based mindset shift which acknowledges that we’re more productive and more creative when we’re recharged. We can see this mindset shift in elite athletes. And the science connecting recovery and peak performance is no less true for the rest of us. It’s not about chilling out under a mango tree or giving up on our ambitions but redefining success and working smarter and more sustainably on a foundation of well-being.
The shift isn’t going to be immediate.It’s going to take a while to reorient our thinking about work and put our humanity at the center. But we can see it emerging.
People are expressing their desire for a new way of living and working in their own individual ways. But what they all add up to is a collective longing to stop living in the shallows, which is where we’re confined when our full identity is reduced to our work. Only by putting our humanity at the center can we truly thrive. That’s the essence of the Human Energy Revolution.
Of all classes I took in high school history was probably my least favorite. I wanted to be an engineer. I was eager to create the future and not revisit the past. But over the years I learned a valuable lesson that all significant innovation is rooted in a long and often interesting history. For example, the ‘1G’ ancestor of our current 5G mobile phones was launched in 1979. Univac, the first commercial computer, dates back to 1951. The impressive James Webb space telescope is an offspring of the OAO-2 launched in 1968. Churchill once said ‘The longer you can look back, the farther you can look forward.’ The history lesson of innovation is that it is a long game.
In this Signal360 issue we have several articles focused on CO2 reduction, the main source of climate change. We collectively produce more than 37 billion tons of it, up from 15.5 billion tons 50 in 1971. The problem with CO2 is that it hangs around our planet and traps heat that would otherwise escape. That affects the delicate balance of our environmental ecosystem. There are two ‘simple’ solutions: either take CO2 out of the air (carbon capture) and/or produce less of it. Both are a rich field for ‘long game’ innovations.
Carbon capturing technologies have existed since the early 70’s. Oddly enough its main use was to enhance oil extraction. Technology innovation to capture carbon has progressed significantly, as has the business model to support it. Icelandic company Climeworks intends to make carbon capture a for-profit business. While the numbers are not anywhere near the CO2 reduction we need, history shows that breakthrough innovations always start small.
The other way to address CO2 reduction is by producing less of it. That’s where all of us have a role to play, especially by using less energy. But the hard truth is that people don’t like the trade-offs that come with this. We all want to keep our homes warm, go places to see people, and wear clean and fresh clothes. We’ve been taught that it takes warm or hot water for a washing machine to do its work properly. P&G Scientist Todd Cline explains how Tide Coldwater can reduce total CO2 emissions of washing clothes by over 70%. The challenge is to convince people to adjust the temperature setting on their washer.
Another under-appreciated source of CO2 emissions is all the computing power we use to write email, watch videos, and connect with each other. Increasingly this is provided through data centers somewhere around the world that we access through the ‘cloud’. It is estimated that data centers are responsible for 2% of CO2 emissions, nearly as much as aviation (2.5%). The automation of advertising is using a good part of this computing power. Brian O’Kelley, an ad tech industry luminary, has founded Scope3, a company focused on simplifying ad tech that will not only reduce computing power but also create a better advertising experience.
Many innovations don’t make money in their first iterations. While search engines existed well before Google, there was no proven business model at that time. The rise of Google as a front door to the internet, combined with a sophisticated search advertising business model, exploded its revenue over the years. Last year search advertising represented over 50% of Google’s $280 billion in revenue. With so much at stake, the arrival of a next generation of search with ChatGPT has many experts, including John Battelle, wondering how it will impact the business of search.
Technology progress, changing behaviors, and business models are three factors that drive how innovations evolve over time. Another factor is how innovators learn from history. One reason that P&G keeps a dedicated Archives space and staff for people to learn from previous generations. It often serves innovation teams to take a look back in history to learn and get inspired to invent the future. Another company that treasures its history is Lego. At Signal 2022 Lego’s CMO Julia Goldindeclared that ‘Creativity is the essential 21st century skill,’ which the people at Lego have practiced for over 90 years.
Even though innovators are eager to pursue the future they should also be explorers of history. Not only does the past hold many interesting stories, it also opens the door to better ideas to pursue. Innovation is a long game, with many stops on the journey.
