Big Ideas Simply Explained - The Business Book

["WORKING WITH A VISION 199 Black Monday\u2014October 19, 1987, when stock markets across the world suffered huge losses\u2014was a strategic in\ufb02ection point that caused massive change in the business environment. and what it is actually doing? understand not just \u201cwhat\u201d is already running behind on four Actions are driven by the stark happening, but \u201cwhy.\u201d One method projects.\u201d Why? \u201cBecause we are reality of having to win business to achieve this is the \u201c5-why\u201d not allowing enough lead time in the marketplace against the technique, invented in the 1930s when quoting.\u201d The technique can competition; a company\u2019s front-line by the father of Kiichiro Toyoda, be used to interrogate internally personnel are likely to see and adapt the founder of Toyota, and used by and externally caused problems. to a new reality \ufb01rst. They are the Toyota during the 1970s. By asking people best positioned to identify \u201cwhy?\u201d \ufb01ve times, you can move It is also important to ask the critical issues. from the symptoms to the root cause right questions. Management guru of a problem. For example, the \ufb01rst Peter Drucker claims that \u201cthe most This means that leaders in the question might be \u201cwhy did we serious mistakes are not made as a organization have to be prepared miss the deadline?\u201d to which the result of wrong answers. The truly to listen to people dealing with answer might be \u201cit took longer dangerous thing is asking the customers and suppliers\u2014who to complete the project than we wrong question.\u201d often tend to be at the lower level of thought it would.\u201d Why? \u201cBecause a company\u2019s hierarchy\u2014and absorb we underestimated the complexity Which questions to ask what they are saying. It helps to of the task.\u201d Why? \u201cBecause we did a Questioning goes beyond looking at have an organizational culture that quick time estimate, without going the competitive environment. Sales encourages this and ensures that through the project requirements bring in revenue, but companies people are not afraid to speak out. in detail.\u201d Why? \u201cBecause we were also have to look at costs, because pro\ufb01t lies in the gap between these For the same reasons, it is It is extremely important to be two. Managers must question their just as important for senior able to listen to the people processes, to see where they can management to listen to the kind who bring you bad news. drive ef\ufb01ciencies, reduce costs, and of information being exchanged in Andy Grove so improve their pro\ufb01t margins. corridor conversations, networking functions, and the general of\ufb01ce Managers also need to constantly grapevine as it is for them to use question whether there might be competitive analysis and modeling. a better way to do something. For example, perhaps nonessential The \u201c5-why\u201d technique functions could be outsourced. To ensure they understand what is Managers have to be restless, driving or impacting a company\u2019s not complacent, and look for every performance, and what is happening opportunity to increase the pro\ufb01t in the market and the wider world, margin and improve the business. senior executives have to constantly ask questions. They also need to Managers have to use their knowledge and experience to connect all the information they gather, and try to anticipate what the world will look like in \ufb01ve or ten years\u2019 time. What changes might take place in that new world? They then have to position the company to take advantage. This requires thinking through several different scenarios and being able to think \u201coutside the box.\u201d \u276f\u276f","200 AVOIDING COMPLACENCY Victorinox\u2019s business model relied on have to be taken. The development action. British Petroleum (BP), once the sales of its Swiss Pocket Knives, of other products\u2014including owned by the British government, but a strategic in\ufb02ection point\u2014the watches, travel gear, fragrances, became publicly owned in 1987. prohibition of knives on planes\u2014forced and fashion\u2014that could be sold Its new CEO was John Browne, a it to add luxury products to its range. at airports was accelerated. The nonexecutive director of Intel, who company also began to explore was in\ufb02uenced by Andy Groves\u2019s The impact of the 9\/11 terrorist new market opportunities, such as thinking on the importance of attacks on the US in September selling in China, India, and Russia. paranoia. Browne was concerned 2001 was felt across the world; for about something far bigger than some businesses it proved to be Victorinox also took action to rival companies\u2014something that a strategic in\ufb02ection point. One preserve one of its core strengths\u2014 could harm the business of not such company was Victorinox, a skilled and loyal Swiss work force. just BP, but the entire oil industry. manufacturer of the ubiquitous Layoffs were prevented by taking Swiss Pocket Knife. The company crisis measures such as reducing Browne reviewed the available had been producing pen knives shift times, canceling overtime, data on climate change, listened to since 1884, but it was hit by new encouraging planned vacations, experts in the \ufb01eld, and considered airline safety regulations that and temporarily lending workers to the impact on the business of BP. prohibited knives to be carried other Swiss companies. Victorinox He recognized climate change as on board aircraft following the 9\/11 not only survived, but thanks to its a slow-manifesting issue, but attacks. This had a drastic effect new products, was able to enhance realized it could impact the oil on Victorinox, because purchases its high-quality brand image. More industry. In 1997 he gave a seminal of its products at airports around than 60 percent of the company\u2019s speech at Stanford University, CA, the world accounted for a signi\ufb01cant turnover now comes from items publicly acknowledging climate portion of its annual sales. other than pocket knives. change as a reality and committing BP to do something about it. Corporate sales also tumbled. Averting catastrophe By the beginning of 2002, pocket- To detect the approach of a strategic This was a bold move for an tool sales had fallen 30\u00a0percent in in\ufb02ection point, the CEO of a oil company at a time when rival just a few months. The company company, in conjunction with the companies were trying to ignore recognized that this could board, must analyze all the available the issue. BP pursued a strategy of represent the start of a long decline, hard data, listen to the softer investing in alternative energy, and and that to survive, action would information, and then take decisive it was the \ufb01rst oil company to set targets for reducing its own greenhouse gas emissions. Employees were asked to \ufb01nd ways Real sustainability is about simultaneously being pro\ufb01table and responding to the reality and the concerns of the world in which you operate. John Browne UK former CEO of BP (1948\u2013)","WORKING WITH A VISION 201 to help meet targets. Browne caused BP\u2019s Helios logo demonstrated its clothes and stores began to look more of a stir when BP launched commitment to \ufb01nding new types of old-fashioned. Consumers started a new brand identity in 2000. The energy sources. Company responses to to shop elsewhere, but still M&S did bright green Helios logo, named after 10X changes, such as climate change, not change course, despite a sudden the sun god of ancient Greece, was need to be communicated to the market. drop in sales and pro\ufb01ts. UK pro\ufb01ts accompanied by the slogan: \u201cBeyond continued to tumble from a record Petroleum\u201d. It represented the author Judi Bevan describes a high of $1.6 (\u00a31) billion in 1997 to company\u2019s acknowledgement that it traditional business environment $232 (\u00a3146) million four years later, needed to provide more, and smarter, with carpeted executive of\ufb01ces, and the share price dropped by two- types of energy. It also sent a clear waiters with white gloves, and thirds. It was not until the emergency message that the company was not staff rules governing punctuality, appointment of CEO Stuart Rose in complacent; it was prepared to ef\ufb01ciency, and politeness. M&S did 2004 to fend off a takeover that the confront and adapt to dif\ufb01cult issues. not have a marketing department dramatic decline was halted. and its executives believed it did not However, after Browne left need to advertise. Stores did not However, the recovery did not BP in 2007, the new CEO pursued accept credit cards, and payment last: M&S once again risked a different strategy, and the was possible only with cash or complacency with a run of eight alternative energy business was M&S\u2019s own charge card. successive quarters of falling closed down. Any environmental clothing sales to 2013. In response, credibility the company had built When rival retailers appeared the company announced it would was lost when an oil well exploded with a more modern vision and fresh, invest in store revamps, logistics, in the Gulf of Mexico in 2010. contemporary designs, M&S\u2019s and IT, and unveiled plans to turn M&S into an international, Conquering complacency multichannel retailer, connecting In the late 1990s, UK retailer Marks with customers through stores, the & Spencer (M&S) took almost the Internet, and mobile devices. opposite stance to John Browne at BP. Board members largely ignored This is the challenge for all the changing UK and global retail organizations. Businesses must environments, and chose to focus on contend with