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The periscopic media tour
The periscopic media tour
The web and creative work
The internet is changing the economics of creative work – or, to put it more broadly, the economics of culture – and it’s doing it in a way that may well restrict rather than expand our choices. Wikipedia might be a pale shadow of the Britannica, but because it’s created by amateurs rather than professionals, it’s free. And free trumps quality all the time. So what happens to those poor saps who write encyclopedias for a living? They wither and die. The same thing happens when blogs and other free on-line content go up against old-fashioned newspapers and magazines. Of course, the mainstream media sees the blogosphere as a competitor. It is a competitor. And, given the economics of the competition, it may well turn out to be a superior competitor. The layoffs we’ve recently seen at major newspapers may just be the beginning, and those layoffs should be cause not for self-satisfied snickering but for despair. Implicit in the ecstatic visions of Web 2.0 is the hegemony of the amateur. I for one can’t imagine anything more frightening.
“The amorality of Web 2.0,” Rough Type, 6 October 2005, www.roughtype.com/archives/2005/10/staytuned.php
How the web is creating new ways to coordinate economic activity
So far in the history of capitalism, we’ve had two major ways to organize economic activity: through companies and through markets. They work in tandem, of course, but they represent two different approaches. Companies coordinate resources (such as people, money, and equipment) through the management hierarchy. A market does the same thing by setting a price on the ultimate economic output that those resources will produce. Now we’re seeing the beginnings of a third way to coordinate economic activity that, in some cases, may be more efficient than either the company or the market. It’s called peer production.
The web is creating new ways to coordinate economic activity by allowing individuals to create products for themselves and others to enjoy. Yale Law School professor Yochai Benkler coined the term peer production to describe “the emergence of a vibrant, innovative and productive collaboration, whose participants are not organized in firms and do not choose their projects in response to price signals.” Peer production is part and parcel of what I call the culture of participation – that is, the explosion of user-generated goods (mostly digital), including open-source software, the Wikipedia online encyclopedia, blogs, podcasts, and photo-sharing sites like Flickr. (I even devote a whole category to the subject on the Business 2.0 blog.)
Just as companies and markets coordinate economic activity (through management control and contracts, respectively), the web allows individual producers and consumers to swarm together with like-minded individuals to create complex products. It also allows them to easily find an audience to test, use, and provide feedback on the content and products they create. Either way, peer production in some cases threatens to decimate the information advantage of companies and markets. In most companies, information about employees, equipment, and capital gets communicated through the management structure – your boss is supposed to know what you can do and how best to motivate you. In markets it gets communicated via price signals – “Sure, I’ll design a toilet for you if you give me $20,000.” In peer production it gets communicated directly between producers and is stored on the web. Since peer production is not primarily driven by the profit motive, it threatens to destroy profits in those areas where it can effectively compete. If consumers are using peer-produced goods and content, many times it’s at the expense of company-produced goods. So even if the peer producers are not making any money, they are potentially taking away sales and market share from companies. (Witness what Linux has done to Sun Microsystems.)
“The economics of peer production,” Erik Schonfed, Business 2.0, 30 September, 2005, www.business2.com/b2/web/articles/0,17863,1112586,00.html
Inefficient IT investment
As a business resource, information technology today looks a lot like electric power did at the start of the last century (when manufacturers built and maintained their own generators). Companies go to vendors to purchase various components – computers, storage drives, network switches and all sorts of software – and cobble them together into complex information-processing plants, or data centers, that they house within their own walls. They hire specialists to maintain the plants, and they often bring in outside consultants to solve particularly thorny problems. Their executives are routinely sidetracked from their real business – manufacturing automobiles, for instance, and selling them at a profit – by the need to keep their company’s private IT infrastructure running smoothly.
The creation of tens of thousands of independent data centers, all using virtually the same hardware and, for the most part, running similar software, has imposed severe penalties on individual firms as well as the broader economy. It has led to the overbuilding of IT assets, resulting in extraordinarily low levels of capacity utilization. One recent study of six corporate data centers revealed that most of their 1,000 servers were using just 10 percent to 35 percent of their available processing power. Desktop computers fare even worse, with IBM estimating average capacity utilization rates of just 5 percent. Gartner indicates that between 50 percent and 60 percent of a typical company’s data storage capacity is wasted. And overcapacity is by no means limited to hardware. Because software applications are highly scalable – able, in other words, to serve additional users at little or no incremental cost – installations of identical or similar programs at thousands of different sites also create acute diseconomies, in both upfront expenditures and ongoing costs and fees. The replication, from company to company, of IT departments that share many of the same technical skills represents an over investment in labor as well. According to a 2003 survey, about 60 percent of the average US company’s IT staffing budget goes to routine support and maintenance functions.
