Building

Long Live the Funnel

Contrary to what you might have heard, rumors about the Marketing Funnel’s demise are greatly exaggerated.

The Funnel is alive and well. And it should be leveraged extensively by Marketers. It provides a consistent and universally understood (and somewhat accepted) framework. The funnel does come in a variety of shapes and sizes and colors – with different twists and turns. Despite this variety, few Marketers really leverage this powerful model.

The funnel enables Marketers to have an almost universally understood visual representation of various customer touch points, and makes it easier to track and score a person’s behavior. The Marketo funnel provides a good (although, not the only) framework and consists of six key stages:

  • Awareness: This is the universe of people who know anything about Marketo no matter what social network they participate on, what articles they read, etc.

  • Inquiry: This is when we finally know something about the person; we know at least their their name and email address.

  • Prospect: This is when the individual has taken some sort of action.

  • Lead: Finally This person is treated as a lead and can be shared with a sales organization.

  • Opportunity: The sales team has accepted these leads and added them to their pipeline.

  • Customer: The person becomes a customer and they are passed on to a new revenue cycle for upsell and retention.

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Of course, each of these stages include multiple marketing tactics and scoring approaches.

It’s important, though, to understand the difference between a contact (or a prospect) and a true lead (someone who has explicitly engaged with the company). Obviously, the relationship does not end after an individual becomes a customer. At that point, you can upsell or cross sell them.

You can determine the value of a customer based on the different products they purchase, if they adopted your product sooner than others or if they are part of a referral program, etc.  As Seth Godin points out – “Customers are traditionally undervalued, and prospects are all treated the same.”

Godin continues:

“Once you see the funnel, it’s easy to understand how valuable your existing customers are, and easy to think about how you want to spend time and money in promoting and building your site. Most Marketers are running a flat campaign. Embracing the funnel changes the way you treat people. And treating different people differently is what consumers demand.”

Having a model like the funnel and a good marketing automation tool enables you to measure and understand the cost of each interaction. Sharing this information with the rest of your organization helps build a Marketer’s credibility in a company, especially with the CFO.

The funnel also provides a learning framework for Marketers to test out different messaging and creative at each stage of the funnel. This gives Marketers the option to fine-tuning his current program.

Since I started my first big marketing job in American Express in 1992, I have heard lots of critiques of the funnel. Marketers love the catch phrases, such as ‘The Funnel is Dead.’ Well, I disagree. It’s advantages have has evolved since 1898 when E. St. Elmo Lewis developed a model which mapped a theoretical customer journey from the moment a brand or product attracted consumer attention to the point of action or purchase. (St. Elmo Lewis’ idea is often referred to as the AIDA-model – an acronym which stands for Awareness, Interest, Desire, and Action). Let’s address some of the funnel naysayers’ concerns, most of which apply to any marketing or sales model:

  1. It fails to take into account the ‘feedback loop between existing customers and prospects.’ Whether it is the funnel or another framework (such as a Life Preserver Ring of unique  ‘Awareness, Interest, Desire and Action areas’), there always exists the challenge of tracking all the interactions among people (customers and prospects ). It’s always difficult to uncover each discussion about your brand online.

  2. The funnel is too linear. According to these critics, the primary problem with the funnel is that the buying process is no longer linear. Well, I was always taught that the shortest distance between two points is a straight line.  Most of the companies I work with, however, do have the majority of their customers follow more or less a linear process. They can be broken down into the different stages described in the Marketo model above.

  3. If fails to track retention or repeat business. I must confess this might be the weakest part of most funnel models. But that doesn’t mean you should ignore the simplicity of the Funnel’s approach. Most frameworks do not go into any great detail about ‘Retention’ or ‘Lifetime Value’ anyway. The bottom line is that good Marketers constantly score their customers over time. American Express might be the masters at this. They leverage all their great Cardmember spending data to model, score and customize online and offline programs.