accelerated change in internal issues. The company was a highly competitive, multichannel, hierarchical and employees were global market, and guard against expected to follow orders. In The complacency\u2014or risk losing out to Rise and Fall of Marks & Spencer, competitors who are able to stay one step ahead. \u25a0 Andy Grove Andrew (\u201cAndy\u201d) Stephen Grove before helping to found the Intel was born in 1936 to a Jewish Corporation in 1968. He became family in Budapest, Hungary, as its president in 1979, CEO in Andr\u00e1s Istv\u00e1n Gr\u00f3f. He hid from 1987, and was Chairman from the Nazis during their occupation 1998 to 2005. He is credited with of Hungary, survived the Siege of the company\u2019s success; during Budapest by the Soviet Red Army, his tenure as CEO, Intel\u2019s stock then \ufb02ed to the US during the value rose by 2,400 percent, uprising of 1956. Once there, he making it one of the world\u2019s most took the name Andrew Grove, valuable companies. graduated \ufb01rst in his engineering class at college and then studied A dedicated philanthropist, for a PhD in chemical engineering Grove has donated millions of at the University of California, dollars to cancer and neuro- Berkeley. He relocated his parents degenerative disease research. to San Francisco, and worked at He also serves on the board of Fairchild Semiconductor (1963\u201367), overseers of the International Rescue Committee.","TO EXCEL TAP INTO PEOPLE\u2019S CAPACITY TO LEARN THE LEARNING ORGANIZATION","","204 THE LEARNING ORGANIZATION IN CONTEXT W hen a company is Discipline (1990). In this book he devoted to the set out the \ufb01ve disciplines to which FOCUS development and an organization should aspire in The personal approach education of its employees it will order to succeed in the long term: be able to reinvent itself constantly, personal mastery; mental models; KEY DATES adapting to the market due to the shared vision; team learning; and 1920s Charles Allen develops intellectual skills and commitment of systems thinking\u2014the \ufb01fth a training program for its employees. If the key to success discipline, which incorporates shipbuilders in the US, which in a rapidly changing marketplace the preceding four. involves personal teaching is adaptability and foresight, then intended to develop loyalty. it makes sense to train and foster The \ufb01ve disciplines talented individuals as a means of The \ufb01rst two disciplines are 1950s Job training becomes marshaling an entire organization. individual. By personal mastery, individualized, replacing the Senge means that individuals teacher with programed This is the essence of what should use their own interest materials that employees work management authority Peter Senge and curiosity to improve their through at their own pace. called \u201cthe learning organization,\u201d capabilities. Mental models refers a place \u201cwhere people continually to ingrained ways of thinking, 1984 Professor Richard expand their capacity to create the which should be challenged so Freeman proposes that results they truly desire, where new that individuals become aware workers are \u201cstakeholders\u201d and expansive patterns of thinking of why they think in a particular and are vital to the survival are nurtured, where collective way, and of the effect this has on of the organization. aspiration is set free, and where behavior. Senge encouraged people are continually learning employees to analyze their own 1990 Peter Senge publishes how to learn together.\u201d To reach subtle mental \ufb01lters and to be The Fifth Discipline, this ideal a company should adopt a prepared to question and change advocating \u201cthe learning collective, community-minded them in order to adapt to the future. organization.\u201d approach so that employees feel part of a worthwhile enterprise The remaining three disciplines that will nurture them, and in are collective. The goal of shared return those employees will show vision involves the members of an commitment to the business. organization deciding together Senge proposed his vision for what they want to create and a corporate utopia in The Fifth agreeing on targets and processes To compete in ...a smart and The work force To excel, tap a constantly adaptable needs to into people\u2019s work force. capacity to changing challenge itself marketplace ...a responsive and the learn. a company needs... and insightful business. approach. The business must learn from its employees and constantly adapt.","working with a vision 205 See also: The value of teams 70\u201371 \u25a0 Creativity and invention 72\u201373 \u25a0 Effective leadership 78\u201379 \u25a0 Organizing teams and talent 80\u201385 \u25a0 Make the most of your talent 86\u201387 \u25a0 Organizational culture 104\u201309 \u25a0 Develop emotional intelligence 110\u201311 The five disciplines individuals to move in search of defined by Peter Senge a better environment with more enable organizations to opportunity for advancement. It is change and develop estimated that the cost of replacing through both individual an employee is between 10 percent and collective learning. and 175 percent of the departing employee\u2019s salary, depending on Team the field of skill. Data from the learning OECD (Organization for Economic Cooperation and Development) Systems Building showed an increase in skilled labor thinking shared migration around the world starting vision in the early 1990s. Much of this The learning drain was from developing organization countries, and became gain for host countries in North America, Personal Mental Australasia, and Europe. But even mastery models in advanced economies, brain drain was a feature of corporate life. to help them get there. In this way, Employee turnover employees will work toward a goal It is pertinent that Senge\u2019s proposal During the 1990s, the highest because they want to, not because appeared against a backdrop of voluntary staff turnover rates in they are told to. Team learning is corporate brain drain. According to Asia were in Singapore. The the process of employees learning a 2004 paper by Arie C. Glebbeek Singapore hotel industry, for together through discussion and and Erik H. Bax from Groningen example, had an average annual dialogue so that they become more University, the Netherlands, turnover rate of 57.6 percent in effective as a team than they would published in the Academy of 1997, while average annual turnover be individually. Management Journal, when the rates in the retail industry ranged labor market tightened and labor from 74.4 percent to 80.4 percent The fifth discipline is the ability scarcity grew during the 1990s, between 1995 and 1997. One to see the organization as a whole, businesses became concerned with study by Singapore\u2019s Nanyang with its own behavior patterns. the detrimental effects of turnover. Business School in conjunction This capability is crucial in order with the UK\u2019s Cardiff Business \u276f\u276f for people to recognize potentially Turnover of personnel is one counterproductive behaviors that of the great blights of modern Productivity \u2026 comes from have come about simply through corporations and nations alike. challenged, empowered, repetition and have remained A desire for further learning and rewarded teams of people. unchallenged over the years. development motivates talented Jack Welch US former CEO, General Electric (1935\u2013)","206 THE LEARNING ORGANIZATION School concluded that poor success by actively fostering the There is no organizational management practices were the education of all employees in order learning without individual major reason for employee turnover. to innovate and adapt. In this The problem of high turnover in respect, Japan\u2019s Honda Motor learning. lower-paid jobs is still an issue. In Company is often cited in case Chris Argyris, the January 2012 edition of the studies as a perfect example of a Donald Sch\u00f6n Harvard Business Review, Harvard \u201clearning organization.\u201d Business School professor Zeynep department store approached the Ton wrote about companies that In the 1980s, while professor Honda team to ask if it could sell had found a way to invest in their of business studies at Stanford the smaller bikes. The sales team staff while keeping product costs University, Richard Pascale analyzed reported back to head of\ufb01ce and low: \u201cHighly successful retail the management style of Japanese advised that instead of launching chains ... not only invest heavily in companies, Honda in particular. He the larger bikes, the Super Cub store employees but also have the concluded that \u201corganizational should be the focus of Honda\u2019s debut lowest prices in their industries, agility\u201d was the reason for Honda\u2019s in the US. Instead of dismissing the solid \ufb01nancial performance, and success. As evidence he cited the underlings, the managers took better customer service than entry of the Japanese company into notice and agreed to go with the their competitors. They have the US market in 1959. advice of the sales team. The result demonstrated that, even in the for Honda was phenomenal success lowest-price segment of retail, bad Honda had been preparing to in the US market. In Peter Senge\u2019s jobs are not a cost-driven necessity launch its larger 250 cc and 350 cc model, Honda is an example of how but a choice. And they have proven motorcycles in Los Angeles, but the \u201cevery level of an organization that the key to breaking the trade- advance sales team soon realized should feel included and valued.