Better known in these parts for lobbing the odd grenade, Maxus Melbourne boss Nick Keenan here channels Nate Silver, Leo Burnett and Mayer-Schonberger and Cukier to expound the need for return on knowledge (ROK) as the new currency. He thinks 2014 is not about ROI. It's the wrong metric. The true benchmark is the ROK. Agencies that get it will be the ones left standing.
Is 2014 the year of the ROK? Yes, no, maybe? Before you answer lets define what it is.
Firstly the acronym stands for 'return of knowledge', and the simplest definition that I found came from an article on big data in a recent Harvard Business Review magazine which defined it as “the capture and sharing of knowledge that is put to more profitable use”.
If that’s too broad and simple a definition then consider this; a recent ebook from an enterprise search and technology provider Coveo defines it further as the method of extracting hidden streams of structured and unstructured data spanning across cloud, social and on-premise systems.
Coveo believes doing this will create the necessary internal oracles within your existing staff, to generate a “return of knowledge” for your clients far superior to those left swamped in the tsunami of big data.
For many it’s seen as the next big differentiator, the new currency which is about getting our infrastructure in place so that we gain the ability not just to handle big data, but to revel in it, and generate the next wave of innovative marketing.
ROK reading
ROK it not new as concept, it first appeared in articles over a decade ago, but it is relatively new as an idea to evolve into a modern currency that reports in more qualitative detail than the quantitative focus of ROI. Yet as a new currency it’s still a code that is yet to be cracked. Nevertheless it’s idea that has been reborn given the ever increasing need to grapple with big data.
Hence the ebooks and HBR articles in search of a definition, but to entertain it further and attempt to give it more meaning where others have not there has been a lot of good literature on big data which may hold the answer. To name a few, books like Big Data: A Revolution That Will Transform How We Live, Work, and Think, by Mayer-Schonberger and Cukier (2013), Big Data Marketing by Arthur (2013), and the really entertaining read The Signal and the Noise by Nate Silver (2013).
All provide some wonderful analysis, insights, and entertaining case studies into the “all data world” we now find ourselves within, and when evaluating all their points of view, ROK in marketing essentially boils down to two things:
1. Knowledge management internally to protect, improve and leverage IP.
2. Knowledge management externally for all ongoing campaign and marketing data.
When it comes to both of these you are correct in thinking that in some ways you are already achieving this, whether it is in the form of basic campaign recording and reporting, to the more sophisticated media econometrics, and regression analysis.
But that is kind of the point as we work to establish a measurable return of knowledge metric given we as an industry have already begun this journey. Many advances in our application of behavioral science, econometrics, analytics, and data visualisation can rightly be argued by many agencies as existing examples of ROK. But the work we have done both internally and externally is still just the tip of the iceberg of what is needed.
Know thyself
To find proof of this look no further than our own internal process of data capture, staff induction, and sharing of knowledge. For those who like a statistical fact, here's three from the University of Southern California who commissioned a study surveying business executives in the US and who found that:
1. Only 10% of senior respondents had access to “learned lessons” from knowledge captured within their business.
2. 85% of documents filed are never retrieved.
3. 60% of employees are spending an hour per day or more duplicating content that already exists.
If that is not enough, then add in our very own Australian marketing churn rate of staff which still sits at 30% (2013 MFA January Report). Given a third of our talent is leaving the average agency we should all be well down the path of protecting our employee’s productivity from document duplication, and data accessibility. Throw in the grenade of modern day big data to the systemic failures listed above and there is an obvious and much larger challenge of knowledge management internally.
A challenge that is not going away, and is best summarised by one of the more well-known data speculators in the US; Nate Silver is famous for predicting the result in every state in the last US election. In The Signal and the Noise IBM informed him that we are now generating 2.5 quintillion bytes of data each day, which in mere mortal terms is the equivalent of 90% of what has been produced in the last two years.