  4. It fails to paint a pretty picture, nor does the word funnel doesn’t sound great. I never did judge a book by its cover or a person by their name. If this is what a Marketer is worried about, then they are focused on the wrong things. There are many powerful Six-Sigma names and diagrams, for example, that don’t convey a powerful image such as SIPOC (Single Point of Contact), DPO (Defects Per Opportunity), PD (Proportion defective)

  5. It fails to take into consideration the powerful feedback loops between existing customers and newly arriving prospects that search and social media have wired up. I beg to differ. If you have some of your word of mouth programs coded properly you should be able to track shares, referrals and other types of influencer programs.

  6. It fails to consider some products, such as iPhones, where marketing is integrated into the product. I think it comes down to how you set up your programs. You should be able to track cross-sell and upsell, and even referrals from within a product. With Flurry, for example, you can track your customers behavior when they use a mobile app. It tracks the big 3: taps, tasks and transitions.

  7. The Funnel fails to capture all touch points. Over time, a good Marketer should be able to define these, however. They also should ensure they are in learning mode so that they can constantly update their list of sources. This means they should be tracking referral links, surveying their customers and analyzing where their competitors get their leads from.

And then there’s the McKinsey Consumer Journey (see below) which attempts to demonstrate that the buying process is not linear and that several steps repeat themselves. For the real digital practitioner, however, it’s too simple to say someone goes from Bond to Buy:

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While brands may put the decision maker, the Customer,  at the center of the McKinsey Customer Journey, the above excludes the importance of the experience the Marketer and the company are having with the customers. Life is not all about the transaction. For example, at Marketo, our energy goes into building relationships with Marketers as well as connecting Marketers together. In addition, you don’t have to be a customer to recommend a product. I am probably the biggest promoter of Tesla, but I can’t afford one. I have only tried it via a Freemium ride provided by a neighbor and have read great reviews about it on Edmunds.com. Does that mean I can’t recommend the vehicle to others? Obviously not.

In sum, CMOs and their teams need to know that the funnel is alive and kicking. Rumors of its demise are greatly exaggerated. The Funnel is an easy to use, easy to remember approach to tracking individuals who interact with your brand – either directly or indirectly. It’s simplicity is what makes it special – and it provides the most universally understood way of thinking about an individual’s interaction with your brand. It works not only in a B2C environment, but also in a B2B environment. Marketers should always feel free, however to add their own creative twist on things and rename all or parts of it.  Long-Live the Funnel.

Disclaimer: I am currently an employee at Marketo, so yes ‘I bleed Marketo Purple.’

Note: This will be the second of a series of posts that look at CMO’s evolving role in companies, especially as the “run and gun” campaign approach moves to building longer-term customer relationships. My next article will focus on How to Build a High Performing Band of Marketers.

Marketers Need To Quarterback (or own) Their Technology Decisions

Over the last year, the role of a marketing team within a company, particularly the CMO, has evolved drastically. Being able to market in its most traditional sense is no longer they key: businesses expect marketers to become digital and technology leaders. The marketing department now consists of technology builders, who have to create new channels (websites, mobile apps, facebook apps, etc), implement new tracking systems (marketing automation, CRMs, mobile analytics), and integrate these into their customers’ experiences. More importantly, they have to quantify each step of the marketing funnel.

As Gardner Research often points out “Technology is the heart of Marketing, and CMOs will outspend their company’s CIO by 2017.” This new responsibility requires looking at their job through a different prism. They need to conduct business in a completely different manner because now, it’s vital to the success of their business. CMO’s now have to:

  • Find the right technology provider whose nimble

  • Ensure they can easily fire your technology provider just as they would do with with their ad agency

  • Build in performance goals for the technology provider

  • Rely on the CIO to drive the technology purchasing decision

  • Make key decisions by extensively kicking the tires of these technologies. (Note: To this day, it still surprises how many technology providers do not have sandboxes or a demo product for CMOs to properly evaluate their products.)

As a result Marketing will have to quarterback the technology acquisition and licensing process for their companies. To accomplish this, they will need to:

  • Sync up with the company’s business goals

  • Prioritize and identify the critical few projects

  • Facilitate projects and communications between marketing and IT

  • Prioritize funding for marketing technologies

  • Select, evaluate and choose technology providers

  • Define success for these providers (hold them accountable)

  • Design and implement technology keeping digital business models in mind

  • Plan ongoing reviews of technology provider and your goals

  • Push your technology provider to continue to ameliorate their technology

According to IBM’s CMO study, however, there are many barriers to adopting technology. See below:

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None of these, however, focus on being able to leverage technology to improve the overall customer experience or extract actionable data. Marketers need to carefully consider how implementing a new marketing system impacts people visiting their site. This needs to be carefully looked at by capturing VOC (Voice of the Customer and looking closely at data.