\u201d off is a combination of investment that the big Japanese bikes were in the work force and operational inadequate for road conditions and Questioning precedents practices that bene\ufb01t employees, the vast distances traveled in the In essence, Senge\u2019s \u201clearning customers, and the company.\u201d US. The team reluctantly sent the organization\u201d draws on earlier models back to Japan for testing. ideas, including those of Harvard\u2019s Learning by listening Meanwhile, the three Japanese Chris Argyris. In 1977 Argyris Peter Senge\u2019s theory about salespeople had been zipping published his theory of \u201cdouble corporate learning went beyond around Los Angeles on the 50 cc loop learning,\u201d showing that just minimizing labor turnover. He Super Cub, a best seller at home companies and their employees intended it to be a model by which but considered inappropriate for can assess and modify underlying companies could maximize their the power-hungry American biker. ways of thinking to improve their Nevertheless, US interest in the capacity to learn and perform Super Cub grew and Sears effectively. The following year The Honda Super Cub became enormously successful in the US, thanks to managers who listened to their sales staff and broke away from the standard \u201cmacho biker\u201d approach.","WORKING WITH A VISION 207 Organizational learning involves both single-loop on routines: the procedures, learning, where errors are identi\ufb01ed and corrected, and conventions, or technologies double-loop learning, in which the assumptions that through which companies operate. underlie speci\ufb01c actions are questioned and improved. These perceived negatives became the focus of scholars such as BELIEFS ACTIVITIES RESULTS Argyris and Senge. Interest in the OR TASKS concept of the learning organization grew in the 1990s, as Single-loop learning business conditions became more Results show what needs uncertain and companies more to be \ufb01xed or improved. dependent on technology. Double-loop learning In 1993 management innovation Results also reveal the bigger picture: the expert Mark Dodgson, then senior fellow at the Science Policy Unit of culture of the organization\u2014the values the University of Sussex, UK, linked and assumptions that govern behavior. economic uncertainty and rapid technological change to an Argyris joined forces with MIT in particular emerged to dominate increased need for learning at all professor Donald Sch\u00f6n to write thinking in this area. The \ufb01rst, from levels in a company, citing the view the highly in\ufb02uential book Yale professor Charles Lindblom in of psychologists that learning is the Organizational Learning: A Theory 1959, was that action taken in highest form of adaptation. of Action Perspective, which organizations is based on historical Dodgson, like other scholars, made explored theories such as double- precedent rather than on a distinction between loop learning. anticipating the future. The second \u201corganizational learning\u201d\u2014when was set out by Richard Cyert and organizations learn a lesson from a Going further back, the \ufb01rst James March, who in 1963 particular event\u2014and \u201cthe learning scienti\ufb01c studies of learning within published their observation that organization,\u201d which embraces a an organization were conducted in behavior in organizations is based continual process of education and the mid-20th century. Two theories implements strategies to initiate that process. In Senge\u2019s opinion, organizations focused on continued learning will gain a competitive advantage in the marketplace. \u25a0 Peter Senge A world-renowned expert on re\ufb02ection, and engaging its management and organizational employees. As he said on one learning, Peter Senge was born in occasion, a learning organization Stanford, CA, in 1947 and studied \u201cis continually expanding its aerospace engineering at Stanford capacity to create its future.\u201d University. He went on to obtain an MA in social systems and a In 1999, the Journal of PhD in management at MIT, and Business Strategy named Peter is now a senior lecturer at MIT\u2019s Senge a \u201cStrategist of the Sloan School of Management. He Century\u201d\u2014one of the 24 people is also the founding chair of the who had had the greatest global Society for Organizational in\ufb02uence on business strategy Learning (SoL). in the 20th century. Senge pioneered the concept of Key works \u201cthe learning organization\u201d\u2014an organization structured in a way 1990 The Fifth Discipline that is conducive to new ideas, 1999 The Dance of Change","208 THE FUTURE OF BUSINESS IS SELLING LESS OF MORE THE LONG TAIL IN CONTEXT Today, companies are no They can now offer a longer constrained by large number of niche FOCUS physical space or costs of Internet business reaching their market. products to many individual customers. KEY DATES 1838 French mathematician ...by buying Consumers have Antoine Augustin Cournot niche items from increasing choice and produces a graph to represent supply and demand. online sellers. want to express their individuality... 1890 British economist Alfred Marshall introduces the concept The future of business of demand curves in his book is selling less of more. Principles of Economics. T he \u201cLong Tail\u201d theory A primary factor in today\u2019s global 20th century Most companies challenges basic principles economy is the Internet, which is sell a limited number of goods, of economics. In the past, shifting the focus from mainstream with the bulk of sales and successful businesses often sold products and markets\u2014represented pro\ufb01ts coming from their high volumes of a limited number by the \u201chead\u201d of the demand top-selling items. of products. Now, according to curve\u2014toward a large number of author Chris Anderson, the future niche or low-volume products and 1990s The introduction of of business is in selling less of more markets, as seen in the \u201ctail\u201d of the Internet proves to be a \u2014low volumes of an increasingly the curve. A conventional demand disruptive technology that large number of products. curve is drawn with price on the changes economic and social traditions. 2004 Chris Anderson coins the term \u201cLong Tail\u201d to describe the concept that a larger proportion of sales is likely to come from the tail, rather than the head, of the demand curve.","WORKING WITH A VISION 209 See also: Beating the odds at start-up 20\u201321 \u25a0 Gaining an edge 32\u201339 \u25a0 The weightless start-up 62\u201363 \u25a0 Thinking outside the box 88\u201389 \u25a0 Small is beautiful 172\u201377 \u25a0 M-commerce 276\u201377 \u25a0 Bene\ufb01tting from \u201cbig data\u201d 316\u201317 vertical axis, and quantity on the SALES Head The Long Tail is based on a representation of a horizontal axis, and demonstrates demand curve of the future marketplace (sales are that people buy more as the price shown vertically, products horizontally). Author falls. Anderson represents sales on Chris Anderson suggests that overall sales of niche the vertical axis and the number products at the thin \u201ctail\u201d of the curve may be of products on the horizontal axis, greater than more popular products at the \u201chead.\u201d showing that growth in many industries will come from the niche Long Tail end of demand\u2014the Long Tail. Removing barriers PRODUCTS Supply was once constrained by factors such as cost of production, from a publisher to meet individual can tailor products and services by physical space for storage, and cost demand. Combined sales of one-of- language and ethnicity, rather than of distribution. Digital processing, a-kind books may be larger than offering to the mass market. Start- online ordering, and electronic that of bestsellers, and so may equal ups are recognizing the Long Tail distribution have removed many more pro\ufb01t. Similarly, iTunes can bene\ufb01ts and using the region\u2019s of these barriers. Selling smaller offer a longer list of music than any diversity to their advantage. One numbers of a greater range of items physical store, and Net\ufb02ix can example is Brandtology, an online can result in higher overall sales and stream almost any \ufb01lm into your company that analyzes social media pro\ufb01t than selling common items. living room. When offered almost and online chat, in local languages, limitless choice, consumers exert for clients in Singapore and Hong Books, music, and movies are their preferences and spend money. Kong. Native speakers of languages classic examples of the Long Tail such as Mandarin, Japanese, and theory. A traditional bookstore can Asia is a large and growing Korean offer social-media analysis only stock books that are likely to market, but it is fragmented by to provide localized insights and sell. Amazon, however, can list many different cultures. Individual interpretation of key issues within every book, even though some may countries offer numerous niche a particular culture. \u25a0 never be sold. Less popular titles opportunities for companies that that are not stored in its vast warehouses can be shipped direct Chris Anderson Author and entrepreneur Chris editor. Chris Anderson joined Anderson was born in London Wired magazine in 2001, in 1961 and moved with his family where he was editor-in-chief to the US at \ufb01ve. He studied until 2012. He currently lives physics at George Washington in Berkeley, California, and University, then quantum is the CEO of 3D Robotics, a mechanics and science journalism drone manufacturing company. at the University of California, Berkeley; he later was a Key works researcher at Los Alamos National Laboratory. After 2004 \u201cThe Long Tail\u201d (published working on two leading scienti\ufb01c in Wired magazine) journals, Nature and Science, he 2006 The Long Tail: