Adjacencies & Disruptions – Amazon, Armani and identifying corollaries

Zeitgeist likes thinking about adjacencies. We’ve written about it before when looking at the art market, but it’s also prevalent in other industry sectors. Think of the UK übergrocer Tesco. The company has expanded into movie distribution – with Blinkbox – as well into banking and mobile, albeit as an MVNO. Why? To diversify its revenue streams; the grocery market is a cutthroat place of late; Morrisons recent conceding that it would be setting off another price war among its peers was hardly greeted with cheers by shareholders. How? By using the equity of trust they have built up with shoppers over the years, they are able to expand into other, similar territories, where their (claimed) competitive advantage of good value and good customer service can be similarly applied.

Amazon has been nothing if not a company constantly on the hunt for the efficient exploitation of adjacencies. A recent article in The New Yorker detailed how CEO Jeff Bezos got into books because he saw the market was ripe for disruption; he saw the Internet was the perfect platform to sell such a product:

“It wasn’t a love of books that led him to start an online bookstore. ‘It was totally based on the property of books as a product’, Shel Kaphan, Bezos’s former deputy, says. Books are easy to ship and hard to break, and there was a major distribution warehouse in Oregon. Crucially, there are far too many books, in and out of print, to sell even a fraction of them at a physical store. The vast selection made possible by the Internet gave Amazon its initial advantage, and a wedge into selling everything else.“

Zeitgeist remembers buying his first book from Amazon back in 1999. It wasn’t long before the company expanded into music, and from there into myriad other offerings. Like Tesco, Amazon found its original industry to be a highly competitive one – at least in terms of margins. It has become a fairly ruthless behemoth in the publishing industry, acting as monopoly in its rent-seeking tactics. The Kindle was an extension of its strategy to ‘own’ the territory of books, and as a publishing company itself it has so far had mixed success, according to The New Yorker. The Kindle Fire addresses its new media offerings, principally video. Just as a recent Business Insider article identified the Xbox 360 as Microsoft’s short-term ploy to encourage a customer to funnel all entertainment through their device before the launch of its successor Xbox One, so with Amazon and its Kindle Fire before this week’s release of Fire TV. The Financial Times featured good coverage of the device here, quoting an analyst at Forrester,

“It is a slightly faster Roku box combined with voice recognition to make search easier and then they have created a full Android gaming device. This puts the product into a whole class of its own.”

It will be interesting to see how the device competes with the much cheaper Chromecast, from Google, itself an exploiter of adjacencies. Google relies less on an equity of customer trust to move into new industries and more an innate belief that tech can be used to solve pretty much any problem. The search engine provides an affordable smartphone OS platform, connected glasses, globe-trotting balloons and driverless cars.

In the world of luxury, that essence of trust is treated with far greater reverence. This is principally why fashion brands have been such laggards when it has come to embracing digital communications and ecommerce solutions. tIronically, this approach, which by extension neglects a dedicated approach to holistic Customer Experience Management (or CEM) is arguably beginning to have a negative impact on how people perceive and interact with these companies. It is why adjacencies seem to happen less than temporary collaborations, an impressive recent example of which can be seen in BMW’s recent tie-up with Louis Vuitton.

It was gratifying to see Giorgio Armani, a company that has carefully crafted diffusion lines as well as adjacencies into hotels and homeware over the years, recently buck the trend, sending out communications over its newest line, Armani Fiori. While style can be eternal, fashion can be quite ephemeral – as with flowers. It’s not clear how much of a market there is for this. That being said, the sector is not exactly brimming with ultra-premium florists. And it might provide a certain level of reassurance for the man purchasing flowers, who can rely on the brand’s prestige to assuage any feelings of whether he is picking a good bunch. Where it might prove especially successful though is in the B2B sector; the lobbies of corporate headquarters and luxury hotels could soon be awash with the fragrance of a designer flower or two.

Adjacencies tend to work best then when they start by identifying qualities inherent in the brand as it currently exists. I.e. what is our current competitive advantage? Is that scaleable or transferable to a related field? Often, as with the cases above, such acquisitions and movements arise when traditional margins are being eroded or under threat of such. Prada, a leader in the luxury sector, has as that leader borne the brunt of strong headwinds recently as the sector as a whole experiences a slowdown. Its own adjacent acquisition? Last month it bought an 18th-century Milanese pastry shop.

Manhattan Musings

While in New York recently, Zeitgeist was privy to a few interesting examples of brand activation and digitally engaging experiences that it thought worth sharing.

