Wednesday, July 30, 2014

BIG’s Blog: Who is Clayton Christensen? Part 1

Today we're publishing another "blast from the past" that, although is relevant for all of you, will be especially helpful for those currently taking our online course.  Enjoy!

BIG’s Blog: Who is Clayton Christensen? Part 1 (March 31, 2014)

Over the last several years in both articles and blogs outside the nonprofit fundraising space, the references to Clayton Christensen are becoming more and more common. Yet virtually none of the 30 or so nonprofit fundraisers I have talked to recently have heard the name . . . hence the Two Part subject for this and the next blog.

Clayton Christensen, or, more correctly, Professor Clayton Christensen wrote a book that was first published in 1996 called The Innovator’s Dilemma.

The major theme of the book is that, from time to time, innovations (technological or otherwise) will arise. These innovations may have the possibility of displacing the existing product or business model of a company or even an industry.

When this happens, leaders face a dilemma because the new innovation never comes fully birthed and ready to displace the existing way of doing business. Therefore, adopting or incorporating the innovation into the business brings with it significant risk of disrupting current operations. However, it is also equally risky to the leader who sees the inherent value of the innovation to lose much long-term by not pursuing the innovation.

The leader thus faces a dilemma based upon this new innovation. The key decision then is how to incorporate the new innovation into the organization to minimize the disruption of current operations, yet allow the new innovation to find its feet so it can grow and achieve its potential.

Examples of both successful adoption and failed adoption are illustrated in the stories of Dayton Hudson Corporation and Eastman Kodak.

Dayton Hudson Corp., based in Minneapolis, was a major regional department store chain. In the late 1950s and early 1960s, a new retail innovation called “discount retailing” had come on the scene and had the potential to significantly impact department stores who were, at the time, the dominant form of retail with names like JC Penney and Sears being at the forefront.

The department store’s business model was to turn inventory twice a year with an average 40% margin. Discount retailing’s innovation was to turn their inventory eight times a year with an average 20% margin.

Dayton Hudson’s management decided that discount retailing was such a threat that if they did not react, their ability to grow as a company could be significantly affected. Rather than disrupt their existing department store business model, they chose to set up a separate operation with its own management team and business plan, and even created a separate name for this new division. Today we know that company as Target. Target has been so successful as the dominant profit generator for Dayton Hudson that the corporation officially changed its name to Target Corporation in 2000.

Eastman Kodak was the story of corporate success from its founding through the end of the 20th century. Kodak was arguably one of the most successful corporations in American history, and through the end of the 20th century dominated photography, owning 89% of the market for film in the United States alone.

In 1975, however, Kodak’s own engineers developed the breakthrough technology innovation for digital photography. Kodak’s CEO at the time, George Fisher, understood the implications of this innovation and the impact it would have on their traditional film business. He set a decade-long plan in place to shift the entire company to digital, even reaching out to young technology companies Microsoft and Apple in distribution partnerships. Yet Mr. Fisher and his successor could not overcome internal resistance to the plan since the film business was still such a dominant product and produced massive profits. Below the level of the CEO, resistance to shifting stifled digital product development. Digital photography product innovation was left to outside companies, and with the shift from analogue to digital post-2000, Kodak’s film business collapsed and are today in bankruptcy proceedings.


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Monday, July 28, 2014

BIG’s Blog: Big Data is Great, but…

Life doesn’t come down to charts, spreadsheets, and data...but experiences.

I can almost hear the cheers of the age fifty-and-older crowd of long-tenured fundraisers whose jobs never included data crunching and analytics in the good old days.

Of course, crunching data is about looking for trends and actionable information. For instance, if you see that 50% of your current donors giving by direct mail always give in the same two months of the year, why are you mailing them another eight times? They have clearly demonstrated a “trend” that should be actionable. This is where charts, spreadsheets, and data can actually save you a lot of money.

Unlike your brethren in the commercial world, fundraisers aren’t selling a product. It is about engaging people in the heart or soul of your mission … the experience.

The mission is the experience.

It is about, first and foremost, making people feel your mission.

What exactly are Geico’s commercials selling? And Flo from Progressive Insurance, she really doesn’t talk much about insurance, does she?  

It’s about connecting a positive experience to their brand of insurance.

And after the Geico and Progressive ads run on TV, where do they go?

Right … YouTube! Why do you suppose they put them on YouTube?

So what about charitable organizations?