Closer to home for us media brats, the media businesses and data we are more familiar with, Mayer-Schonberger and Cukier in their book Big Data: A Revolution That Will Transform How We Live, Work, and Think, reported that Google currently processes more than 2 petabytes of data per day. That's a thousand times more than all the printed material in the U.S Library of Congress. Facebook users upload more than 10 million photos per hour, like and comment 3 billion times per day, and Twitter over a year ago was already propagating 400 million tweets per day, a number that has grown to well over 500 million in 2013.
Silver points out “most of this data is just noise, but the noise is increasing faster than the signal”, a point that rings especially true in media. ROK is about zeroing in on the signal and being set up to drown out the noise. Get to the good stuff.
Silver believes that can only be achieved through cultural change within an organisation where human thinking remains paramount, forecasting biases are minimised and the fear of constantly reforecasting is removed. As he aptly points out “today’s forecast is the first forecast of the rest of your life”, it’s an ongoing, never ending analysis. Our ability to collate, condense, and make sense and share of the right information internally is surely the best place to start. To succeed in delivering ROK to clients we must look internally first.
Data hairballs
When we look at ROK externally we now have a lot more science to wade through. With big data, small data, unstructured data, and more recently semi unstructured data most businesses involved in marketing suffer a varying degree of what Lisa Arthur describes in Big Data Marketing as “data hairballs”.
A data hairball is the "complicated mess of interactions, applications, information, and processes that occurs when companies are unprepared to take in information from a variety of sources". I think all of us agency cats have lined up on the media sidewalk and coughed up a data hairball at one time or another. The solution to overcome this and what I believe to be a fairly decent road map to providing external ROK is put forward her five point plan:
1. Get smart and strategic on customer interactions, analytics, data, structure, and technology
2. Tear down internal silos of information (remove that duplication)
3. Untangle the data hairball
4. Make metrics your mantra internally and externally
5. Establish integrated marketing processes
Metrics mantra
To finish let’s focus on step four, as developing a better ROK in media is for me best described by evolving the media metrics we are KPI’d to deliver. How many times have you heard the KPI complaint? However it is our duty to assist our clients in redefining these so we futureproof their entire marketing ecosystem.
The best place to start according to Arthur (and I agree) is the comparison of the business and marketing relationship between return on investment (ROI), and return on marketing investment (RMI). The point is made that ROI is a measure that was only ever intended to score a one-time capital investment, such as adding a new facility or funding a major corporate purchase.
In the general business community squillions has been made getting this metric right, yet many argue it has never really sat comfortably as a be all and end all marketing metric.
Gallatically stupid
Nearly all marketers at one time or another have reported receiving numerically odd, factually incorrect, and gallatically stupid definitions of “you guessed it” ROI. A lot of the time however it is what the agency has been KPI’d to report, but ROI metrics applied to marketing, particularly in today’s always on media world, provides a factually incorrect score of ever diminishing returns of scale.
The more that is spent, the lower the ROI. To solve this another metric that has evolved is ROMMI (return on marginal marketing investment), which is aimed at analysing and focusing on only the marginal increases from marketing spends. For me this makes more sense as most regression analysis we do suggests a brand's base equity (depending on time in market) accounts for a significant chunk of sales, subs, and phone calls.
As such it is our job to advise on how to protect the base (brand advertising) and nip around and grow/influence of the smaller spheres and margins of genuine growth. The practice of this is a discipline can be categorised as a return of knowledge, and that is one of the first tasks good ROK in media has to achieve for marketers.
Sink or swim
So those that provide a consistent and uninterrupted return of knowledge for each and every campaign they implement will be the agency of the future, as the digital tsunami of information that has swamped all of us provides a significant opportunity for those still game enough to take a swim.
As the great media legend Leo Burnett once said “marketing is the art and science of finding out what people want, and offering it to them”. In 2014 the Year of the ROK that should be simple, right?
Nick Keenan
Managing director
Maxus Melbourne