Stan Joosten & John Battelle,
Editors-In-Chief, Signal360 / Co-founders, Signal P&G
It’s rare that the marketing industry has a chance to ask such a blank-canvas question, but the rapid acceptance of AI-driven chat experiences likeChatGPT presents just such an opportunity. And with both Microsoft and Google planning tolaunch at-scale versions of the technology in coming months, it’s a question every marketer should be pondering.
Innovations in the media business regularly pair with the emergence of new technologies — radio in the 1920s, network television in the 1950s, the world wide web in the 1990s, social media in the early part of this century. But while new media formats drive new ad formats, the most powerful and disruptive shifts in the media business are driven by rare, complicated and interconnected technological forces that build over decades, then break out in what feels like an instant.
“Generative artificial intelligence” — ChatGPT and its kin — is having such a moment. Over the past 30 years, I can think of just one similar disruption: Search. That gave us Google, the largest media company in history. More than a trillion dollars in market cap later, search remains the world’s most powerful digital marketing channel.
Search not only augured a fundamentally new interface to knowledge, it also upended decades of advertising norms. Instead of paying by impression, you paid for an action taken by a prospective customer — a click. Search allowed for unprecedented targeting, unprecedented experimentation, and unprecedented results. Within a decade, every marketer — from the smallest retailer to the largest consumer packaged goods company – became a search marketer.
So what role might marketers play in the generative AI revolution?
More than likely, they’ll help pay for it. When Google launched its eponymous search engine back in 1998, no one could have predicted that a highly disruptive, multi-hundred-billion dollar market would emerge from an ad unit built on the back of the humble blue link. Two years and ten billion queries later, Google struck gold with AdWords.
OpenAI’s ChatGPT is following an eerily similar trajectory. Launched just five months ago, it’s quickly amassedmore than 100 million users and a torrent of punditry claiming that the “conversational interface” is the future of, well, everything.
This puts Google in a classic “innovator’s dilemma.” The company must protect its market share, but it’s facing a disruptive technology that it helped create (Google invented the “T” in “ChatGPT”). Google must thread the needle of its legacy cash cow — AdWords — with whatever product emerges from AI-driven search. So farGoogle’s announced Bard, an upcoming (and for now, experimental) chatbot similar to ChatGPT. As I’vewritten before, it will be difficult for Google to disrupt itself, but if any company is well positioned to succeed, it’s the company that helped invent AI and brought modern search to billions of people.
Over the course of the past few weeks I’ve spoken to search and marketing executives, deep thinkers in tech and media, and leaders at Google and Microsoft. Our conversations all started with “What will the ads look like?” And while their answers aren’t definitive, some patterns certainly emerged.
Let’s start with the big players — Google and Microsoft. I reached out to both, and neither is officially commenting on how they might monetize their new offerings. “Google search has long incorporated LLMs (large language models, a staple of artificial intelligence) to better hone queries and answers…with search ads appearing alongside them,” a Google spokesperson said to me, insinuating that when Google does launch monetization for Bard or similar AI tools, the engine behind AdWords will be part of the mix. That’s to be expected, but it doesn’t tell us how the actual ad experience might change for a consumer engaged with Google’s chatbots. Alas, Google remains tight lipped: “We’re way too early to be speculating about the consumer use case,” the spokesperson said. No doubt scores of product managers at Google are hard at work on the problem, but none are talking to the press quite yet.
Microsoft has also remained quiet, at least to reporters. But anarticle earlier this year claimed Microsoft is telling major ad agencies that its Bing Chat will incorporate traditional paid links in the results. This would be step one — forcing the old model into the new. But it doesn’t take advantage of the new consumer behaviors inherent in chat-based search. As I wrotelast month:
The consumer experience of ChatGPT, Google Bard, or Bing Chat is fundamentally distinct from how search works today. Traditional search’s prime directive is to convert the user as quickly as possible, and to deliver revenue as quickly as possible. There’s a reason a search servicenever pops up a refining dialog box to ask “Wait, did you mean….?” Roughly 50 percent of search users will abandon a query if they don’t get the right result after just one prompt.