Ah, the obvious … sharing the experience of your mission in a way that is real, engaging, and, many times, connects to people.  

For sixty or eighty years, your organization has been sharing those experiences via direct mail appeals.

But direct mail appeals are one-dimensional marketing mechanisms in the increasingly multi-dimensional world dominated by the Internet.

Sharing experiences is what the Internet is really good at, plus that is where the people are.


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Friday, July 25, 2014

BIG’s Blog: “It’s Online S----d”

Struggling fundraisers are seeing their historical workhorse (direct mail appeals) begin to decline in effectiveness. But the nonprofit direct mail industry is still billions of dollars…that’s billion with a “B.” But for fundraisers, costs keep rising, responses keep falling and margins are compressing. You mail more to get less and less. Last year the American Cancer Society drastically scaled back their mail, including ending acquisition mailings, saying, in effect, we cannot count on direct mail to acquire our future donors.

So what does this mean?

It means you change your perspective on your direct mail fundraising program…and quickly!

Do you know how to do that?

Get up…go on…get up from your chair or couch and walk across the room.

Now, you are looking at your immediate world from a slightly different perspective.  

From this new perspective, admit to yourself…even saying out loud …“direct mail is not our future.”

There…you’ve done it.

You have now joined the growing group of large (think American Cancer Society) and small (think Our Lady of Angels Association) and all sizes of nonprofit organizations and charities in between in admitting your organization’s future revenue growth will not come from direct mail.

Now what?

Two things…

First, understand direct mail isn’t going to go away tomorrow. But…something has changed. Now you are under no illusions that mail is your future. So rather than “living the fantasy” that direct mail will go on forever, you correctly shift your “thinking” and “planning” to…A) “managing the decline,” and B) “building for the future.”

Managing the Decline

How do you do that?

It revolves around analytics, but more on that another day.

Building for the Future

Second, so now you are managing the decline of your direct mail program to maximize excess revenue, but where is the growth? How do you grow new supporters and keep them donating?

Do you remember James Carville, the so-called Ragin’ Cajun who was Bill Clinton’s campaign manager when he first ran for president? When asked by the press about the centerpiece of their campaign platform, he famously said, “it's the economy stupid.”

So then, borrowing Carville’s lingo to answer the question “How do we generate new donors and increasing revenue without direct mail?” Or, stated another way, “What is our future?” The answer is, “it's online stupid!”


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Wednesday, July 23, 2014

BIG’s Blog: Follow the Money

When you want to know what is really happening, especially in the realms where people or businesses are choosing to spend their money … you follow the money.

One person’s actions are not necessarily representative, nor are they a statistically valid trend for a whole population. However, when we begin to compare our behaviors and habits today to five years ago, even we can see things are changing.

Five years ago (2009), I watched regular TV programming. Admittedly not as much as I used to, but still, I watched television at the regularly scheduled broadcast times. But also, five years ago I began to record some programs using my new DVR.

Today, other than a few big sporting events, with maybe the Oscars thrown in, I rarely watch live TV. In fact, since acquiring Netflix streaming three years ago, I have not watched but maybe two live shows on TV.

Am I so different from you?

Little by little, step by step, our behaviors and habits are changing when it comes to how we get information and entertainment. It never happens overnight, so we just gradually shift without even noticing it.

And what is at the heart of this change? That’s right, digital disruption.

So when people’s behaviors and habits begin to change based upon new digital online technologies like DVRs and Netflix, pretty soon businesses who depend on reaching people through advertising start to notice.

For years broadcast networks have seen their advertising decline as new alternatives like Netflix and, of course cable TV, began to dominate. A network broadcaster may only have one channel, but cable TV delivers them all.

But just last week, cutbacks lead by GM and Procter & Gamble saw the first big pullback in ad revenue for the crucial “upfront” of ad dollars committed to cable networks for the fall season.

And what are the advertisers shifting their marketing dollars to? You guessed it: digital media, including online video.

“Cable TV networks have been a bright spot in the overall TV ad business in recent years, taking ad dollars away from broadcasters as they have ramped up original programming and built loyal audiences. That momentum is stalling.”

Stalling? If my habits (and yours) are any indication, it will soon be in freefall!

So if the big boys are switching from “traditional” media to digital and online, what about you and your direct mail? There is nothing more “traditional” than direct mail.

And it isn’t that direct mail doesn’t still work in generating net revenue, but just like broadcast networks and now cable TV … it’s not what it used to be. The decline is already underway.