“The end of corporate computing,” Nicholas Carr, Sloan Management Review, Spring, 2005.
Using scenarios at Shell
To use the metaphor of air navigation, the work of the Shell Scenarios team is designed to help charter routes across three interrelated levels: the Jet Stream level of long-term predetermined trends, uncertainties, and forces; the Weather Systems that reflect specific features of key regions as influenced by the Jet Stream context; and market-level trends and turbulences. This report presents Jet Stream contexts that will impact the Royal Dutch/Shell Group as a whole, through predetermined trends and through long-term equilibria captured in Global Scenarios to 2025.
The analytical framework developed for this report can also shed light on Weather Systems and market-level risks and opportunities, something done separately in customized Navigation applications.
Over the last three decades, Shell has developed Global scenarios to cast light on the context in which the Group operates, to identify emerging challenges and to foster adaptability to change. These scenarios are used to help review and assess strategy.
The Global Scenarios to 2025 released in 2005 build on this foundation to develop an enhanced, robust methodology that addresses a broader range of strategic and planning needs across the whole spectrum of relevant time horizons and contexts.
Hence the transition that has occurred from a three-year scenario cycle to an annual one. This will provide greater continuity while also enabling flexible contributions to Group processes for identifying critical risks and opportunities.
“The Shell Global Scenarios to 2025,” www.shell.com/scenarios
New paradigm for software development
“There are a whole set of things which, taken together, are a new paradigm for software development,” says (venture capitalist Jim) Moore. “The revolution is that a set of elements now allow people, including end users, to very simply knit together powerful ‘web services.’”
Until recently, professional software developers have mostly created web services using one of two complex sets of code. Microsoft has .Net (pronounced “dot-net”) and Sun, IBM, and others use the competing J2EE. But Moore thinks we are heading to a world of web services built around RSS and other simple web technologies. This will let just about anybody build on to someone else’s software application on the web. “The elements of this programming are very simple instructions, like URLs, RSS, and zip codes,” he says.
One example of how technology already lets people build onto other software applications is Google Maps, which allows you to subscribe to a map from its database and then put your own information on top of it. That’s just the kind of service, or simple application, that Moore finds exciting.
Moore believes that even companies like enterprise software giant SAP could find themselves threatened, as pieces of their business become available as much simpler services on the web. He speculates, for example, that companies will begin to figure out how to perform tasks, such as tracking inventory, using RSS feeds.
“Fast forward: cashing in on RSS,” David Kirkpatrick, Fortune, 12 August, 2005.
The evolution of financial services
We also looked to the experience of other industries to discern patterns of value migration that might be repeated in financial services. In information technology and retailing, for example, the recent story has been one of consolidation: A decade ago, there were no clear victors; today, a relatively small number of firms dominate the market. In IT, Microsoft dominates software, IBM dominates services, and Intel dominates hardware; in retailing, the collapse of the middle-market has seen department stores supplanted by large, low-cost distributors and small, high-end boutiques. The dominance of large firms in financial services is complicated by a high level of merger activity, but it nonetheless exists.
The industry’s market structures will continue to evolve, creating significant scope for individual firms to win or lose. While the exact nature of this evolution is obviously impossible to predict, we assume that it will be shaped by common trends similar to those observed repeatedly in other industries but not in financial services so far. Three trends stand out: the way in which value leaves the middle ground; opportunities to fix broken parts of the value chain; and shifts in industry boundaries.
Value leaves the middle ground
A number of factors indicate that certain financial services segments will break down vertically and that value will be squeezed out of some of today’s profit zones:
Elements of the value chain are becoming commoditized.
Massive scale is proving economically rewarding.
Outsourcing is becoming increasingly acceptable.
Manufacturing and distribution specialists are emerging.
This effect is becoming apparent in retail banking, for example, with the emergence of specialized distributors and white-label providers, increasing commoditization of transaction processing, and the delegation of back- and middle-office functions to non-financial providers. Such shifts will be more powerful in sectors that are currently integrated, such as retail banking, than in those whose supply chains are already fragmented, such as insurance. Value resides in the demand as well as the supply side of the equation, and it is the collapsing value of the middle of the customer spectrum that is likely to prove more important to differential profit growth. As customers demand more channels, and customer information becomes more critical, the three zones of customer focus today – specialist high-risk propositions, mass-market low-cost propositions, and tailored service- or advice-led propositions – will give way to further micro-segmentation and a shift in emphasis from products to solutions. The current value of the central mass-market zone will consequently migrate to the two more specialist zones.