The interface model for ChatGPT-like services is quite literally the opposite of this approach. Consumers approach the service in conversational mode, honing queries and exploring concepts through informal dialog. The goal isn’t to immediately take action — it’s to find something out. The big shift is that we’re literally talking to the computer, and the damn thing is actually making sense when it talks back to us. That changes everything — not only what we say (the queries), but also what we expect when we approach the service in the first place.
Beyond boring old blue links, here are four additional ways chat-driven search might incorporate marketing:
The affiliate model. If you work with Google’s Maps or Flights features, you already understand this approach. The platform makes money when a searcher converts from exploring a high value session (“compare the best luxury electric cars,” “give me a five day itinerary for a trip to Sydney,” “is it a good time to refinance my home?”). The chatbot will deliver a summary, and when the user decides it’s time to move down the funnel toward purchase, Google or Microsoft gets paid for the lead. This model is already at scale all around the internet, but could prove highly lucrative given how rich the context can be in a chat-based search session. The platforms will have to be careful about when they insert these links and whether they interfere with a high quality experience, saysJim Lecinski, a professor of marketing at Northwestern’s Kellogg School of Business (and a former Googler). “The reason I like the AI responses is there are no ads in the middle of that text,” he told me. “But in some instances there may be a case where the ad itself is the right content.”
The subscription. OpenAI alreadyoffers a subscription service to consumers for $20 a month, with premium features and faster response times. It’s reasonable to assume these services will be advertising free. But as with any subscription service, the vast majority of us won’t pay. That’s an opportunity: Sponsors could underwrite the premium version on behalf of consumers, in exchange for the right to collect an email, show a short video, or connect in some other way. This model could be enriched by the platform’s rich data on each user. Imagine, for example, McDonald’s underwriting free chat sessions for consumers who live in the delivery radius of participating franchises. Audi or BMW might be interested in underwriting sessions for segments of consumers identified as luxury auto intenders.
The underwritten experience. This sponsored subscription idea brings us to what I like to call the “NPR” model. If you’re listened to public radio, you’ve heard the presenter thank brands which have underwritten various types of reporting – GM might underwrite coverage of the environment, or P&G coverage of healthcare. Imagine something similar, but at scale and in depth: Brands might compete in an auction to be associated with specific contexts of chat sessions, similar to how brands once competed to be in highly contextual sections of popular magazines. This would of course require brand-friendly ad units – the equivalent of full page ads — but if consumers are getting value from the service, I’d wager they’d be willing to tolerate brands being part of the experience, just as we did with magazines back in the day. The trick will be to find “native” executions of brand messaging — an ad unit that adds value and is appropriately contextual to the conversation that’s happening on the service. It’d be a creative and media buying challenge, but isn’t that what marketers are supposed to be good at?
The branded agent. Chat-based search will certainly evolve beyond the rather flat call-and-response approach we’ve all been trying over the past few months, and when it does, intelligent agents will likely start to emerge. These agents are software programs that consumers empower to perform specific tasks such as scanning marketplaces for specific deals, monitoring health sites for information that might matter to a particular consumer, or any of a million other ongoing questions that will emerge as that magic wheel of technology, possibility, and entrepreneurial insight starts to spin. Smart brands will build branded AI agents that offer useful services to their consumers — Nestle might build an agent that leverages ChatGPT to deliver insights and tips around nutrition, for example, or Pampers could do the same for parenting. These kinds of programs already exist in the realm of apps and content marketing, but the added dimension of conversational interface could be a game changer, in particular for customer service and sales-based channels.
Of course, beyond ad units, platforms like OpenAI, Microsoft, Google and others will certainly reap untold petabytes of valuable new data about how we use AI, and will be tempted to use that data to create any number of new marketing products that benefit the platforms, but not the consumer or the advertisers that are paying for it all. We’ve been down that road before, and Kellogg’s Lecinski echoed the advice of many I spoke with about this emerging medium. With AI, he said, “we will certainly find new customer behaviors that bring new ways to monetize.” He then paused, reflecting on the state of digital advertising to date, and added: “Maybe this time we’ll get it right.”