It just so happened that during the visit to New York, the fourth and final tennis grand slam of the year was in full swing in the form of the U.S. Open. Zeitgeist was impressed with the official site’s homepage, which had lagged behind that of the other slams in recent years in terms of user engagement and interactivity. Most impressive was the video functionality, which allowed live, crystal-clear streaming of all recorded matches, in a pop-out window that included information on important match statistics, a chat forum and even picture-in-picture capability so that the viewer could watch more than one match concurrently (see below picture). Also pleasing to see was an article written at the end of the tournament on the greatest matches of the 2011 Open, which included dozens of comments from people via Facebook. Zeitgeist was taken through to the site after seeing it linked from the U.S. Open’s Facebook page. Nice integration.

While most of Manhattan’s citizens had sensibly fled the city’s dog days of summer, some were still caught in the rat race. It was good of HBO then to attempt to bring some enjoyment into the workers’ commute, in a stellar piece of brand activation that lasted for several days. The cable network HBO has had an astonishing run of successful series – recently noted in The Economist – popular with audiences and critics alike, from Sex and the City through the Sopranos, Curb Your Enthusiasm and now with Boardwalk Empire. According to the Gawker, the network had spent so much on advertising on the Metro over the years, “the MTA let them buy the entire car”. The Prohibition-era series came to life for several days with passengers able to ride an authentic 1920s traincar, replete with the odd advertisement promoting the upcoming new season of Boardwalk Empire. It’s a superb idea, something very engaging while at the same time actually serving a purpose (functioning as an otherwise normal subway train). It also fits in very well with a particular fascination New York seems to have currently with speakeasies, a number of which have popped up in midtown and lower Manhattan.

Similarly, BMW have also been taking over a space, this time in the East Village, promoting the automaker’s take on what sustainability means in the form of the BMW Guggenheim Lab. The Lab will include more than 100 free lectures, movie screenings and discussion, according to an article on Luxury Daily, which quotes Harald Krüger, BMW board of management member, as saying “premium is also defined by sustainability”. PSFK called it an “urban curiousity hub”. A picture of the Lab is below.

It was also interesting to wander through the Museum of Modern Art’s current exhibition entitled ‘Talk to Me: Design and Communication between People and Objects’. As the website blurb says,

“The exhibition focuses on objects that involve a direct interaction, such as interfaces, information systems, visualization design, and communication devices, and on projects that establish an emotional, sensual, or intellectual connection with their users.”

Running through November 7th, one of the more interesting practical things Zeitgeist noted about the show was the introduction of Augmented Reality as a way of enhancing some of the pieces exhibited. Also included were QR codes featuring more information for visitors, as well as hashtags for each object, to encourage people to talk about them and discuss them more easily via Twitter. Really interesting stuff.

So as you can see, there is an awful lot of interesting and relevant stuff going on in the city that never sleeps. FYI, Zeitgeist will be accepting commissions for future trips, especially ones that involve further investigation into the speakeasies mentioned earlier.

The (Deceptive) Art of Performance

On the way back from Paris two weeks ago, Zeitgeist was treated to a magnificent sunset as the Eurostar sped through the francophone countryside. It occurred to him how much more enjoyable the journey would be if the whole of the shell of the train were transparent, one giant window. Aside from structural engineering issues, this might also pose difficulties with the heat and light from the sun. Nevertheless, those hypotheticals did not give Airbus pause when it announced earlier this week they would be building a transparent plane ready for 2050.

Indeed, Zeitgeist has been thinking a lot about transport recently. In the past several weeks we have written about planes, trains and automobiles. The above spot, via Creative Criminals, for an M-powered BMW is a guilty pleasure, what do you think to its authenticity? These sorts of virals / candid shots / advertisements are becoming increasingly popular – though BMW years ago produced the perfect example –  as typified by the below video featuring a tennis player and a suspiciously nice-looking Mercedes. This is not the first time that Mr. Federer has shown off his viral-inducing skills. Could this sort of practice be extended to other brands? How about a blurry video of someone looking remarkably like Gordon Ramsay rushing into the Tesco Express that sits two doors down from his flagship restaurant on Hospital Road for some last-minute ingredients?

One question to ask might be whether the authenticity of the video even matters if it creates and stimulates discussion about the brand. In large part it is the aura of candour that provides excitement to the viewer; ‘this wasn’t meant to be released, you shouldn’t be watching this’, or ‘you are one of a select few who can’. As one blogger notes on a Mercedes forum, speaking to these types of video, “Fake, but I enjoyed every one of them :D”. And that, surely, is the point.

We Have (Green) Ignition

Shell and Renault might not leap to mind as producers of the most ‘green’ products in the market right now. Hence why both companies are trying to alter this perception by touting their so-called ‘green credentials’. In the past week, one brand has come off better than the other in managing these expectations.