Why the joined The Economist, holding Future of Business is Selling various positions (in London, Less of More Hong Kong, and New York), from 2012 Makers: The New technology editor to US business Industrial Revolution","210 TO BE AN OPTIMIST\u2026 HAVE A CONTINGENCY PLAN FOR WHEN ALL HELL BREAKS LOOSE CONTINGENCY PLANNING IN CONTEXT I n business, things rarely go as He who fails to plan planned. Companies have to is planning to fail. FOCUS prepare for sudden changes to Winston Churchill Operational risk markets or the environment to ensure that day-to-day business can UK former Prime Minister (1874\u20131965) KEY DATES continue \u201cwhen all hell breaks loose,\u201d 1947\u20131991 Governments as US professor Randy Pausch put it. In 2011, a devastating earthquake and multinational businesses struck Japan\u2019s east coast, followed develop contingency plans Contingency planning sets a minutes later by a large tsunami. for potential nuclear attack course of action to deal with a crisis, The Japanese government\u2019s during the Cold War. whether this is industrial (such contingency plans for earthquakes\u2014 as the \ufb01nancial collapse of a key from earthquake-resistant buildings Late 1990s Countries around supplier), human, natural, or technical to an early-warning system and the world put contingency in nature. It requires identifying rapid-response coordination\u2014saved plans in place for the Y2K possible disasters, assessing countless lives. Many companies, or \u201cmillennium bug\u201d\u2014an the likelihood of occurrence, and such as NEC, were able to restore anticipated computer failure developing a course of action to operations within minutes thanks due to the millennial date minimize the impact. Having a to their prepared emergency plans. change (from 1999 to 2000). plan enables a company to manage Even natural disasters as large as the crisis and recover quickly. earthquakes can be managed with 2010 A lack of contingency good contingency planning. \u25a0 planning leads to closure of Identify key tasks northern European air space A contingency plan has to be based for the \ufb01rst time, following the on critical business activities. eruption of a volcano in Iceland. A utility company that relies on Businesses lose revenue due to a call-center team to manage the transportation restrictions. customer inquiries should identify alternative premises in case of 2012 Due to the ongoing \ufb02ood. A marketing company \ufb01nancial crisis, businesses planning for the same incident may around the world draw up need to allow staff to work remotely. contingency plans for the breakup of the Eurozone. See also: Managing risk 40\u201341 \u25a0 Learning from failure 164\u201365 \u25a0 Avoiding complacency 194\u2013201 \u25a0 Scenario planning 211 \u25a0 Coping with chaos 220\u201321","WORKING WITH A VISION 211 PLANS ARE USELESS, BUT PLANNING IS INDISPENSABLE SCENARIO PLANNING IN CONTEXT I n addition to contingency publicly. However, it never comments planning, which involves on the scenarios it discloses, since FOCUS preparing for sudden disaster, this might guide other companies\u2019 Business planning companies also need to prepare for or governments\u2019 decisions. the many alternative futures they KEY DATES face. This is known as scenario Shell\u2019s scenario planning allowed Early 19th century Prussian planning. It has its roots in military it to minimize the impact of an oil military strategist Carl von planning, and companies start the embargo on Western countries in Clausewitz formulates the process by asking: \u201cwhat if\u2026?\u201d October 1973. Within weeks, the principles of strategic planning. price of crude oil had soared and What is likely to happen in stock markets tumbled. Although 1940s The US Air Force the next two, \ufb01ve, or ten years? Shell was hit by these events, it had considers opponents\u2019 possible Companies have to consider local, already begun to diversify into other actions in order to prepare national, and international events, energy sources, allowing it to recover alternative strategies. and must try to identify underlying more quickly than competitors. \u25a0 trends. They have to determine the 1950s US futurist and military probability of future scenarios, strategist Herman Kahn how they might be affected, and encourages governments how they can prepare to mitigate and individuals to \u201cthink the the effects, or even to reap the unthinkable\u201d by imagining bene\ufb01ts. Scenario planning does possible future scenarios. not remove uncertainty, but it can help a company adapt to change. 1967 French philosopher Bertrand de Jouvenel coins Prepared for change During the OPEC oil embargo of the term futurible to mean Oil company Royal Dutch Shell has 1973, Shell\u2019s scenario planning meant \u201ca fan of possible futures.\u201d used scenario planning for nearly it had already decided what it would half a century. Its early work was do in the case of price hikes, allowing 21st century Companies based on intuition, but it has now its executives to act fast and effectively. and governments use scenario developed sophisticated techniques planning for wide-ranging to create scenarios, which it shares issues including food, water, and energy supply, and See also: Managing risk 40\u201341 \u25a0 Learning from failure 164\u201365 \u25a0 Avoiding population growth. complacency 194\u2013201 \u25a0 Contingency planning 210 \u25a0 Coping with chaos 220\u201321","212 IN CONTEXT THE STRONGEST FOCUS COMPETITIVE FORCES Competitive strategy DETERMINE THE PROFITABILITY KEY DATES OF AN INDUSTRY 1921 US economist and statistician Harold Hotelling PORTER\u2019S FIVE FORCES says that as long as there are pro\ufb01ts to be had in a market, more and more vendors will arrive to serve it, until it reaches saturation point. 1979 Michael Porter\u2019s \u201cHow Competitive Forces Shape Strategy\u201d is published in Harvard Business Review. 2005 W. Chan Kim and Ren\u00e9e Mauborgne publish Blue Ocean Strategy, suggesting that companies should aim for uncontested markets rather than compete with each other in existing markets. 2008 Michael Porter writes The Five Competitive Forces That Shape Strategy. I n order to survive, companies have to understand and respond to competition. So it is natural to look at immediate competitors and established rivals to develop a strategy. However, this can restrict thinking, de\ufb01ne competition too narrowly, and ignore other strategic forces. In the 1970s, economist and strategist Michael Porter changed people\u2019s thinking on strategy. Porter\u2019s 1979 article \u201cHow Competitive Forces Shape Strategy\u201d showed that awareness of wider competitive forces\u2014those beyond the obvious competing companies\u2014 can help an organization understand the structure of its","WORKING WITH A VISION 213 See also: Study the competition 24\u201327 \u25a0 Gaining an edge 32\u201339 \u25a0 Leading the market 166\u201369 \u25a0 Porter\u2019s generic strategies 178\u201383 \u25a0 Good and bad strategy 184\u201385 \u25a0 The value chain 216\u201317 The pro\ufb01tability of an industry is shaped by \ufb01ve competitive forces... ...the bargaining ...the bargaining ...rivalry among ...the threat of ...the threat of power power existing new entrants. substitute products or of suppliers. of buyers. competitors. services. The strongest competitive force\u2014which varies according to the industry\u2014determines the overall pro\ufb01tability of the industry. industry and develop a position and unionized labor forces\u2014take the market share is tough to win and so that is more pro\ufb01table and less lion\u2019s share of pro\ufb01ts. New players pro\ufb01ts are harder to make. Intense vulnerable to attack. According enter the industry on a regular competitor rivalry occurs when to Porter, there are \ufb01ve competitive basis. Substitutes are available there are many competitors, growth forces that collectively de\ufb01ne an in other forms of transportation, in the industry is slow, products are industry\u2019s structure, shape the such as trains, buses, and cars. not differentiated and can be easily nature of competitive interaction substituted, competitors are of within an industry, and ultimately Where the forces are much equal size, customer loyalty is low, determine pro\ufb01tability. Now weaker\u2014for example in the and it is dif\ufb01cult and costly to exit referred to as Porter\u2019s Five Forces, software, soft drinks, and toiletries the industry. this model places existing industries\u2014companies can make competitors at the center, a bigger pro\ufb01t. In all industries, The hotel business is just such surrounded by four other forces: pro\ufb01t can be affected by weather an industry. In a city such as New customers, suppliers, potential or cyclical change in the short term, York, there are many hotels. Guest entrants, and substitute products. but in the medium and long term, numbers are relatively static, so \u276f\u276f it is the structure of the industry Using Porter\u2019s model that drives competition and The \ufb01rst one gets Porter used commercial aviation pro\ufb01tability. Porter is adamant that the oyster, the second as an example to explain the model other factors\u2014such as the type of in action, because the strength product or service, the maturity of gets the shell. of all \ufb01ve forces makes the airline the market, regulation, or level of Andrew Carnegie business one of the least pro\ufb01table technical complexity\u2014are not industries of all. At the center are de\ufb01ning factors for pro\ufb01tability. US industrialist (1835\u20131919) established rivals (such as Qatar Airways, Virgin, and Qantas), The force of \u201crivalry\u201d