I am surprised, however, how many still don’t focus on lifetime value or retention. As eMarketer shows below, there tends to be a focus on one time activities (campaign tracking) and brand analysis (which does focus on their customers behaviors and competitive intelligence.

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Understanding your customers data is the fuel of your marketing organizations. Since marketing is now a key for major technology buyers, CMOs need to know how to evaluate, implement and leverage new systems. All parts of marketing is impacted by technology.

To prepare for their new role, CMOs then need to

  • Be able to quantify each step of the funnel which means they need to have the technology to accomplish this.

  • Identify or hire individual who has the technology background in Marketing Automation, CRM, and Web Analytics. In many cases, you don’t even need to have a Marketing Technology officer as some companies are beginning to do. As a result, a new job title has come on the scene – “Chief Marketing Technology Officer (CMTO). Within large companies — more than $500 million in annual revenue — 81% of them now have a chief marketing technologist role, up from 71% just a year ago. Another 8% expect to add that role within the next 24 months. However, smaller companies might not be able to afford to pay for an additional Marketing chief.

  • Have this person map out your technology and challenge them to figure out how the many pieces of the many technology puzzle fit together (no solution will solve all your problems) — how your marketing automation system fits with your CRM system, for example)

  • Be committed to a just-in-time agile approach (they can learn from their engineers meet Agile Development process and apply it  marketing)

  • Map out the process too before buying the technology (but be flexible)

  • Embrace technology — pick a few technologies to learn. Yes, I think CMOs need to understand how some of these products work.

Marketers need to understand that any change in a company’s infrastructure can impact the overall customer experience. They need to embrace technology vs. fear it. They can no longer say ‘it’s too technical to understand.’ As Phil Fernandez, Marketo’s CEO said, “The days of ownership are being replaced with the days of partnership.”

In the modern, connected, mobile environment, companies need to connect with customers with personalized and differentiated services. So called “stickiness” is essential and CMOs should be better equipped to meet those demands, regardless of whether or not they have the same level of technical knowledge as the CIO

Despite all of the above, CMO’s should not be lead by technology and should remember that it is just an enabler. Instead, marketing leaders should:

  • Map out the ecosystem of everyone who impacts your product

  • Focus on a few target audiences at first (prospects, customers, partners)

  • Map out each of their customer journeys (online and offline)

  • Identify their water holes and where they spend their time

  • Understand how they speak about their work, your product, etc.

  • Understand the jobs/tasks they get paid to do

  • Map out potential experiences in the funnel

  • Determine the right technology to collect data at those key touch points

Much of the change in the CMO’s role is due to customers’ every increasing influencer. More and more conferences, articles, etc. will focus on this. For example, next month, the Incite Conference in San Francisco will focus on the CMO’s evolving role. There need to be more detailed blueprints for Marketers to follow. Hopefully, this post provides some guidance.

This will be the first of a series of posts that look at CMO’s evolving role in companies, especially as the move from ‘run and gun’ campaign approach to building longer-term customer relationships. My next article will discredit the myth that the marketing funnel is dead.

10 Reasons to Build a G+ Community

Google+ had a big 2013. With over 1 billion registered users and 340 million active users, it is steadily gaining ground on Facebook. Part of its success is the result of  the rapid adoption of Google+ Communities, which resemble instantly creatable, lightweight discussion forums and are full of prospects and potential followers.Google-Plus-is-here-to-stay-and-marketers-are-missing-out-on-major-engagement-opportunities-if-they-arent-using-it.-299x300

Here are 10 reasons why you should use and build your own Google+ Communities:

  1. Embrace User Created Content: Google+ Communities allow you to leverage a platform where your strategic partners and customers can share best practices, answer each other’s questions and share valuable information. In essence, you are creating a place where your stakeholders can interact with each other. For example, National Geographic is one of the most memorable and traditional brands that has a thriving Community. It is called Exploration, not National Geographic, and is dedicated to an open “community of people who share a joyful sense of adventure, a passion for exploration and discovery, a love of learning, and a desire to make a difference.”