For fundraisers, digital and online fundraising must start generating significant revenue … and soon.

And you need to do it while you still have direct mail bringing in the dollars.

Drip, Drip, Drip.


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Monday, July 21, 2014

BIG’s Blog: Distant Thunder Portends Rain

It’s been a busy first half of the year! This week we are featuring a few of the "best-of-the-best blog posts” (as judged by reader’s reactions) that you might have missed. Enjoy!

BIG’s Blog: Distant Thunder Portends Rain (January 22, 2014)

Throughout the 1990s while I ran a database marketing company, our sole customer base consisted of the retail branch networks of large retail banking organizations (Chase, Bank of America, Wells Fargo). Electronic banking had been on the scene for a decade, but in the late 1990s its adoption really began to accelerate. To help our bank clients we would always put out predictions of trends we were seeing across the whole of our network of common bank clients to help them get a sense of what was coming. We found this was valuable since a trend that caught on in Indiana and California might take off in other markets as well.

One of those trends that I personally took ownership of (and had major economic implications for our banking clients) was the coming decline in the growth of printed checks by the bank’s retail customers as electronic banking caught on and gained momentum.

There were two major check printing companies, Deluxe Check and Harland, who together easily controlled 80%+ of the retail check business with banks.  I had a small team that tracked the slowing growth of check volume by these two companies in hopes of allowing us to validate to our clients the decline in checks that was surely coming. By the mid 1990s, year-over-year growth in printed checks for these two companies had slowed to the low single digits. In 1995, the growth was under 2%. This gave me the confidence to predict in my January 1996 prediction that check volume would fall for the first time. I felt I was on fairly safe ground.

In 1996, however, printed check volume rose 4.3% over 1995. Huh? 

Although I felt chastened, I could read the trend lines, and every subsequent year until I sold the company in 2000, I predicted that "this coming year" would see the expected drop-off in printed check volume. And every year up until 2000, check volume grew.

Though I sold my interest in the company and moved on to another industry, I kept my eye on check volume.

In 2001 the worm turned, and for the first time in over 100 years, check volume declined, down 6% in 2001 over 2000. Then came the waterfall. Check volume, which, for the past decade had been growing by low double digits - but still growing - suddenly went into freefall. Off by 14% in 2002, then another 17% in 2003, and then I quit tracking it because my long-predicted decline had arrived.

The banks were fine. By this time they had long-seen the trend to electronic banking and had been building out their electronic banking infrastructure and downsizing their check-processing capacities. They were ready for this major shift.

The check printing companies? Well, that is another story. They clearly saw the shift coming and they knew the end of their check-printing gravy train was coming to an end. They tried to diversify and to date have had some success. Are they still printing checks in 2014? Of course, but every year their volume drops. These check companies are still scrambling to find the new growth business that will be their future. 

So why am I dredging up a story from my past?

Well, its because it really is an apt comparison to the fall-off of analog printing in general and direct mail (printed matter) in particular.

In fact, when I compare printed checks for banks being displaced by electronic banking, and printed direct mail appeal communications being displaced by online communications, I am struck by “the Internet” being the common thread. From the inception of the Internet in the 1990s, it has been disrupting industry after industry.

Recently The Agitator (another well-read blogger in the nonprofit fundraising space) played up the same post from AnalyticOnes I mentioned in Monday’s blog over three separate posts. That fact is quite remarkable for The Agitator. The post we were both focusing on is Unsustainable Trends (Part One and Two).

The implications contained in these two posts are not only the evidence of the coming fall-off in direct mail that so many have been predicting, but also show exactly why the fall-off is coming. Their conclusions are based on the data that AnalyticOnes has compiled in their work with nonprofit fundraisers . . . especially those with large direct mail programs.

Once you read these two posts and have digested the implications, you are left with two questions.

First, you now understand that it is about managing the decline of your direct mail program. Growth is coming to an end if it isn’t here already. How do you maximize and optimize your profitability as your program declines?

Second, what takes direct mail’s place?

My suggestion …

Call AnalyticOnes for the answer to the first question.

I think you know who to call for the second question.

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Friday, July 18, 2014

BIG’s Blog: Customized for You

It’s been a busy first half of the year! This week we are featuring a few of the "best-of-the-best blog posts” (as judged by reader’s reactions) that you might have missed. Enjoy!