who all compete intensely on price. Of the \ufb01ve forces, rivalry among Customers can search easily for the existing competitors is the major best deal. Suppliers\u2014in this case determinant of competitiveness aircraft and engine manufacturers and pro\ufb01tability within an industry. In a very competitive industry,","214 PORTER\u2019S FIVE FORCES Industry structure, product accessibility. For example, substitute raw materials or as manifested in the strength soft-drink manufacturers have suppliers. Their power is increased of the \ufb01ve competitive forces, achieved this by introducing if they are large and can threaten branded vending machines, so to step in and produce themselves. determines the industry\u2019s competitors are unable to offer their long-run pro\ufb01t potential. products at that particular place. Oil is an example of a scarce resource that is controlled by a few Michael Porter Buyer power countries. OPEC (Organization of Buyers can demand lower prices the Petroleum Exporting Countries) similar growth is slow; within a or higher product quality from represented the political power of speci\ufb01c star-rating the hotels are all producers when their bargaining oil-exporting countries in 1973 when fairly similar, as are the sizes of the power is strong. Both scenarios it placed an oil embargo on the US. big hotel chains. Customers can result in lower pro\ufb01ts for producers, OPEC\u2019s action disrupted supply and choose to go to any hotel, and have because lower prices mean lower forced up the price of oil four-fold. good access to prices. Exit from revenues, and higher-quality the industry is dif\ufb01cult because products usually incur higher New entrants of the upfront investment. Many production costs. Buyers exert If an industry is pro\ufb01table and there large hotel groups have introduced strong bargaining power when are few barriers to entry, Porter says loyalty programs as part of their there are few of them; they buy that competition will increase and strategy to differentiate their brand. in large quantities; they are price pro\ufb01ts will fall. Typically, existing sensitive; they control distribution organizations try to create ways to Substitutes to the \ufb01nal customer; there are deter new entrants. The threat of The most signi\ufb01cant of the \ufb01ve forces many subsititutes; and switching to new entrants is high when the cost is not always the most obvious one. another supplier can be done at low of entering the market is low; there For example, even though rivalry is cost. Buyers may also be able to is little government regulation; often \ufb01erce in commodity industries, produce the product themselves\u2014 customer loyalty is low; existing that may not be the factor that so may use this as a threat. businesses can do little to retaliate; ultimately limits pro\ufb01tability. and economies of scale can be The \u201cthreat of substitutes\u201d force Buyers for big supermarkets have easily achieved. Risk is increased is surprisingly important here\u2014 huge bargaining power in the food if existing companies have not buyers in these markets can easily and drink industry. Fresh milk is established brand reputation and \ufb01nd substitute raw materials or often at the heart of supermarket do not possess patents, and when products that have attractive prices price wars, because the big chains or are higher quality. What\u2019s more, have signi\ufb01cant buying power over Buyer power is high in the food and buyers can switch from one product suppliers. UK farmers have claimed beverage industry because consumers or service to another with little that they are so pressured to reduce can easily \ufb01nd a substitute that may be cost. For example, it costs relatively prices that they often make a loss cheaper or differentiated, such as by little for a consumer to switch from on each bottle of milk produced. offering increased nutritional bene\ufb01ts. tea to coffee, unlike switching from traveling by bicycle to car. Supplier power When the bargaining power of In some industries, companies suppliers is strong, it allows them try to limit the threat of potential to sell higher priced or lower quality substitutes by ensuring wider raw materials. This directly affects the pro\ufb01ts of the company that is buying, because it has to pay more for its raw materials. Suppliers have strong bargaining power when there are few of them (but many buyers); they hold scarce resources; the cost of switching raw materials is high; and when there are few","WORKING WITH A VISION 215 Michael Porter The hotel industry is characterized operators. Personal pride in their Born in 1947 in Michigan, by intense competitor rivalry. Some own trucks and the fact that they Michael E. Porter was the hotel chains have introduced loyalty were economically dependent on son of a US Army of\ufb01cer, schemes to try to increase customer their vehicles made them less and lived in different places preference and encourage return visits. price-sensitive as purchasers. around the world as a child. Paccar therefore decided to invest Porter served in the US Army products are nearly identical. An in developing an array of features Reserve following graduation. example of a market with a low with owner-operators in mind, such He received a BSE with high threat of new entrants is the software as luxurious sleeper cabins, leather honors in aerospace and market for personal computers. seats, noise-insulated cabins, and mechanical engineering from Microsoft came to dominate the sleek exterior styling. They offered Princeton University, in 1969, market with its Windows 95 thousands of options for owners to an MBA in 1971 from Harvard operating system. New entrants put their personal signature on their Business School, and a PhD found it hard to break in because trucks, by simply inputting them on in business economics from programs such as Excel, PowerPoint, computers at network dealers. They Harvard University in 1973. and Word are universally used. also offered roadside assistance The author of 18 books and and fuel-ef\ufb01cient, aerodynamic more than 125 articles in the Choosing a position designs. As a result, Paccar has \ufb01elds of competitiveness and Porter used the US heavy-truck been pro\ufb01table for more than 68 management, Porter\u2019s manufacturer Paccar to illustrate years in succession, and delivers academic studies encompass the principles of choosing how to better-than-average returns. competitiveness in national, position a company within a given regional, social, and health- industry structure. In a crowded No matter how different care arenas. He has served market, Paccar wanted to \ufb01nd a industries appear on the surface, as an advisor to governments, space where competitive forces Porter\u2019s model offers any company corporations, nonpro\ufb01t were weak, and where it could avoid a way of assessing pro\ufb01tability organizations, and academics buyer power and price-based rivalry. through analyzing \ufb01ve easily across the globe. calculated, competitive forces. In In the heavy-truck industry, revealing an industry\u2019s underlying Key works where large \ufb02eet buyers dominate, structure, Porter\u2019s model simpli\ufb01es it is hard to create a niche based a mass of information, providing 1980 Competitive Strategy on differentiation. Paccar, based in managers with a clear process for 1985 Competitive Advantage Washington state, chose to focus making sense of industry data and 1990 The Competitive on one group of customers: owner- using it to form effective strategy. \u25a0 Advantage of Nations Defending against the competitive forces and shaping them in a company\u2019s favor are crucial to strategy. Michael Porter","216 IF YOU DON\u2019T HAVE A COMPETITIVE ADVANTAGE, DON\u2019T COMPETE THE VALUE CHAIN IN CONTEXT The interconnected activities through which a company delivers products or services can be viewed as a \u201cvalue chain.\u201d FOCUS Competitive Advantage The chain consists of primary and secondary value activities. KEY DATES 1933 US economist Edward Primary value Secondary value Chamberlin introduces the activities include inbound activities include concept of product procurement, HR, differentiation in Theory of logistics, manufacturing, Monopolistic Competition. outbound logistics, technology, and marketing and sales, infrastructure. 1970s The idea of competitive advantage takes hold as and after-sales service. Japanese companies begin to outsell US and European Through analysis of its value chain, a company can identify where rivals. This is later attributed to achieve cost or differentiation advantage on its products. to superior management. T he goal of every company celebrated business guru, advised: 1979 US marketing consultants is to create and sustain a \u201cIf you don\u2019t have a competitive Al Ries and Jack Trout write competitive advantage so advantage, don\u2019t compete.