Is the Tipping Point Toast?

From Fast Company, by Clive Thompson

"Marketers spend a billion dollars a year targeting influentials. Duncan Watts says they're wasting their money.

Don't get Duncan Watts started on the Hush Puppies. "Oh, God," he groans when the subject comes up. "Not them." The Hush Puppies in question are the ones that kick off The Tipping Point, Malcolm Gladwell's best-seller about how trends work. As Gladwell tells it, the fuzzy footwear was a dying brand by late 1994--until a few New York hipsters brought it back from the brink. Other fashionistas followed suit, whereupon the cool kids copied them, the less-cool kids copied them, and so on, until, voilà! Within two years, sales of Hush Puppies had exploded by a stunning 5,000%, without a penny spent on advertising. All because, as Gladwell puts it, a tiny number of superinfluential types ("Twenty? Fifty? One hundred--at the most?") began wearing the shoes.

These tastemakers, Gladwell concluded, are the spark behind any successful trend. "What we are really saying," he writes, "is that in a given process or system, some people matter more than others." In modern marketing, this idea--that a tiny cadre of connected people triggers trends--is enormously seductive. It is the very premise of viral and word-of-mouth campaigns: Reach those rare, all-powerful folks, and you'll reach everyone else through them, basically for free.

Loosely, this is referred to as the Influentials theory, and while it has been a marketing touchstone for 50 years, it has recently reentered the mainstream imagination via thousands of marketing studies and a host of best-selling books. In addition to The Tipping Point, there was The Influentials, by marketing gurus Ed Keller and Jon Berry, as well as the gospel according to PR firms such as Burson-Marsteller, which claims "E-Fluentials" can "make or break a brand." According to MarketingVOX, an online marketing news journal, more than $1 billion is spent a year on word-of-mouth campaigns targeting Influentials, an amount growing at 36% a year, faster than any other part of marketing and advertising. That's on top of billions more in PR and ads leveled at the cognoscenti.

Yet, if you believe Watts, all that money and effort is being wasted. Because according to him, Influentials have no such effect. Indeed, they have no special role in trends at all.

In the past few years, Watts - a network-theory scientist who recently took a sabbatical from Columbia University and is now working for Yahoo - has performed a series of controversial, barn-burning experiments challenging the whole Influentials thesis. He has analyzed email patterns and found that highly connected people are not, in fact, crucial social hubs. He has written computer models of rumor spreading and found that your average slob is just as likely as a well-connected person to start a huge new trend. And last year, Watts demonstrated that even the breakout success of a hot new pop band might be nearly random. Any attempt to engineer success through Influentials, he argues, is almost certainly doomed to failure.

"It just doesn't work," Watts says, when I meet him at his gray cubicle at Yahoo Research in midtown Manhattan, which is unadorned except for a whiteboard crammed with equations. "A rare bunch of cool people just don't have that power. And when you test the way marketers say the world works, it falls apart. There's no there there."

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Leadership and Innovation

From the McKinsey Quarterly, by Joanna Barsh, Marla M. Capozzi, and Jonathan Davidson.

"Innovation has become a primary force driving the growth, performance, and valuation of companies. Our research reveals a wide gap between the aspirations of executives to innovate and their ability to execute.

Many companies make the mistake of trying to spur innovation by turning to unreliable best practices and to organizational structures and processes. Our research shows that executives who focus on stimulating and supporting innovation by their employees can promote and sustain it with the current talent and resources—and more effectively than they could by using other incentives.

Three approaches can help executives mount innovation efforts. First, senior management should actively support behavior that promotes innovation. Second, network analysis can identify where the capacity for innovation already exists within an organization and help it build more innovative networks. Finally, executives should seed innovative thinking by focusing on selected managers and projects."

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Net Work

Net Work, by Patti Anklam - a review by Mick

"If you have never picked up a book on networks, and how they impact everything we (organizationally) do - then pick this one up.

Since Walter Powell differentiated between "Hierarchies, Markets and Networks", and we all discovered that we are within 6 degrees of each other, networks have fascinated. Yet the understanding of how they work has only gradually become clearer in recent years.

Patti Anklam has written a thorough yet very clear book, leading the reader step by step through the science and the implications of modern network theory. Anklam almost makes a sales person's "pitch" for why you should take networks seriously. They can help speed knowledge transfer, boost innovation, help nurture alliances and drive quality. Why wouldn't we all take networks seriously?"

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Connecting employees to create value in investment banks

From the McKinsey Quarterly, by Vijay D’Silva and Osman N. Nalbantoglu

Record profits. Ever-larger deals. Relentless expansion into new geographies. In many ways we live in a golden age of investment banking and securities trading.

Yet many institutions find the going tough as clients demand - and increasingly expect - integrated services, including (among other things) advice, the raising of capital, and risk-management solutions. In this environment, banks often struggle to leverage the potential of their talented and highly compensated professionals. Many banks blame their size and complexity, the pace of work, and, above all, “silo thinking” for this problem. Opportunities to build on the success of a particular product in one territory are therefore often overlooked elsewhere, while sales teams serving specific clients largely ignore the possibility of cross-selling products from other groups.

Fortunately, help is at hand in the form of network-mapping tools that identify and encourage value-creating connections across organizations. Companies in a variety of sectors, from biotechnology to construction, have been using these well-established techniques to track and replicate high-performing networks, to help employees emulate the collaborative behavior of other colleagues, and to serve customers more effectively. But investment banks have only recently started to learn the power of that approach.

Banks should carefully tailor their use of such ideas to the industry’s context and circumstances. Collaboration is as hard as it is desirable in all knowledge-intensive businesses - and investment banking is a knowledge industry par excellence. Yet the rewards for looking beyond the organizational chart to unlock value can be considerable.

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