  2. Understand the mindset of your customers: By mining your Community’s content, you will gain a better understanding for how people talk about your company and its products. Their phrases and words can be incorporated into your marketing communications, your SEO, etc. I remember when I presented to Scott Cook, the Founder of Intuit. He would always say “don’t tell me the numbers, share the verbatim”. In other words, he wanted to know what were people saying and how they said it.

  3. Drink Google Juice: According to Google, 97% of consumers search for local businesses online. By leveraging what you learn from Google+ Communities, you can determine the general sentiment of users on certain topics and identify keywords that can be used to have a positive impact on your SEO efforts. Google reportedly also favors Google+ content in search. With the number one search engine behind it, your Google+ business page and content will be indexed effectively. This alone makes quite the case for marketers looking for new brand visibility outlets.

  4. Let the people speak for you: By letting your customers and business partners speak about and show their appreciation of your products with +1s and clicks, your brand will gain credibility. Google reports that ads using Google+ get about 5% more clicks because the addition of +1 button. This adds credibility to your brand because people trust recommendations from people they know. indicates a sign that the ad is trustworthy.” Authorship certifies a certain credibility that sets Google+ apart as well.

  5. Establish Thought Leadership in the Industry: By having an open forum where people can express their opinions and share their experiences, you can become known for more than your product features or your brand name and logo.  Your brand will be associated with thought leadership within a certain category. It will become a trusted voice within your industry.

  6. Flexibility to create Private or Public Community: By setting up a private Community for your most avid customers and Power Users, you can create a VIP community of sorts. You can even have both a public and a private community and use the latter to demonstrate that ‘membership has it’s privileges.’ You can give your All-Stars direct access to employees, special content and unique offers. Several of my clients have a public community and a private community for their power users and AllStars. In a private community, they can be like the United Nations in a closed assembly, planning and voting on the future direction of their open Communities.

  7. Generate leads: By implementing what I call implicit marketing tactics—link users to useful information on your site vs. highlighting a new product—you can drive traffic to a landing page and then launch visitors into your regular lead-generation process. Think of your Google+ Community as the top of the marketing funnel.

  8. Enables you to segment content: By building out categories and using hashtags, you can filter your content and thus improve the discoverability of content. Users can just select the content they want much more quickly.

  9. Launch an event: By leveraging Google+ Hangouts technology, you can broadcast (one broadcaster to many viewers) or conduct small town halls (many to many, up to 10 people at a time). From Google +, you can schedule events, send out updates, and provide guests and manage updates. Hangouts are increasingly becoming a valued asset in communities.

  10. Ring around the Circles: By leveraging the Circles functionality, you can extend your network and segment and send customized messages to different groups of users. Once you have, you can then invite these segments into relevant communities. It is also a way for you track different types of content. For example, every morning, I check two circles I created: One for Small Business Influencers and one for Google+ Communities managed by Google employees.

Over time, Google will increasingly integrate it’s Google+ platform with the company’s other products and services. Today, Youtube and Photos work nicely with Google+, making the social network more dynamic, engaging and attractive for users. Tomorrow, we will see even more ways to build Google+ Communities into Google’s offerings. Therefore, if you want to be ahead of the curve, you need to jump on the Google+ Community bandwagon now.

Article was originally published on Hootsuite.com

Building the Everything Store with Many Silver Bullets

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In the new book The Everything Store: Jeff Bezos and the Age of Amazon, author Brad Stone explores the rise of Amazon.com and the man behind it all, CEO Jeff Bezos. While we may all be very familiar with the brand today, the story of how Bezos and his team built an eCommerce giant from the ground up is quite astonishing. Stone states that Amazon needs ‘a chain of small advantages’ to stay ahead. I wish more CEOs thought this way. Almost all my clients look for a silver bullet that will take them to the promise land. It’s not that simple.