\u201d Positioning: the Battle for Your that it can sell more products and Mind, outlining how companies generate higher pro\ufb01ts than its US professor Michael Porter\u2019s should build a strategy around rivals. As Jack Welch, CEO of US \u201cgeneric strategies\u201d consist of two their competitors\u2019 weaknesses. multinational General Electric and types of competitive advantage: cost advantage and differentiation 1985 Michael Porter introduces his theories of competitive advantage and the value chain in Competitive Advantage: Creating and Sustaining Superior Performance.","WORKING WITH A VISION 217 See also: Leading the market 166\u201369 \u25a0 Porter\u2019s generic strategies 178\u201383 \u25a0 Red, yellow, or purple? Good and bad strategy 184\u201385 \u25a0 Porter\u2019s \ufb01ve forces 212\u201315 Fashion retailer Benetton, advantage. Porter identi\ufb01ed a set When you\u2019ve got only launched by the Benetton of activities that businesses can use single-digit market share\u2014 family in Italy in the 1960s, to better understand how to achieve and you\u2019re competing with pursues a differentiation these forms of differentiation. These strategy with its bold brand interrelated activities\u2014dubbed the the big boys\u2014you either image. To achieve this, the \u201cvalue chain\u201d by Porter\u2014describe differentiate or die. company has focused on every the \ufb02ow of a product from its initial Michael Dell aspect of its value chain, from supply to the \ufb01nal customer. supply to satisfying the latest A company can add value to the US founder of Dell Computers (1965\u2013) consumer fashions. To ensure product at each stage of the chain, Benetton garments are through product-related activities\u2014 as \u201coverheads,\u201d secondary value up-to-the-minute, the company its inbound logistics (supply of parts can be generated, for example, manufactures many of its or materials), manufacturing, and through better use of technology. clothes in gray, then dyes after-sales service\u2014and market- them to meet the demand for related activities: outbound In addition to their horizontal whatever colors are in fashion. logistics (the delivery of products activities, companies operate in a Although this is costly in to the end user), and marketing \u201cvalue system\u201d of vertical activities, production, it minimizes stock, and selling the product. such as a manufacturer who buys reduces wastage, and enables parts from suppliers and outsources the company to respond Gaining the advantage its distribution. Competitive quickly to changing consumer To achieve competitive advantage, advantage relies not only on the tastes. Benetton stores are run a company cannot focus on one company\u2019s value chain, but on the by agents, and garments are activity alone, but needs to value system of which it is a part. shipped directly to the stores consider each of the activities in and immediately placed on the the chain. For example, Mercedes- Reinventing value shelves. This creates a strong Benz pursues a differentiation Porter\u2019s theories on competitive value system, keeps costs strategy, \ufb01rst through producing a advantage were highly in\ufb02uential, lower, and allows each part of high-end product, but also through and have been built upon by other the chain to absorb \ufb02uctuations providing outstanding after-sales business theorists. Management in demand. Benetton has more service. Analyzing the value chain scholars Richard Norman and Rafael than 6,500 stores in more than can also help companies to identify Ramirez argued in 1993 that the 120 countries, and its turnover what areas of their business might market complexity of the 1990s exceeds $3.2 (\u20ac2) billion a year. be suitable for outsourcing, which required companies to \u201creinvent\u201d can help the company to achieve the notion of value beyond the linear Benetton\u2019s value chain boosts a cost advantage. thinking of the \u201cchain.\u201d In 1995, its differentiation advantage. US executives Jeffrey Rayport and Clothes can be dyed in fashionable Primary value-chain activities in John Sviokla drew parallels with colors to match customer taste. a company are supported by a series the emerging world of the Internet, of secondary activities, which can suggesting that value could be also be used to achieve competitive added to online activities and advantage. These activities vary products in a \u201cvirtual\u201d value chain. \u25a0 by industry, but typically include: purchasing (procurement); human resource (HR) management; technology development, including research and development (R&D); and infrastructure functions, such as \ufb01nance and legal. Although support activities may be viewed","218 IF YOU DON\u2019T KNOW WHERE YOU ARE, A MAP WON\u2019T HELP THE CAPABILITY MATURITY MODEL IN CONTEXT In level 1 of the Capability B usiness processes are a Maturity Model, initial series of actions taken to FOCUS processes are ad hoc achieve an outcome. The Business processes and poorly controlled. objective might be to produce a product, to pay an invoice, or to KEY DATES In level 2, processes start serve a customer, for example. Adam 1899 US engineer and to be applied to projects Smith was one of the \ufb01rst people management consultant Henry to describe business processes, Gantt develops the Gantt chart and are repeatable. when he dissected the many to illustrate a project schedule. manufacturing processes used in In level 3, processes become an 18th-century pin factory. From 1970s Data-\ufb02ow diagrams are de\ufb01ned and can be describing the different actions, he developed to allow structured developed the idea of division of analysis of how data moves proactively implemented. labor, where work can be divided from one process to another. into a set of simple tasks performed In level 4, processes are by specialized workers, in sequence. 1979 Philip B. Crosby develops measurable and can be a quality-management Continuous improvement maturity grid in his book managed. The sequence of steps in a process Quality is Free. can often be visualized as a \ufb02ow By the time level 5 is reached, chart. As Watts Humphrey, inventor 1988 The Capability Maturity processes can be optimized of the capability maturity model Model (CMM) is described by through careful monitoring. (CMM), pointed out, it is always Watts S. Humphrey in an \u201cgood to know where you are\u201d in article published in the journal the process. Humphrey developed IEEE Software. the idea that continuous process improvement is based on many 2003 In Business Process small evolutionary steps, rather than Management is a Team Sport, large, revolutionary innovations. Andrew Spanyi claims that His CMM provides a framework for strategy should drive business organizing these evolutionary steps process design, which, in into \ufb01ve levels of development, turn, should drive each of which prepares the way for organizational design. the next. The CMM was developed","WORKING WITH A VISION 219 See also: Keep evolving business practice 48\u201351 \u25a0 Reinventing and adapting 52\u201357 \u25a0 Simplify processes 296\u201399 \u25a0 Kaizen 302\u201309 \u25a0 Critical path analysis 328\u201329 \u25a0 Benchmarking 330\u201331 Adam Smith observed workers making The CMM describes \ufb01ve levels of The strength of CMM is its effective pins in a pin factory and realized that increasing maturity through which measurement of the standardization if the process were split into separate, an organization or team manages of an organization\u2019s processes. This specialized steps, productivity would its processes: in the \ufb01rst level, work is why the model moved from being increase by 240 to 4,800 times. is conducted in a chaotic and ill- used to assess software development, de\ufb01ned way; in the second level, to applications in project with funding from the US Air processes are put in place and management, risk management, Force, and was used as a model for adhered to with some discipline, personnel management, and systems the military to evaluate software and previous successes can be engineering. It provides a starting subcontractors. The model\u2019s repeated; in the third level, processes point for managers looking to improve original goal was to improve are de\ufb01ned, standardized, and can a company\u2019s processes and a software-development processes, be proactively implemented; in the framework for prioritizing actions. but it is now applied as a general fourth level, they are managed and It also offers a way of de\ufb01ning what model of the maturity of processes. monitored; and in the \ufb01fth level, \u201cimprovement\u201d might really mean. \u25a0 It is often used in evaluating they undergo regular improvement IT service management, for through monitoring and feedback. The whole idea was example, or more widely across to motivate people to think organizational systems. Comparing industries about how they\u2019re working, The CMM can be used to compare different organizations in similar and how to improve it. industries. For example, two Watts S. Humphrey companies could be compared on the basis of their software- development processes. Increasingly, IT projects, which involve complex software development and new system implementation, can impact a company\u2019s operation and pro\ufb01tability, as they affect all of the company\u2019s departments. Watts S. Humphrey Business. After graduating, companies Adobe, Intuit, and he joined the Software Oracle. Humphrey was awarded Software engineer Watts S. Engineering Institute (SEI) at a National Medal of Technology Humphrey, known as the Carnegie Mellon University, in 2003 for his work in software \u201cfather of software quality,\u201d Pennsylvania, where he founded engineering. With his wife, was born in 1927 in Michigan, the Software Process Program, Barbara, he had seven children, US. He credited his father with which focused on understanding and died at his home in Florida his approach to problem solving. and managing the software on October 28, 2010, at 83. After high school, where he engineering process. This work struggled with dyslexia, he resulted in the development of the Key works joined the US Navy to serve Capability Maturity Model (CMM), during World War II.