Fixing the broken link
An entire industry’s fortunes can be transformed by the action of its member firms by fixing areas of underperformance in the value chain. One example is the growth of open architecture in mutual funds management. Distributors have responded to customer demand by offering a variety of branded products, not just their own. This has created a sharper distinction between manufacturing and distribution, and is gradually reshaping business models. Fund managers may have given up some margin, but they save on marketing and distribution costs. Those dealing directly with consumers (typically banks and wealth managers) offer a range of products and manage according to well-defined wholesale and retail margins.
We anticipate similar industry-wide benefits in many insurance sectors, where information processing technology could be used to significantly improve profitability, efficiency, and cycle time, possibly even also driving up demand.
Boundary shifts and border crossings
Newcomers and fringe participants will inevitably encroach on traditional financial services territory. Diverse manufacturing giants such as Ford, General Electric, and IBM will continue to push into financial services using their vast customer reach and skills in portfolio management. Large retailers will use their own expanding customer franchises to compete with retail banks.
We expect that substantial value will leak out of the industry this way, but we expect this to be simultaneous with even greater value creation within the industry from new business models. While the rate of leakage will be driven by the transfer of non-strategic activities to specialist providers outside today’s industry, the rate of value creation will be driven by internal and external innovation and by efforts to deliver more revenue in ways that incur less cost and capital.
“Future scenarios for financial services,” Nader Farahati, Chris Welton, and Caleb Wright, Mercer Management Journal, 19, 2005.
Microsoft: The burden of size
In the dog years of Silicon Valley, Microsoft, at 30, is in advanced middle age. The company relies on Windows and a suite of desktop applications – products released a decade ago – for 80 percent of sales and 140 percent of profits. Newer products – the Xbox videogame machine, the MSN online service, the wireless and small-business software – collectively have racked up $7 billion in losses in four years.
In web-server software, Microsoft has 20 percent of the fast-growing market, while the free Apache program, a Linux variant, has 70 percent – worth $6 billion in revenue had Microsoft gotten the sales. In search, Google and Yahoo! get 70 percent of queries while MSN gets only 13 percent. Google now gives away features (desktop search, photo archiving) that Microsoft promises in its next upgrade of Windows – which is running two years late.
What has gone wrong? Microsoft, with $40 billion in sales and 60,000 employees, has grown musclebound and bureaucratic. Some current and former employees describe a stultifying world of 14-hour strategy sessions, endless business reviews and a preoccupation with PowerPoint slides; of laborious job evaluations, hundreds of e-mails a day and infighting among divisions so fierce that it hobbles design and delays product releases. In short, they describe precisely the behavior that humbled another tech giant: IBM in the late 1980s. Tellingly, IBM reached a point of crisis just over three decades after it started selling computers to commercial users.
“Microsoft is a vestige of the past,” says Marc Benioff, chief of rival Salesforce.com, whose shares, since they were first offered to the public in June of last year, are up 27 percent; Microsoft’s are down 5 percent in that period. Salesforce, which trades at 84 times next year’s earnings (versus 20 for Microsoft), rents its software to businesses over the internet. “Microsoft,” Benioff says, “still wishes the internet hadn’t been invented.”
“Microsoft has become what it used to mock,” says Gabe Newell, a developer on the first three versions of Windows. At late-night rounds of poker with “Bill and Steve” in the mid-1980s, he says, “we laughed at IBM. They had all this process for monitoring productivity, and yet we knew they had spectacularly bad productivity. That’s Microsoft now.”
Jeff B. Erwin, who quit in December after five years there, adds, “Microsoft has some of the smartest people in the world, but they are just crushing them. You have a largely unhappy population.”
“Microsoft’s midlife crisis,” Victoria Murphy, Forbes, 13 September, 2005.
Disaster response: planning versus improvisation
Critics of the response to Hurricane Katrina in New Orleans tend to focus on the need to formulate and implement better plans. I suspect that a more sober assessment might instead identify poor improvisation as the main problem. That is, if officials close to the scene had assumed more responsibility and been granted more leeway to focus on results, rather than waiting for instructions or assistance, then some of them would have taken more initiative and averted some of the worst problems.
