For more than a decade, Jim Taylor and Watts Wacker have been traveling companions on a journey into the future. They are alike in many ways: insatiably curious, perpetually mobile, consciously provocative. But Taylor, 49, has always been the more "executive" of the two. Over the last 20 years, he's held senior positions with E.F. Hutton, Ernst & Young, Yankelovich Partners, and Hill & Knowlton.
Last March, Taylor entered the world of high technology, taking a position as senior vice president for global marketing at Gateway 2000, the fast growing computer manufacturer based in North Sioux City, South Dakota. Gateway is a classic story of the Digital Age. Chairman and CEO Ted Waitt started the company in 1985, when he was just 22, and sold his first computers literally out of a barn. Today it is one of the world's leading computer suppliers, with annual revenues of roughly $5 billion and 9,000 employees. Founder Waitt, now a ripe old 33, is worth $1.7 billion.
Gateway differentiates itself by its strategic model and brand identity. The company sells nearly all its products directly to consumers -- a distribution channel it dominates along with arch rival Dell. But Gateway has also nurtured a distinct public image -- an emotional connection with customers that reflects its offbeat marketing and Midwestern sensibilities.
Gateway's ads, which often star the company's employees, are famous for their self-deprecating humor. The boxes in which the company ships its computers, like the walls of the factories where it makes them, are covered with black-and- white spots borrowed from Holstein cows.
Jim Taylor joined Gateway to help it prepare for the future -- to apply the blue-sky ideas he's developed with Watts Wacker to the in-the-trenches realities of digital competition. Fast Company visited Taylor in South Dakota to explore how his idea agenda is shaping Gateway's future marketing agenda.
Communities of Strangers
You've come to Gateway to help position the company for the next round of competition. What will it take to win in the future?
The future of the personal computer is as a tool to connect what Watts and I call "communities of strangers." These are people linked together based on common ideas and values -- shared identity -- rather than social proximity. This is an absolutely revolutionary change. By using the computer to find people who share your views, you can live in whatever kind of world you want. Reality is no longer a defined constant. It is a choice.
How does that translate into how people live?
There are lots of kids today whose best friends are people they've never met. They spend 20 hours a week in chat rooms with other kids. Over time, as they share their interests and lives, they develop a shared identity -- a real sense of community that has nothing to do with where they live.
It's a difficult adjustment for parents. A father sits down with his kid and says, Who's your best friend?" And the kid says, "Sabbir from Bangladesh." The father says, "But what about Jake next door?" And the kid says, "I don't have anything in common with him." The father is mystified, "How can you have something in common with a kid in Bangladesh and nothing in common with the kid next door?"
But that's exactly the point. Politically, the world is still organized around geographic entities called countries. Socially, it's reorganizing itself around shared collective interests -- communities of strangers with their own language, rituals, heroes, icons. We want to create relationships that make us a partner with these communities. We want to help manage their sense of connectedness.
What does that mean for marketing?
It means that how you characterize communities of strangers becomes one of your most important strategic insights. It also means that if you want to reach these communities, you'd better speak their language.
Let me give you an example. One of our most important market segments is what we call the "enthusiast" population. But there are several different enthusiast populations, and they each relate in a different way to their computers. For "avant garde hackers," the PC is a tool. But for "scientistic enthusiasts," the PC is an intimate reference point for life experience itself. Both of these communities are intense Web users. Both believe you can't be part of the future unless you believe in the power of technology. But we have to talk to them each differently. Our job is to identify distinct communities, figure out where they gather and what they care about, and talk to them using messages that address their specific needs.
Change Is Personal
What else will it take for computer companies to prosper in the future?
Winning companies will help people maintain their personal rates of change. The speed at which computer technology changes -- the speed at which Gateway operates -- is unreal. We change parts to the line every three hours. We change product configurations every three days. We change prices every day. If memorychip prices drop, our prices drop. If we get an unexpected production efficiency, our prices drop.
That's why I love the direct channel. We talk to 100,000 people a day -- people calling to order a computer, shopping around, looking for tech support. Our Web site gets 1.1 million hits per day. The time it takes for an idea to enter this organization, get processed, and then go to customers for feedback is down to minutes. We've designed the company around speed and feedback.
But isn't that the problem with computers? People are dazed and confused by all the change.
Complaining that technology changes fast is like complaining that rocks are hard; it's true but useless. I was just at a conference where a senior executive from EDS talked about the "tyranny of choice." Tyranny? We see it as liberation.