\u00a0 for which he is best known, and 1995 A Discipline for Software inspired the subsequent Engineering Humphrey then studied development of the Personal 1999 Introduction to the Team for a BSc and MSc in physics Software Process (PSP) and the Software Process before completing an MBA in Team Software Process (TSP), 2005 PSP, A Self-Improvement manufacturing at the University which was later adopted by IT Process for Software Engineers of Chicago Graduate School of","220 CHAOS BRINGS UNEASINESS, BUT IT ALSO ALLOWS FOR CREATIVITY AND GROWTH COPING WITH CHAOS IN CONTEXT T he top-down, hierarchical chaos, chaos can be managed and organization of businesses even embraced. US politician Tom FOCUS dates back to the industrial Barrett acknowedged the value Change and uncertainty revolution, when management was of working in an unstable world, all about control. Today\u2019s companies noting that \u201cchaos brings KEY DATES need a radically different approach. uneasiness, but it also allows for 1992 M. Mitchell Waldrop creativity and growth.\u201d\u00a0 writes Complexity, which The \ufb01rst decade of the 21st explains the theory of the century saw many disruptive events Managing chaos science of complex systems. across the world. These, combined Scienti\ufb01c chaos theory, which with accelerated technological investigates the patterns in complex 1997 Researcher Shona Brown developments, the rise of developing systems such as the weather, says that the edge of chaos nations, and a changing world can be related to organizations. has a structure that allows order, make living with uncertainty Effective leadership, clear vision, companies to be malleable a reality for business today. This open communication, and strong enough to change but not means that companies now need values are necessary to deal with fall apart. a \ufb02atter structure, incorporating such complexity. Leaders need to \ufb02exibility instead of direct control. set clear boundaries, then allow 1999 In Sur\ufb01ng the Edge of Rather than being overwhelmed by individuals and teams enough space Chaos, Richard Pascale, Mark to self-organize, self-regulate, and Millemann, and Linda Gioja say Chaos theory proposes that complex make their own decisions. Creativity a too-rigid management system systems are highly sensitive to initial and growth are enabled because can have nothing original or conditions. A butter\ufb02y\u2019s \ufb02apping wings employees have a higher level of innovative emerge from it. in Japan might start a chain of reactions responsibility and accountability that leads to a hurricane in the US. for their work, as well as a bigger 2000 The dot-com bubble investment in the outcome. bursts, causing turmoil in \ufb01nancial markets. A company also has to revisit its strategy continually, with the September 2001 The 9\/11 focus on delivering increased value terror attacks in the US have to the customer, to ensure that it far-reaching \ufb01nancial and remains relevant in the changing business impacts around external environment. A more the world. \ufb02exible company helps to ensure that staff is involved and can adapt","WORKING WITH A VISION 221 See also: Managing risk 40\u201341 \u25a0 Reinventing and adapting 52\u201357 \u25a0 Creativity Thriving on chaos and invention 72\u201373 \u25a0 Avoiding complacency 194\u2013201 Thriving on Chaos, written Economic, social, and New technology adds by US business expert Tom political events uncertainty. Peters, was published on create chaos. \u201cBlack Monday\u201d (October 19, 1987), when stock markets Rigid control no longer works\u2014businesses need to be \ufb02exible. around the world crashed. His timing could not have If employees are given more information and involvement, been better. In the book Peters they become more creative, helping the company to be laid out a future of change, stating that everything known \ufb02exible and change. \u201cfor sure\u201d about management would be challenged\u2014and Chaos brings uneasiness, but it also allows that 100-year-old traditions for creativity and growth. of mass production and mass markets would be threatened. swiftly to change. Such companies retail bank in the UK. The new His forecast was correct. What collaborate more readily with company had to create one new had been a fairly predictable external partners, rather than merely identity, one new way of doing things, business environment transacting with them, to encourage and streamline its IT systems and disappeared; organizations adaptability and shared learning. differing organizational cultures. It and managers had to embrace also needed ways of communicating change, or face collapse. Creativity from chaos positively to customers. A potential source of chaos is Peters correctly predicted internal change and reorganization But the biggest challenge of that the business winners of a company. Involving and all was common to many situations of the future would deal engaging the employees is the of business chaos\u2014motivating proactively with chaos, answer to managing this. In the employees who were harassed by seeing it as a source of market most complex \ufb01nancial services customers and worried about their advantage. Successful integration ever to occur in Europe, own jobs. Through constant companies would be those Halifax Bank of Scotland (HBOS) communication (including daily who could create and add was acquired by Lloyds TSB team brie\ufb01ngs on internal changes), quality and value continually following the \ufb01nancial crisis of 2008. workshops on team problem solving to their products and services External chaos (unprecedented and vision building, and measures in response to the ever- economic turbulence) was mirrored for gathering ideas from staff and shifting desires of their by internal chaos\u20146,000 branches customers, the combined companies customers. He described and 30 million customers had to be showed that chaos can not only be this as \u201ca revolution.\u201d brought together to form the biggest managed, but may be a rich source of growth for a business in \ufb02ux. \u25a0 There is no sense in pining for the past\u2014the stability we took for granted for so long will never return. Tom Peters","222 ALWAYS DO WHAT IS RIGHT. IT WILL GRATIFY HALF OF MANKIND AND ASTONISH THE OTHER MORALITY IN BUSINESS IN CONTEXT T he US author Mark Twain temptations. In the 1980s, for said we should \u201calways do example, the price of Guinness FOCUS what is right,\u201d but this has shares was in\ufb02ated to assist the Business ethics not always been the case in company\u2019s takeover bid for Distillers, business. High-pro\ufb01le scandals a leading Scotch whisky company. BEFORE such as Enron and Lehman Brothers 1265 Italian philosopher and in the 2000s have led to a collapse Businesses worldwide are under theologian Thomas Aquinas of public trust in companies. greater scrutiny to be ethical in states: \u201cno man should sell their practices. In 2011\u201313 several a thing to another man for Individuals are often tempted to multinational companies came more than it is worth.\u201d use immoral means to further their under \ufb01re for shifting pro\ufb01ts between aims. J. D. Rockefeller controlled the countries, thereby avoiding large tax 1807 The UK and US outlaw US oil industry in the 19th century liabilities. Though not illegal, many the Atlantic slave trade. because of underhanded methods regard it as immoral, and consumer to put competitors out of business. perception can affect pro\ufb01t. \u25a0 1948 The United Nations Today, some corporate companies (UN) adopts the Universal are, in essence, a collection of In 2013, several oil companies came Declaration of Human Rights. individuals who want their company under investigation by the EU antitrust to get ahead of the competition, but authority for preventing other companies 1970 US economist Milton are also alert to opportunities for from entering the price assessment Friedman claims: \u201cthe social personal gain. They may even go process, thereby distorting oil prices. responsibility of business as far as illegal phone hacking or is to increase its pro\ufb01ts.\u201d price collusion. For example, in 2013 Dow Chemicals was ordered to pay 1970s The term \u201cbusiness $1.2 billion for price-\ufb01xing. ethics\u201d comes into common use in the US. Executives may be tempted to break the law because of pressure 2011 The UN Human Rights from shareholders for results or for Council endorses Guiding performance-related bonuses. Gains Principles for Business and from share prices and the value of Human Rights, which sets the business overall pose additional global standards for human rights and business activity. See also: Play by the rules 120\u201323 \u25a0 Pro\ufb01t before perks 124\u201325 \u25a0 Collusion 223 \u25a0 Creating an ethical culture 224\u201327","WORKING WITH A VISION 223 THERE IS NO SUCH THING AS A MINOR LAPSE IN INTEGRITY COLLUSION IN CONTEXT I n a market economy, We have always known that companies are in commercial heedless self-interest was bad FOCUS competition with one another. Ethics of competition It is illegal for them to \u201ccollude\u201d morals; we now know that to \ufb01x prices or make secret trade it is bad economics. KEY DATES agreements. However, collusion and 11th century Legislation in collaboration are close relatives, and Franklin D. Roosevelt England outlaws monopolies sometimes companies argue that and restrictive practices. the way in which they \u201cwork US former President (1882\u201345) together\u201d does not constitute 13th century King collusion. Rival companies have businesses in the US, Korea, and Wenceslaus II of Bohemia been known to \u201ccollaborate\u201d in Japan secretly colluded to raise passes a law to prohibit order to gain advantage over other the price of lysine (an ingredient in iron-ore traders from working competitors, or to increase pro\ufb01t. animal feed) above its average price together to increase prices. They might do this by sharing in the international market. Within restricted information, limiting nine months the illegal cartel had 1790s After the French the supply of goods to in\ufb02uence the raised prices by 70 percent. Gains Revolution, agreements by price, or \ufb01xing prices. Two airlines for the companies and individuals members of the same trade hit the media in 2007 when they would have been signi\ufb01cant if they to \ufb01x prices are declared were accused of price-\ufb01xing. Staff had not been caught. Several void, unconstitutional, and at British Airways had tipped off executives went to prison and US \u201chostile to liberty.