I think that people have a tendency to put too much faith in centralized planning, and they do not have sufficient regard for decentralized improvisation. The more ambiguity that exists in a situation – because of its novelty, uncertainty, and the absence of critical information – the more that it favors improvisation over planning.
“The planning illusion,” Arnold Kling, Tech Central Station, 22 September 2005, www.techcentralstation.com/092205B.html
The large significance of small business clusters
Most business capitals shout their names from the hilltops – literally, in the case of Hollywood. Everyone knows which industry dominates that town, and which ones rule Detroit and Houston. But how many could name the capital of socks? Or medical imaging technology? Or firearms? These are among dozens of hidden capitals of vital US industries, each populated by and dependent upon dozens of small companies that both compete and collaborate.
This idea of industry capitals, or “clusters,” as academics call them, might seem like a quaint tourist draw for small towns, an excuse, say, for Gilroy, California, to throw its annual garlic festival. But they serve an important function in the economy. Overlapping businesses in the same region gain a number of advantages, drawing in more suppliers and customers along with financial institutions that understand the industry. Meanwhile, the labor pool grows to include more workers with special skills and experience. Even on a local scale, sticking together makes economic sense: An “auto mile” of car dealerships or an entertainment district with bars and restaurants can draw more customers, share parking, and pool its marketing dollars to promote the neighborhood.
While business capitals have been around for centuries, they spring up and prosper today for very different reasons. Before computers and modern air travel, says Harvard Business School professor Michael Porter, who studies business clusters, capitals were located near natural resources – such as iron-ore deposits or a deep-water port for shipping goods. Today, Porter says, it isn’t natural resources but human resources that make for an industry boomtown. Concentrations of specialized experts may result from a university producing patents on new technology and graduates who understand them, or a large corporation sloughing off workers who see entrepreneurial opportunities their less nimble employer didn’t. Silicon Valley is a prime example of a brainpower-based capital, as is our lesser-known find, Orlando, where the University of Central Florida feeds the local virtual-reality industry. Sometimes, as in the case of sports medicine in Birmingham, Alabama, a single expert is enough to draw an industry.
Still, you’ve read the headlines: tele-commuters are working from home in their bunny slippers! A business’s location, it is said, no longer matters. “That isn’t true,” says Porter. “You can’t just set up any business in the middle of a cornfield. There are powerful benefits of proximity to a cluster in terms of efficiency and productivity.” While you could plunk an aircraft-engineering firm in the middle of Vermont, the experience of hiring topflight employees will be infinitely more frustrating – and less competitive – than if you were to locate in Wichita, the biggest hub for light-aircraft manufacturing in the USA.
Professor Richard DeMartino, who studies clusters at the Rochester Institute of Technology College of Business in New York, says recent research has gone beyond touting economies of scale and unearthed another benefit – faster innovation: “When you have people in the same area thinking and talking about a particular field, not only do people cooperate, but ideas flow quicker.” Workers who change jobs pollinate their new environment with ideas from their old one.
“Secret capitals of small business,” Fortune Small Business, September 2005.
“Perfomative ties”: how good companies share information
In a recent study, Levine has found that often, what gives firms competitive advantage isn’t just their repository of sheer knowledge, but their use and encouragement of so-called “performative ties” – those impromptu communications made by colleagues who are strangers in which critical knowledge is transferred with no expectation of a quid pro quo. “Not many managers even understand that this happens, much less why,” says Levine. “They think it’s just friends helping friends. But it’s not. Usually, people will reach out and connect with colleagues whom they have never met or talked to before. It’s not dependent on prior or future favors.”
While many companies have the potential to realize competitive advantage by creating and transferring knowledge more efficiently across employees, few know how to do it successfully, Levine notes. “The idea of knowledge as a source for competitive advantage is relatively young, and there’s not much research that looks at how knowledge flows within firms. So professional services firms seemed a good place to start. They have no retail locations. They rent generic office space and have computers. In other words, there are no assets other than knowledge to explain their success. Plus, they can charge a premium that can’t be explained simply by the accomplishments of their staff; most have a generic business degree, not several decades of industry experience. Even partners haven’t usually spent more than a decade there.“
What they do well, says Levine, is move knowledge around effectively, taking the company’s entire accumulated know-how and gathering it quickly to a single point to create a solution for a client. “The question was, how do they manage to do that? It can’t be easily documented in manuals, because valuable knowledge is tacit and customized to each client’s needs,” says Levine. Moreover, he notes, in a large firm, there is no way someone can know everyone else who works there. “Even the most social person can’t know every employee personally, especially because many of these firms are large and global, and have turnover rates of more than 25 percent a year. Plus, each team commits to a level of client confidentiality, so they can’t divulge extremely specific details about a case.”