BIG’s Blog: Customized for You (February 21, 2014)
There are few people alive today who are as consistently insightful in their analysis of the changing world around us (especially in the marketing realm) and as prolific in sharing their insights as Seth Godin.

Recently he wrote a blog entitled Done to us vs. things we do.

When I read the blog, I was stunned. His thoughts captured and encapsulated the emotional tug-of-war that many baby boomers face as they lead fundraising organizations today in a world that we personally enjoy but aren’t certain how to navigate professionally.

“Malaria, the atomic bomb, the McCarthy hearings, television’s ubiquity, the decay of the industrial base – these are mammoth changes, changes that came from all around us, changes we had to withstand.”

Seth is talking about changes that personally affected us. You and I could name other changes in our lives over the past 50 or 60 years that we had to endure. They were forced on us. For us in fundraising, we have recently had to endure changes that are ending the era of the printed word, and with it direct mail as well as the shrinking pool of supporters with a trusting nature of institutions. As Godin says, these are mammoth changes that we have to deal with whether we like them or not. They are forced on us. But then he switches gears and talks about us personally.

“Today, we’re personally faced with an entirely new kind of change – changes we can choose to make, the changes that are available to us as opposed to changes that are forced on us.”

From a personal perspective, we as customers are facing a widening world of choices. You don’t have one choice in a phone. You aren’t tied to one cable monopoly. We can shop online or at the mall. Walls are falling and choices are opening up. You have freedom and options.

“No one had to cajole you into living with the changes of the last fifty years, because here they were, like it or not. You had no choice. Today, most of the change – in media, in culture, in commerce – is there if you want it. You can choose to be a media company, a buyer, a seller. You can choose to go out on the long tail, choose to be weird, choose to enter the connection economy.”

Freedom and choice are becoming the watchwords of our new world. The consumer … and the donor … are now in charge, which has huge implications on how companies must treat their customers if they want to keep them. And for charities, which have long been organization-centered (read self-centered when it comes to being transparent and accountable), they, too, must become customer oriented. In other words, charities need to be what you would personally expect them to be.

“In many ways, this choice makes the change ever more difficult, doesn’t it? The future isn’t so much about absorbing or tolerating change, it’s about making change.”

That’s really it in a nutshell isn’t it? We all personally love the freedom and choice of our changing world because we can personally choose or not. It’s up to us. We have the choice.

But it also means that our organizations have to change to offer choices that are in line with the terms of the people who may want to connect with us … not just our terms.

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Wednesday, July 16, 2014

It’s been a busy first half of the year! This week we are featuring a few of the "best-of-the-best blog posts” (as judged by reader’s reactions) that you might have missed. Enjoy!

BIG’s Blog: Remember the Titans (February 17, 2014)

Every man (or woman) is a master of his own life. Abraham Lincoln said it slightly differently: “Every man owns his own face.” With very few exceptions, we own our own life. And this means that those of us in leadership positions also own the fate of the organizations, groups, or teams that we lead.

Most of us will never have in our personal lives the freedom and the power we enjoy as leaders . . . and we are loath to give up that power. Mother Angelica, the cloistered nun who built EWTN Global Catholic Network, once asked an audience why it is that we suffer aches and pains as we grow older. Her audience gave no response, so she answered her own question. “It’s because we are so powerful, it’s God’s way of keeping us humble.”

We prize humbleness in our leaders, don’t we? Because we intuitively understand that power is corrupting. I mean, seriously, when was the last time you remember a national leader “admitting” they made a mistake in a policy or action that they took? Oh, yes, there has been a steady stream of apologies and admissions of personal failure for sexcapades, especially from those in the highest offices in the land . . . but admissions of failed decisions that affect the lives of hundreds of thousands or millions? Nary a peep.

Humbleness is also when we face something overwhelmingly difficult and see failure beginning to set in … and we seek help.

Our usual reaction is to tough it out, thinking it is temporary and “things will turn around.” But what if they don’t turn around?

Sometimes we are lucky and we get to see this internal drama played out in art. And in seeing it in someone else, it challenges us.

There is that great scene in Remember the Titans where, in the final game for the state high school football championship, assistant coach Bill Youst (played by Will Patton) is the defensive coordinator and is getting his butt kicked by the opponent’s offense. Coach Youst tries every trick in his book, but nothing is working and the other team keeps scoring. Head coach Herman Boone (played by Denzel Washington) is riding him to get his defense to stop them from scoring.