Though unquestionably adept when it comes to social media – having in the past month launched their products on the latest incarnation of the Sims game, as well as the ubiquitous Facebook integration – Renault has fallen foul of the ASA twice over a period of five weeks. At the end of March, seventeen people complained that the company’s strapline for their new electric car, that it was a ‘zero-emissions vehicle’, was a fallacy, as it “did not take the full life cycle of the vehicle into account… the ASA adjudicated that if the car was charged using energy sourced from the UK’s national grid, CO2 emissions would be produced as a result.” The article also mentions a new set of codes by Defra meant to combat ‘greenwashing’ tactics. Yesterday, Brand Republic reported the ASA had banned a second Renault advert, when one person complained “it was using French rather than UK figures to make the claim that one of its electric cars reduces CO2 emissions by least 90%.” The ASA concluded the ad was “misleading”.

Where Renault has stumbled, Shell has not, with those wonderful JWT minds producing a simple but visually engaging advertisement that immediately speaks to the relative cleanliness and quality of its fuel.

One luxury brand not usually associated with such serious things like sustainability is Aston Martin. But then neither was BMW before it recently unveiled its prototype electric car (see headline picture). Campaign magazine reported yesterday that the manufacturer “is looking for an agency to handle the launch advertising for its Cygnet city car”. The project is being managed in conjunction with Toyota, based on that company’s iQ car. “a large proportion of Aston Martin drivers also own a smaller car, such as a Mini or smart car, which they use for their inner-city commutes or to do the shopping. Reports suggest that the Cygnet will cost around £30,000 and feature a low-emission economical engine.” It’s an interesting decision. Although one might initially blanche at the idea of Aston Martin producing a more economical car, as the above quotation illustrates, it is in fact very on-brand. In this case, why sell to half of the consumer’s automobile product purchase, when you can sell to it all? The model will, initially, only be available to those that already own an Aston Martin.

Zeitgeist is most pleased to see efforts being taken by the those industries with an environmentally questionable past to prepare for a cleaner future. Moreover, who’d have thunk it, but electric cars can be cool and fast (although UK hybrid and electric sales are unfortunately slipping). It’s clear from Renault’s example though that people won’t tolerate a greenwash. Perhaps the open-source project “c,mm,n“, will help.

Augment that Reality

Recently, a prestigious blog (no longer an oxymoron) on advertising questioned whether despite all the hubbub, Augmented Reality might just turn out to be another Second Life: a flash-in-the-pan fad that was explosively white-hot at its inception but quickly lost its lustre when it became apparent that no one was making use of it. Could Augmented Reality [AR] suffer the same fate? Before answering, let us delve first into what AR is all about, as well as look at some uses of the technology.

It might be deemed unfair to make a comparison between Second Life and AR, purely on the grounds that one is an application and one is a technology. The difficulty in sustaining use will be in ensuring a practical and enjoyable use of the technology, i.e. fun without being gimmicky (a la QR codes).

Augmented Reality in its simplest terms is a virtual representation of the real world through still image or video overlaid with aspects of digital content. This content could be in the form of an animation to help show off a product, or it could be imagery showing a location that has been ʻtaggedʼ. Currently AR can be viewed with a webcam or with smartphones such as phones using the Android OS or iPhone. One of the most prominent examples at the moment is Layar. It can tell you where your nearest tube stop is, what the price of the house youʼre standing in front of is, a Wiki for the gallery across the road, a Flickr photo or tweet made nearby. Does all this risk being a little too much to take in though?

There are some singularly fantastic executions that companies have been doing over the past year or so. GEʼs example was the first example that Zeitgeist saw and is beautiful in its simplicity, as well as being a great piece of PR for the conglomerateʼs smart grid that President Obama has recently been tubthumping.

Lego also produced something extraordinary, featuring an ʻexplodedʼ version of one of its products on the back of the box, which then fits together, neatly assembled. Anyone who has ever experienced
any trepidation upon opening the hood of their car will welcome BMWʼs foray into the world of AR. Another example that demonstrates the usefulness for such an application is the work that AKQA produced for the USPS. Last month, Esquire magazineʼs AR issue hit the shelves: “The cover, which will feature actor Robert Downey Jr., will emerge on the screen in 3D and feature flying text and images that animate based on how the magazine is positioned.”

Only time will tell; there could even yet be a future for QR codes. Exciting prospects and practical opportunities for AR abound; the technology will have to convert consumers quickly by being easy to use with very beneficial results. Second Life turned out to be pointless; they built it, people came, had a look around and left. Let us hope the same does not happen with Augmented Reality.