Unfortunately, digital products don’t work that way – the reality is that even big ideas require incremental changes via testing and fine tuning. One-Click checkout is a great example. Amazon implemented and tweaked it over time. However, they also prevented it’s main competitors at the time, Barnes and Noble (which has a preliminary injunction against them) and Borders (whose website I managed at the time) from implementing this innovative approach to shopping. In other words, implementing was one thing, preventing competitors from using it was another. Basically, Amazon won its case against Barnes and Noble, who was forced to turn their one-click into a two click approach. And Borders.com backed down and adopted the same type of functionality.

Eventually, they surrendered their monopoly on one-click, but it wasn’t until they had sufficient amount of time to establish a competitive advantage. I know from personal experience, having designed and implemented one-click checkout on eToys, Borders.com, KBtoys.com and a few other websites. It is not as easy as putting a button on web page.

To be successful, small changes require:

  • Clear definition of the product and feature
  • Agreement on the incremental, evolution change approach
  • An agile first-to-market implementation
  • A simple method for measuring ROI and Impact
  • A process for collecting customer feedback
  • A mindset of continuous improvement

With the increasing usage of mobile devices, it will be important to think in incremental improvements. What was it that Neil Armstrong said – “That’s one small step for [a] man, one giant leap for mankind.”

All of this requires the Bezos strategy of starting with the customer and working backward. While this sound obvious and somewhat cliche, I am constantly surprised how many companies don’t talk to their customers on a consistent basis. In fact, last year a client asked me “why would you want to talk to a customer if you already know what they are going to say.” Maybe that’s the problem. Customers often just want to be heard, But better yet, customers might even provide more insights the more you talk to them. Have you ever heard of the 5 Whys? It is an iterative question-asking technique used to explore the cause-and-effect relationships underlying a particular problem.[1] The primary goal of the technique is to determine the root cause of a defect or problem. (The “5” in the name derives from an empirical observation on the number of iterations typically required to resolve the problem.) Here’s an example from Wikipedia:

  • The vehicle will not start. (the problem)
  1. Why? – The battery is dead. (first why)
  2. Why? – The alternator is not functioning. (second why)
  3. Why? – The alternator belt has broken. (third why)
  4. Why? – The alternator belt was well beyond its useful service life and not replaced. (fourth why)
  5. Why? – The vehicle was not maintained according to the recommended service schedule. (fifth why, a root cause)
  6. Why? – Replacement parts are not available because of the extreme age of the vehicle. (sixth why, optional footnote)
  • Start maintaining the vehicle according to the recommended service schedule. (possible 5th Why solution)
  • Adapt a similar car part to the car. (possible 6th Why solution)

If you apply this technique to eCommerce, focus groups and quarterly check ins don’t cut it in this environment. You literally need to adopt a customer and become his/her best friend.

Obviously, Amazon continues to do amazing things. I was particularly impressed recently when they beat IBM in a contract to host the CIA’s web services. Hope they accidently share customer data with the intelligence community : ).

To hear a great interview with Brad Stone, the author of this new Amazon book, listen to the interview with him at NPR’s Fresh Air.

The Starbucks Generation!

starbuckslogo2Staffing is one of the most critical parts to the success of any company. While finding and attracting the right talent can be tough, it’s not as difficult as it once was. As the free agent economy continues to grow, there are more and more options to building your workforce, for both the short and long term. As I build my own company, I am now practicing what I have been preaching for years – that you can find great talent online.

In recent years, there have been a surge of websites that act essentially as online job marketplaces for freelancers. Sites such as ODesk and eLance provide companies access to thousands of talented and well-qualified independent contractors. These sites can not only provide additional staff to larger companies but they can also provide tremendous value to the small business economy, especially if you are targeting what Go Daddy calls “The Very Small Business”. I often tell my clients to look at these sites and study the behavior of the different verticals available, such as Sales and Marketing or Copywriting. By reading the job descriptions and analyzing the types of words and language used, companies can gain insights into how to position their own marketing communications.

As site like these continue to see success, it is obvious that the free agent economy is not only booming but also it is continuing to grow as a rapid pace. Some corporate leaders do fear these independent consultants because they have their doubts about telecommuting, require hands-on supervision, they spread themselves too thin across multiple clients, and  that they could potentially really act like free agents, going to the highest bidder. The reality is that a blended workforce — combining both free agents and loyal full-time employees is probably the best solution. Many high tech companies have proven this to be a viable model.