Go back to what I said earlier. Everybody can construct their own reality. People can pace how much they know about technology change to their tolerance for change. If you want to live in a world where there's almost no change in technology, you can do it. You just restrict how often you visit the media. If you want to live in a world where computer technology makes one big change every 18 months or so, you can do that too. Or you can go much faster. Someone told me that an innovation in digital technology gets produced somewhere every three seconds. I suppose that's your maximum fly-by speed.
We act as a technology broker for customers, regardless of their personal rates of change. We don't expect our customers to operate on the ragged edge of technology, except for the die -- hard enthusiasts. Our job is to monitor the technology -- change market, broker the best components in the world, and deliver the right computer systems for that moment in time.
"Fusion" Builds the Brand
Technology companies are all trying to compete on more than technology. They want to create brands. What will it take to build a brand in the future?
Building a brand requires a "fusion" strategy. In physics, fusion is a process that compresses atoms and produces more energy than it takes to do the compression. In marketing, fusion takes two contradictory constructs, pushes them together, and produces a new construct whose "energy" exceeds either one of its constituent parts.
We practice fusion here. Gateway is Silicon Prairie -- we fuse computers and cows. It doesn't make any sense; the two constructs are wonderfully at odds. So why does Silicon Prairie work? Because it fuses people's desires to connect to salt-of-the-earth values -- deep, spiritual, humanistic impulses -- with the desire to connect to breakthrough technology, which is in some ways the antithesis of those values. That's what distinguishes us from our competitors. Dell sells on product. We sell on spirit. It's hard to describe what an advantage those silly cow-spotted boxes are. People just love them.
So building a brand is about fusing substance with emotion?
It's also about consistency. Every company, once it assumes a brand identity, has to live with the moral consequences of that identity. A brand is a promise, and you have to keep your promises.
There's no difference between what we sell and who we are. The Gateway brand is really just the aggregate personality of the people who work here. We have 9,000 employees. Each of them has 7 close friends; each of those friends has 7 friends. That's 440,000 people -- and they all have email! We can't market a lie. We have to be cow-spotted everywhere, from how we build our machines to how we treat our people.
Advertising Is a Conversation with Yourself
Gateway's ads almost always feature company employees and you do most of your creative work in-house. Is that because of this "consistency" issue?
Most of what's wrong with advertising would go away if companies understood that the first job of an ad is not to create a one-way communication with customers, but to enact conversations inside the company. At Gateway, advertising is a communication from the company to the company -- we talk to ourselves first. That means we often advertise in media we know our own people read over media that we know they don't read, even if other media might deliver a better audience.
You wouldn't believe the reaction when we run an ad that doesn't feel "Gateway." We get thousands of emails from our people. That means our employees become the customer's best friend. They won't let us lie or shade the truth; they'd get wildly insulted.
It sounds dangerously self-reverential: We advertise to talk to ourselves. Don't you have to talk to customers?
At Gateway, a great ad does three things. One, it describes the performance of our technology. Two, it exudes our personality. Three, it communicates our ability to personalize technology for customers.
That third element is critical. We shipped 1.3 million computers last year and every one was custom built. We may build 1,500 computers on Monday with the exact same configuration. But if Jane Smith ordered one of those computers, she needs to understand that it was her computer moving through the plant. In fact, if she visited our assembly line, she'd see slips of paper with her name moving right along with the components. Her name travels literally around the plant with her computer. We always communicate to customers that we deliver machines personalized to their needs.
Customers for Life
Are there any important trends we haven't discussed?
There's one other trend that's changing everything: the aging of the population. In 1960, there were 5,000 Americans 100 years old or older. Today there are more than a million -- and there'll be 5 million by the year 2010. The oldest woman in America died recently. She was 120. Can you imagine?. She saw World War I in her forties. By the way, she worked in her backyard until she was 105.
That's where things are heading. Life spans will just keep on stretching. If I were a young adult today, someone starting a family, I'd plan on my son or daughter living to be 150. In fact, on their first birthday I'd take $10,000 and put it in a conservative investment like a guaranteed income contract. This way when they hit "adolescence" say, at 75they'll have a couple of million dollars to play with. And they will be able to play. They'll look the way a healthy 50-year-old looks today. Their skin will be supple, their heart will be strong. And they'll have 75 years left!
The social and political implications are huge. And there are big implications for this industry. Our strategic pathway recognizes that customers can buy 20 to 30 computer systems from us over their lifetime. If we can evolve along with their personal needs, if we can create an annuity relationship with them, that becomes a major advantage. You begin to understand the value of a lifetime customer.
William C. Taylor (email@example.com) is a founding editor of Fast Company.