It's no surprise that R/GA, the digital agency that helped longtime client Nike develop its Nike+ FuelBand fitness tracker, recognizes the connections between real world brands and the abundance of data at their disposal. To Barry Wacksman, the former chief growth officer who was recently promoted to chief strategy officer at R/GA, the impact of data extends far beyond supply chain efficiency or advertising and marketing. It's actually the foundation for an entirely new type of business model Mr. Wacksman, a 16-year veteran at R/GA, is helping to define.
In fact, Mr. Wacksman named it. "Functional integration" is what he calls the approach taken by a new breed of company that has thrived by creating "connected ecosystems of value," or products and services that are intended to work together and are often tied together with data.
"We started to see the rise of a new type of company," he said, calling Apple "by far the most powerful practitioner of this strategy." Functional integration is a modern-day answer to the classic horizontal integration model by which companies create multiple versions of similar products.
But it's not just tech firms that can explore functionally integrated models. Even R/GA client McCormick and Co., the spice maker, has incorporated the concept into things like its FlavorPrint initiative, which entices people to answer questions about flavors they prefer in order to predict which recipes they'd like.
"I would argue that every category has those opportunities," said Mr. Wacksman.
The functional integration concept is reflected in R/GA's own structure, which includes a Business Transformation department overseen by Mr. Wacksman. "We're building out the team in New York first, and ensuring that it's connected to our Planning and Analytics departments, which I now oversee," he said.
Ad Age asked Mr. Wacksman to explain functional integration, cultural data and other ideas R/GA has developed to help clients navigate what the agency calls "the connected age."
Ad Age: To some, the concept of functional integration may not seem much different from the Internet of Things. Is it? How?
Mr. Wacksman: Functional integration, which is a new business model I observed and named, refers to a new class of companies that incentivized their same consumers to buy more things by creating connected ecosystems of value.
The pioneers of this new model are Apple, Google and Amazon. All three have built a mix of interconnected products and services that reward customers for deepening the relationship with the brand. Apple painstakingly built an ecosystem that started with Macs and iTunes and later included iPods, iPhones, iPads, Apple Watches and Apple TV -- all synchronized via iTunes and its various media stores. Google and Amazon have similar if not quite as elegant ecosystems.
This is different from IoT, which is a class of individual products that connect to a digital service. When Nest first launched, it was an IoT product. As that company later encompassed fire detectors and security cameras on a single service platform, it became a functionally integrated ecosystem.
Ad Age: Is what R/GA calls "cultural data" distinct from the broader social media data category?
Mr. Wacksman: Cultural data is a new form of data only made possible by social media. Many companies and agencies are already using this information to see what conversational trends can be gleaned about their brands, which is called social listening. But there are broader uses of cultural data to mine insights into what people care about right this minute.
Ad Age: How are brands using cultural data to inform marketing efforts or product development?
Mr. Wacksman: Mining this data [such as trending topics on Twitter] enables work to be created at the speed of culture. By creating ads that are responding to what people are already talking about, it fosters work that is more relevant and authentic. But it means that the work must be created nearly in real time with these conversations, which is a vast departure from the three to six months it typically takes for a television commercial to be produced from initial brief to final cut.
Ad Age: How does the concept of functional integration apply to what the business transformation team does at R/GA?
Mr. Wacksman: We see functional integration as the key business model of the 21st century, what we call the "connected age." All companies and brands must figure out how to create these ecosystems -- or they won't thrive.
This is in stark contrast to how most Fortune 500 companies grew in the past. Historically, they built horizontal portfolios of disconnected products and brands -- many of which were actually competitive with one another, as in the many brands of laundry detergent made by Procter & Gamble or the various models of cars made by Ford. As these mature categories became commoditized, suddenly Apple and Google emerged with a completely new business model that gets the same consumers to buy or use nearly everything they make. And these happen to be two of the most valuable companies in the world.
The reason Apple is so valuable is not just because it designs beautiful, functional products. It's because Apple is the first company in history to make a line of products and services whereby an enormous population of consumers owns and uses all of them, because of their inherent interconnectedness. Our business transformation capability seeks to help companies make the leap from horizontal integration to functional integration. And this requires vast changes, both in product offering as well as internal organization. In essence, the emergence of functional integration enabled us to build a new consulting offering that aligned with where all companies are now headed.