Big companies can no longer ignore the independent contractor market. MBO recently came out with its annual report and some of the key statistics seem to prove this point.

For example:

  • Today, 17 million people are independent contractors. This number is scheduled to grow to 24 million by 2018.

  • 77% of Independent contractors are committed to remaining free agents.

  • 64% are highly satisfied with their current situation of working out of their homes, at Starbucks, etc. The flexibility of working from home, working on your own time, etc. is a driving factor in the growing number in independent contractors and leads to the high job satisfaction rates, which equals happier employees and better quality work

  • Close to $1.2 Trillion have been generated by this segment. This is up from 20% in 2012.

  • There exists a multiplier effect because independent contractors tend to hire each other

The report also goes into the demographics of each of these groups and it may surprise you. For instance, Gen Y or millennials, which I refer to as the Starbucks Generation, make up 20% or almost 4 million people of this segment. To understand more about this generation, read my book Millennial Leaders. I call them the Starbucks Generation because they represent today’s assembly line. Unlike the past when assembly lines existed on the farm or in factories, today’s specialized labor exist behind the counter in Starbucks, Peets’, and McDonalds.

Each week, I work out of four different Starbucks in my neighborhood and each one employs several well educated college graduates. They kids (I can call them that cause I am over 50) are great — motivated, talented and trying to make a dime. In future posts, I will share some of my interviews with them.

Yes, independent contractor are everywhere.

Adoption ‘Technology’ Curve for Small Businesses

When building a new community or functionality on a social network, one of the first questions I ask is ‘tell me about the people who will use it.‘ I want to learn more than just their demographics, their psychographics or even what we called at Intuit, their firmographics (how many employees are at the company, how much revenue have the generated, or their occupation such as purchasing agent or IT professional).

And I also want to know where on the technology adoption curve the target audience(s) reside. And I want to know about the words and phrases they use in their ever day business.

A few years ago, when we introduced Podcasts on the Intuit Community website, nobody clicked on the word ‘podcast.’ So we did some tests in usability and learned that our users — who tend to be older and not residing on the cosmopolitan coasts of the USA — didn’t know what that term meant. Instead, we learned that they related better to more common phrases, such as Radio-on-Demand, so we used that term. We also learned (a few years ago) that they had no idea what a blog was and they had no interest in blogging.

So, it’s important to understand where your users (the people) are on the adoption curve.

As the above chart shows, Geeks started using Blogs a lot sooner than Small Businesses. Sound obvious, right?

It was until we started talking to people that manage online communities and social media activities. At that time, everyone wanted to build a blog, write a blog, and ‘do the blog.’ But we resisted at Intuit because our typical Small Business owners were not ready at the time. Today, they might just be ready. However, Business.com recently did a survey listing out the top social media tools for different vertical/industry segments. And at the top of some of the lists were Webinars. Who knew that something so old web school could still be popular?

I am working on compiling a list of examples like the ones above. So, feel free to send them my way.

Community Playbook: Today’s tips

Some key plays for building a good community. All of which take place in the trenches.

  1. Launch and learn – each team  member must needs contact with users
  2. Understand the importance of sharing learnings directly to the developers (better yet, let them hear it from users)images
  3. User involvement in the development process never stops, never ends (especially as more and more web products are developed)
  4. Community is a great place to test new product development processes
  5. Change is never constant, it is always happening
  6. It is great to collaborate with your heavy users and most valuable customers, but don’t leave out other users, especially since you need to develop to the lowest common denominator, the less experienced and knowledgeable users
  7. Verbatims are just as important as ‘numbers and scores’ (Yes, everyone on the team should read them!)
  8. Find a users problem and solve it well!
  9. Make sure to do a post mortem after your failures and learn from them.
  10. Solutions are not always transferable from one product/service to another. (you can not plug in a previous approach to ratings to this group of users

And remember: This all sounds easier than it is. It takes hard work and constant effor

Future of Work Interview: David Baszucki, CEO and Founder of Roblox (one of the best online games)

Typed up on very bumpy Delta Flight 1680 from San Francisco to Denver

In business school, I developed a service for middle schoolers to create their own online curriculum and study materials. Back then, I had aspirations of competing against Prodigy and Compuserve.