In spite of all that, Levine observes, some firms are very good at sharing knowledge. “The data suggest that yes, people do turn to their immediate officemates for advice, but the major indicator of a firm’s knowledge transfer ability is whether its employees routinely call upon distant colleagues – people unknown to them – for information, after a wide search. Those are performative ties,” he explains.
Often, employees conduct a wide search, looking for colleagues or even firm alumni who may be of help on the case in question, says Levine, whose study on the subject is called “The Strength of Performative Ties.” “Although these people are likely to be complete strangers, when they share knowledge, it’s done in an intimate transfer as though the parties involved were actually close friends. There’s no negotiation, no explicit reciprocity, no quid pro quo on an individual basis. It’s more the idea that ’I’ll help you today because I expect that if I needed help someday, someone else would help me.’”
“Do talk to strangers,” Knowledge@Wharton, 21 September 2005, http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=1285
Is high performance in your organization’s DNA?
So, how do you build a better organization? How do you reverse entropy and restore an organization to robust health and profitability? The first step is figuring out what sort of organization you live in. What are its unique traits and attributes? What is its “DNA”?
The DNA metaphor is useful in understanding the idiosyncratic characteristics of an organization. Like the DNA of living organisms, the DNA of living organizations consists of four basic building blocks, which combine and recombine to express distinct identities, or personalities. These organizational building blocks – decision rights, information, motivators, and structure – largely determine how a firm looks and behaves, both internally and externally. The good news is that – unlike human DNA – organizational DNA can be modified.
An organization’s DNA strongly influences – and, in some ways, even determines – each individual employee’s behavior. It explains why the Georges in your organization behave as they do. It accounts for your behavior as well. Which customers do you call on? Which e-mails do you leave unanswered? What determines whether you offer a customer a discount to increase volume or hold the line to protect margins? How do you share information with someone in another business unit or region? These daily decisions – often made far from the executive suite – determine an organization’s ultimate success or failure.
The next chapter examines each of the organizational DNA building blocks and how they combine in different patterns to influence both functional and dysfunctional behavior. We also suggest, through real-world case examples, how you can adjust and integrate your organization’s decision rights, information, motivators, and structure to drive improved performance.
Results: Keep What’s Good, Fix What’s Wrong, and Unlock Great Performance, Gary L. Neilson and Bruce A. Pasternack, (Crown Business, 2005).
Marketing’s falling status
In many companies, there has been a marked fall-off in the influence, stature and significance of the corporate marketing department. Today, marketing is often less of a corporate function and more a diaspora of skills and capabilities spread across the organization. By itself, the disintegration of the marketing center is not a cause for concern, argue the authors, but the decline of core marketing competence certainly is.
For this article, the authors undertook a series of in-depth interviews with leading marketing executives and chief executive officers to clarify the root causes of the decline. Their research identifies eight distinct factors that contribute to marketing’s waning influence – among them a worrying “short-termism,” significant shifts in channel power and marketing’s inability to document its contribution to business results. The consequences are not immediate, but they are far-reaching: Absent a core of marketing competence, say the authors, the corporate brand will suffer, product innovation will weaken, and prices will be less robust.
“The decline and dispersion of marketing competence,” Frederick E. Webster Jr, Alan J. Malter and Shankar Ganesan, Sloan Management Review, Summer, 2005.
How important is the first mover?
Take this quick test: which firm is the innovator that brought us online bookselling in the 1990s? If your answer is Amazon.com, you are wrong. The idea for online bookselling – and the first online bookstore – came from Charles Stack, an Ohio-based bookseller, in 1991. Computer Literacy bookstore, a successful retail chain, also registered an internet domain name in 1991. Amazon did not enter this market until 1995.
Another quiz: which innovator came up with the idea for online brokerage services? If you answered Charles Schwab or E-Trade, again you are wrong. Two Chicago brokerage firms – Howe Barnes Investments and Security APL Inc. – launched the first Internet-based stock trading service, a joint venture called Net Investor, in January 1995. Schwab did not launch its web trading service until March 1996.
Both examples highlight a simple point that is at the heart of this book: the individuals or companies that create radically new markets are not necessarily the ones that scale them up into big mass markets. Indeed, the evidence shows that in the majority of cases, the early pioneers of radically new markets are almost never the ones that scale up and conquer those markets. For the last 20 years, the Xerox Corporation has been derided for its inability to successfully commercialize scores of new products and technologies, notably including the now ubiquitous personal computer OS interface developed at its PARC research center in Northern California. In reality, Xerox’s failure is more the norm than the exception!
Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets, Constantinos C. Markides and Paul A. Geroski (Jossey-Bass, 2004).
The power of dumb ideas
The solution to marketing’s current ills is not more creativity. It’s less.
Marketing is overwhelmed by complexity, and marketers’ predisposition toward creativity only complicates their job, their companies’ operations, and their own lives even more.
Ten years ago, the challenges were merely: the advance of the five-hundred-channel universe, reconciling the historic tensions between marketing and sales, calculating the return on advertising investment, and keeping abreast of fickle public taste.
Today, a quick look at Google indicates that we’re grappling with an eight-billion-channel world. The distinction between marketing and sales has evaporated in the face of direct-marketing technologies that brand products, take orders, and fulfill them at the same time.
Even worse, there is no more public taste. There are only publics’ tastes, which are ever more atomized, specific, and hard to fathom.
David Ogilvy’s contention that “it takes a big idea to attract the attention of consumers and get them to buy your product” no longer applies. His fellow advertising guru Bill Bernbach’s belief that, in marketing, “not to be different is virtually suicidal” today may be suicidal in and of itself.
The solution to marketing’s current ills is not more creativity. It’s less.
Novelty for the sake of novelty is not only risky, it’s more often than not a recipe for irrelevance. A study of 1,300 publicly traded US companies in 55 industries by Chuck Lucier, senior vice president emeritus at Booz Allen & Hamilton, found that only four broad ideas, copied over and over again in one sector after another, accounted for 80 percent of the breakout businesses created between 1965 and 1995: power retailing, megabranding, focus/simplify/standardize, and the value chain bypass. True, the big-box store may not be the most original concept on Earth – which is exactly the point! Originality hasn’t mattered a whit to the customers, employees, and shareholders who have enjoyed its application in consumer electronics (Circuit City), home improvement (Home Depot), and office supplies (Staples).
So what is the simple, dumb truth?
Imitation across industries is more efficient and effective than blue-sky creativity and innovation. If you accept that one million monkeys pounding on keyboards for one thousand years will eventually, accidentally produce a ton of gibberish and one Shakespearean sonnet, you must also accept the converse: that a lone creative individual racking her brain will produce much less gibberish, and nothing profound. Appropriating existing marketing concepts is cheaper – and certainly quicker to implement – than developing new ones. The secret is bringing a great idea from another market or industry to your market or industry.
The Big Moo: Stop Trying to Be Perfect and Start Being Remarkable, by The Group of 33 and edited by Seth Godin (Portfolio Books, 2005).
Strategic dilemma in the auto industry
Domestic marketing executives don’t hide their disdain for the current situation. DaimlerChrysler Motor Company VP Jeff Bell thinks employee discounts are simply the latest marketing gimmick that consumers can see right through. Unfortunately for Bell, his company had to piggyback on its competitors’ strategy or risk losing sales. According to Bell, the real key to growing sales is a focus on the brand.
“Brands drive everything,” he said at the recent Frost & Sullivan Sales and Marketing Executive Summit. “You need to start with the brand. What does it promise? Then everything you do from manufacturing to sales to service has to deliver on that promise.”
Bell and his team take that strategy seriously. They monitor brand perception annually, have re-architected the car maker’s web sites, and use customer targeting to reach appropriate markets better – including making an interactive connection with customers through the company’s loyalty program and such events as the Jeep “World of Adventure Sports” TV series. Even the showroom experience is evolving to match the brand better. “By 2007 we plan to be [considered] equal to Toyota in quality and resale value,” Bell said. “We’re looking not to have to compete on price.”
What manufacturers need is a persuasive case for how brands and customer relationships build long-term profit, not just for manufacturers but for dealers as well. The only way to build that case, however, is to start looking at the problem through the customer lens, rather than the product lens. Rather than dreaming up new ways to discount their product, they need to dream up new ways to create value – both short-term and long-term value – from their customers, one customer at a time.
“Auto industry spins its wheels,” Martha Rogers, Inside 1to1, 3 October, 2005, www.1to1.com/View.aspx?DocID=29133
Craig HenryStrategy & Leadership’s intrepid media adventurer collected these sightings of strategic management in action around the world. Craig Henry is a marketing and strategy consultant based in Carlisle, Pennsylvania (Craighenry@aol.com). He welcomes your contributions and suggestions.