Coach Youst was supposed to be the head coach of the Titans, but the school board wanted a black coach to lead the first integrated high school football team in Virginia in 1971. Coach Youst stayed on as assistant head coach and defensive coordinator because of his commitment to the players.

As his defense is getting beaten, coach Youst’s first response to coach Boone is, “you just focus on your offense.” But soon coach Youst has to admit to himself that he is out of ideas . . .  and with the game on the line, is it going to be about him or the team?

Head coach Boone had been a defensive coordinator in his previous job, but he respected coach Youst enough to let him make the calls … win or lose.  

In the end, coach Youst admits he is out of ideas and asks head coach Boone to run the defense. Coach Boone, to his surprise, switches roles and hands the offense to coach Youst. The switch works and they win the game.

I know … I know … Hollywood ending, right? But what is the turning point? When coach Youst admits he is out of ideas or when he humbles himself for the sake of the team?  

What has worked in fundraising for decades is shifting under your feet, even as you read this. This is big … very big. And no one person has all the right answers, especially as a 40, 50 or 60-something fundraising immigrant into the brave new digital online world.

But what you do have is the power to shift your future by seeking out help.

Remember the Titans … or, better yet, remember coach Youst!

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Monday, July 14, 2014

BIG’s Blog: You can never go back

It’s been a busy first half of the year! This week we are featuring a few of the "best-of-the-best blog posts” (as judged by reader’s reactions) that you might have missed. Enjoy!

BIG’s Blog: You can never go back (February 14th, 2014)

I take way too many arrows in my back about my position on direct mail because too many people A) don’t read my words, and B) don’t listen to what I actually say in my Webinars and speeches.

My position on direct mail is that direct mail … done correctly … is a fantastic vehicle to generate new donors and annual revenue.

I love the predictable, beautiful mathematics of direct marketing. You test . . . if all looks good, you up your quantity and test again . . . and if the numbers validate, you roll out. I have been a direct marketing professional for almost 40 years! And, yes, I still consult occasionally with nonprofit fundraisers in direct mail techniques.

That is my real position. Keep using it as long as it is working for you.

But …

The best days of direct mail are in the past. Some would say “way in the past.” For nonprofit fundraisers who use direct mail, the best I can surmise is that the last good year for all fundraising organizations was 2005. Since then some have still been able to make it work while other programs are failing fast.

With each passing year, the symptoms of decline become more obvious and acute.

The truth is, as much as I love direct mail marketing, you can never go back. Time marches on, and though I would love to turn back the clock to when direct mail fundraising was simple and profitable, its best days are in the past.

But just when you are ready to join the “club of the disrupted industries” like the music business (which has seen album sales tank for the tenth straight year), new voices are popping up, talking about how the Internet and digital technology can create a new music business model. New people are coming onto the music scene, and despite the talk of doom and gloom, they see the prospects for massive growth.

As I list some of the new ideas that are now being touted in the music business, I will connect the ideas from it to the fundraising industry where, by the way, I see massive growth.

1) Holistic, multifaceted online music services that tie together many of the individual music-related elements today (social, streaming, downloads, concert tickets etc.). I know most of you have heard of Spotify and Pandora for streaming music, but have you heard of Kickstarter or GiveMob for fundraising? These are the new acquisition tools of the online world. Coupled with other elements and technologies, they help you reach people faster.

2) Direct artist-to-fan and fan-to-fan engagement. When you send your direct mail to prospects or donors, is that a person-to-person connection? It used to be state-of-the-art 20 years ago, but now the Internet has changed the definition of connection. And as far as fan-to-fan connection in the music world, why do you think fans want to connect to each other? Could it be they share a passionate common bond with the artist and their music? How about your passionate supporters who share a common bond with the people and the mission of your organization? The tools exist to let your passionate supporters talk to each other. Why wouldn’t you do that?

3) The rise of music festivals fueled by social media. Just imagine what you could be doing with technology-driven engagement in offline (real life) and online connection. Music festivals are where fans come together to hear music. How about creating a live and virtual conference to re-ignite your supporters?

4) Younger players in the music ecosystem inherently understand that a multipronged, community-based business model of fan expansion and direct ongoing engagement is the new normal. Young and new start-up nonprofit charities are already all over this (this is part of our online e-learning Courses), and unless you don’t want a future, you had better be figuring out what they already know and are succeeding at. New start-up charities don’t have an arms-length relationship with their supporters and neither should you.

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