I am always  on the lookout for similarly conceived products (yes, I am still kicking myself for not taking on Scholastic Online or Lego.com). It wasn’t until I discovered Roblox in 2011 that I found a company, which enables kids to design and build their own online activities.

Today, Roblox is a user-generated virtual playground and workshop designed for children ages 7 and over. Players can create virtual worlds with blocks of various shapes, sizes, and materials. It can be thought of as online Lego.  Roblox has roughly three million devoted players from all over the world who visit the site and spend 40 million hours building, playing, and sharing their creations.

Mission Impossible: “Allow Users To Build and Share Online”

According to Roblox CEO and Founder David Baszucki, the site’s mission is to allow users to have the same experience online that their parents had (offline) as children, playing with construction toys, model racecars, or erector sets (from Lego to K’nex). David believes, “People at Roblox will ultimately be able to create something that <is> not even possible in real life, such as visiting each others’ creations and ultimately making games out of these creations that are playable by thousands if not millions of users.”

How does his service go beyond what we or our parents got with our Lego sets?  If, for example, you want to build a bulldozer, you would not only search and find a fully simulated bulldozer on the site, but also hundreds of models that could be taken apart.  As David says, “You would see engines and treads and you <would> be able and share and buy these different digital assets. We want everyone to share and use 3D digital assets!” Does this executive sound like he’s having fun or what!

The Maker Culture

David wants Roblox to be part of the ever-growing maker culture, which represents a technology-based extension of the Do-It-Yourselfers, who are known for more traditional activities such as metalworking, woodworking, and arts and crafts. Typical interests of technology-based makers include engineering, electronics, robotics, 3-D printing as well as creating new and unique applications of technologies. They also encourage inventing and prototyping. For more information, read Chris Anderson’s new book, Makers: The New Industrial Revolution, which I recently reviewed. (Source: Wikipedia)

David, however, hopes to move beyond the online maker subculture and eventually make Roblox into a household name. He envisions his brand being synonymous with online building, creating, inventing, and playing:

“We want to be known as a kind of cool digital erector set that attracts everything from younger users up through the Maker Faire Crowds, “as well as “all those people <who> have a passion for creating cool stuff <like> Erector Sets, sharing <their creations> and experiencing it with others.”

His reference reminded me of Gilbert Toys’ Print Ads from “Boys Today. Men Tomorrow.” There’s a whole group of individuals who are finally getting to relive their childhood and be part of the DIY (Do-It-Yourself) /Maker culture.

[Note: 1949, an Erector Set was used to build the precursor to the modern artificial heart by Drs. William Sewell and William Glenn of the Yale School of Medicine. The external pump successfully bypassed the heart of a dog for more than an hour.]

It’s difficult to “genetically evolve a great game”

One reason for Roblox’s success is David’s keen attention to metrics. David believes analytics enable a company to “choose, tweak, and squeeze out that extra 5%-10% of what you are trying to optimize.” His approach of focusing on continuous yet incremental improvements differs from most game companies in Silicon Valley, who have a tendency to use analytic methods, such as AB testing “to kind of genetically evolve a great game.” This means they hope that a single, key insight will lead to dramatic improvement in their game. In layman terms: they focus on looking for a silver bullet. As David correctly points out, most great products don’t get created that way. Many slow, incremental improvements, rather than a single breakthrough, are the essentials of successful creation.

Roblox takes the same, calculated approach with its customer data by looking at the lifetime value of the different user classes in its user base, such as:

  • Leaders of groups and clans on the site
  • Battlers who compete to accumulate the most wins online
  •  Entrepreneurs, who are good at trading their Roblox bucks currency
  •  Artists, who want to be known as the great developer or designers of clothing in their virtual store

Each of these clans gets parsed even further as Roblox collects data on every event that takes place on its service. The company then shares this information with its entire organization. This sort of democratic thinking fosters creativity and innovation and enables employees to react and respond more quickly to user behavior.

Game Mechanics and Improving Kids’ Live

“Game Mechanics” is a term that unfortunately often gets defined by managers as ‘give me a leaderboard and some badges and we will have gamified.’ David understands that the value of game mechanics is great deal more than that. He describes the essence of game mechanics as determining the overall characteristics of the game itself, such as an obstacle course, which comes with its own rules, complexity, user interaction, and environment. There’s tremendous value in experiencing problem solving in an online environment.

Unfortunately, most people dismiss online games (and even crowdsourcing products like Roblox) as escapist entertainment. But Jane McDonald, the author of Reality is Broken and a researcher at the Institute of the Future, asserts that games can provide four key ingredients that lead to a meaningful life: satisfying work (or task) because of clearly defined and achievable goals; real hope or optimism for future success in a game); strong social connections; and the chance to be part of something bigger than ourselves. While these benefits are available in the real world, they are often difficult for children and adolescents to find because of their own fear of trying something new or reaching out to strangers. But when they can function in a safe online environment like Roblox, they are more likely to take the risk of trying and finding it.

Word of Mouth in the School Yard

With the majority of its players under 16 years, David encourages “word of mouth” run wild in the schoolyard. He aims to attract multiple users to play from the same middle or high school. He believes that it’s difficult to attract kids to a site if you try and reach them through their parents.

Most early online services focused on appealing first to parents instead of letting kids really make a purchase decision.  If you are a teenager, you don’t necessarily want to buy something a parent recommends and you certainly don’t want to use the same service. [Based on my dozen of interviews with high school and college kids, Facebook is experiencing some of this parent-child conflict right now, as more and more kids don’t want to be on the same online service as their parents.]

This is not to say, however, that parents don’t play any role in their child’s online behavior. For most online games, though, parents seem only get involved when it comes to purchasing a virtual currency or getting a monthly subscription that is directly related to the quality of the service. [Note: Virtual goods are purchased with virtual currency, a digital medium of exchange similar to dollars and cents. Virtual currency is in a very nascent stage, but projected to be a rapidly growing area of the web!]

Master the App Store

To be a successful mobile marketer, David advises people to focus on how product placement works in the Apple, Android, and other App stores: “There’s a lot of experimenting going on with companies switching price from $.99 to $6.99 <and> back and forth <again>” as a way to “seesaw their way into the top standing.” This level of competition will require companies to shift from a traditional desktop website acquisition strategy to a mobile app store one.

[NOTE: Neither Apple nor Google releases information about their algorithms for determining placement in an App Store, but some of the key attributes seem to include the following: keywords, product name, product, and user ratings. Also, there are some slight differences between iTunes and Searches on the iPhone itself. I will cover this in a future post, but in the meantime, you should know there is lots of opportunity to master this area. Just look at all the SEO experts out there.]

“Self-Organization of a Company”

David describes his approach to managing Roblox as the following: “We put a premium on each employee’s value, and believe that when they are left to their own devices, they can typically work in the right order of priorities.” Roblox keeps its teams limited to three to four people while management ensures the company’s objectives intersect with a bigger company goal. The company’s direction is determined by “a mixture of big picture coupled with the prioritization of our users’ requests.” David believes his company’s success is based on the ability of his people to work in small, autonomous teams.

David believes that as a company brings more and more people into an organization whose values align with others already working there (as in his ‘self-organization approach’), its employees see a continuous flow of great results: “You start to see things happen from the ground up rather than from the top down.” This is an energizing force.

Follow Your Passion to the Next Big Thing

At the end of the conversation, David, whom I see as one of my virtual mentors (something he doesn’t yet know), provided three pieces of advice for the career of today’s entrepreneur:

  1. Find something you are extremely passionate about regardless of money.
  2. Figure out how it is linked to a very large market opportunity.
  3. Couple this with finding with very good people <to work with>. He believes these ”can take you a long way” towards creating “a fairly resilient structure for you to work through things as you work on building the next big thing!”

In the meantime–before you identify the type of product you want to build–it is probably worthwhile to visit Roblox. The site isn’t the sexiest one in the world, but it does enable you to build Lego-Like objects online.

OK, here’s a thought. Imagine when Roblox lets can be integrated with 3D Printing and users can design, build (online) and create (offline) Lego-Like objects.

Some useful links