\u201d staff at competitor Virgin Atlantic company, Archer Daniels paid the over fuel surcharges. British largest antitrust \ufb01ne in US history. \u25a0 1890s The Sherman Act in Airways admitted to collusion, and the US makes it illegal for large was \ufb01ned $195.5 (\u00a3121.5) million. companies to cooperate with rivals to \ufb01x their outputs, Accountability prices, or market shares. Individuals in large organizations sometimes consider themselves 2000s The Treaty of Lisbon infallible. In the mid-1990s, \ufb01ve prohibits anticompetitive agreements, including price- See also: Play by the rules 120\u201323 \u25a0 Pro\ufb01t before perks 124\u201325 \u25a0 Morality in \ufb01xing, in the European Union. business 222 \u25a0 Creating an ethical culture 224\u201327","224 IN CONTEXT MAKE IT EASIER FOCUS TO DO THE RIGHT Business ethics THING AND MUCH HARDER TO DO KEY DATES THE WRONG THING 44 BCE Roman lawyer Marcus Tullius Cicero writes De CREATING AN ETHICAL CULTURE Of\ufb01ciis, discussing ideals of public behavior. 1200s Italian philosopher and theologian Thomas Aquinas argues that price has a strong moral aspect. Early 1900s US president Theodore Roosevelt declares that businesses should \u201cact for the interests of the community as a whole.\u201d 1987 \u201cEthical Managers Make Their Own Rules,\u201d a Harvard Business Review article by Adrian Cadbury, highlights the con\ufb02ict between ethical and commercial considerations, and the increasingly close scrutiny of corporate decisions. T he fundamental assertion of business is that it exists to make a pro\ufb01t. However, the way that companies make a pro\ufb01t has come under intense scrutiny, particularly in the global economy. The \ufb01rst recorded reference to moral principles was Cicero\u2019s De Of\ufb01ciis, written in 44 BCE, which stated that \u201cright is based, not upon men\u2019s opinions, but upon Nature.\u201d In the 13th century, the philosopher and theologian Thomas Aquinas de\ufb01ned the principle of natural law, saying that as a re\ufb02ection of God\u2019s rational plan, our idea of what is naturally right is also rational: an action is ethical if it is judged to be rational, or reasonable. This is still","WORKING WITH A VISION 225 See also: Leading well 68\u201369 \u25a0 Effective leadership 78\u201379 \u25a0 Organizational culture 104\u201309 \u25a0 Avoid groupthink 114 \u25a0 Pro\ufb01t before perks 124\u201325 \u25a0 Morality in business 222 \u25a0 The appeal of ethics 268 The company\u2019s The company The company The company The company leader recruits new orients new publishes and recognizes people to its communicates and rewards demonstrates people for ethical behavior. ethical their values ethical its code of culture. conduct. behavior. as well as their skills. A company must be proactive across its entire operation in order to make it easier to do the right thing and harder to do the wrong thing. the basis for ethical conduct today. very important. The Institute for Stephen Covey Aquinas also asserted the \ufb01rst Ethical Leadership, based in principles for the marketplace, Canada, de\ufb01nes an ethical business Born in Salt Lake City, Utah, in pointing out that the price set as \u201ca community of people working 1932, Dr. Stephen Covey was for a product is a moral issue. together in an environment of an internationally respected mutual respect, where they grow leadership authority, teacher, A more moral world personally, feel ful\ufb01lled, contribute to organizational consultant, and The notion of what is acceptable a common good, and share in the author. He grew up on a farm in the business world today has personal, emotional, and \ufb01nancial in Utah and was bound for an changed radically from earlier rewards of a job well done.\u201d There is athletic career, but in his late centuries. Slave labor was a shared understanding that success teens he was struck by a the norm for cotton and sugar depends on a myriad of relationships degenerative disease that led plantations in the US until \u2014both internal and external\u2014not all him to require crutches while the mid-19th century. At the of which are under the organization\u2019s walking for several years. He same time, workers (including control, but which it can in\ufb02uence studied business administration children) were exploited during through the ethical way it operates. at the University of Utah, then the industrial revolution in Europe, spent two years as a Mormon being forced to work long hours, An ethical business that employs missionary in Britain before at low wages, in unhealthy people from diverse backgrounds earning an MBA at Harvard conditions. A pioneer in showing starts by agreeing and documenting and then a PhD at Brigham that business could make a pro\ufb01t its own principles or standards, Young University. In 1983 he while pursuing an ethical path which are often termed the opened the Covey Leadership was Welsh social reformer Robert company\u2019s \u201ccharter\u201d or \u201ccode of Center in Provo, Utah, which Owen, whose New Lanark Mill, conduct.\u201d These standards become later became the Franklin near Glasgow, Scotland, became the reference point for decision Covey Company. Covey died world famous for its moral rather making in the working environment, in 2012, at 79. than commercial values. particularly when employees are faced with dif\ufb01cult decisions. Key works Today, companies have to consider every aspect of their However, it takes more than a 1989 The 7 Habits of Highly operation\u2014from sourcing written pledge to ensure an ethical Effective People ingredients to marketing policies\u2014 business. Organizations have to 1991 Principle-Centered in order to be judged ethical by their foster a culture in which it is far Leadership consumers. Employment policies are easier for people \u201cto do the right thing and much harder to do the \u276f\u276f","226 CREATING AN ETHICAL CULTURE Fashion businesses use materials and labor from all around the world. Consumers increasingly demand transparency about goods and policies, so they can buy with a clear conscience. wrong thing,\u201d according to US leadership expert Stephen Covey. Faced with daily decisions about the right way to behave, employees have to know what \u201cdoing the right thing\u201d actually means. A company\u2019s policies covering everything from safety to accepting gifts from suppliers exist to ensure that people understand how they are expected to conduct business appropriately. Driven from the top the limits of law\u201d and \u201crules of the relationships according to principles. Companies that prioritize an ethical game\u201d that ensure \u201copen and free These natural laws and governing culture often select employees for competition without deception or values are universally valid. their values as much as their skills, fraud.\u201d However, the 2007\u201308 and ensure that new employees are \ufb01nancial crisis showed clearly that Ethical leadership made aware of their role and codes, laws, and regulations are not Typically, leaders in ethical responsibilities, and also how things enough to maintain ethical business organizations are not domineering. are done in the organization. Such standards. Leaders with personal They are likely to have an open, companies are eager to ensure that integrity are vital to enact and engaging style and to be good new staff both hears the company\u2019s encourage ethical behavior listeners, able to tune in to issues values and sees them af\ufb01rmed in the throughout an organization. By across the business. The company actions of people around them. espousing the company\u2019s principles they create will have a clear Such a culture has to be driven at every opportunity and at every structure with well-de\ufb01ned roles and from the top. US economist Milton level, leaders can continually responsibilities, be transparent, Friedman famously said that the demonstrate their importance with promotion based on merit, and social responsibility of business is within organizational culture. a well-communicated strategy, so to increase its pro\ufb01ts \u201csubject to that employees know what they In Principle-Centered Leadership, have to do and where they \ufb01t in. We\u2019re pioneers and Stephen Covey describes trust, we want to show that respect, integrity, honesty, fairness, Leaders with personal integrity this model works, that it equity, justice, and compassion as are a powerful in\ufb02uence on others. can become self-sustaining. the \u201claws of the universe,\u201d classing Numerous studies have shown them as essential values for ethical that good people can make bad Ali Hewson leaders. Covey is best known for his decisions when acting in groups, book The 7 Habits of Highly particularly in stressful situations. Irish ethical businesswoman (1961\u2013) Effective People, in which he To avoid the risk of unethical proposed that ineffective people try \u201cgroupthink,\u201d the CEO has to set to manage their time around the right tone for everyone in the priorities, whereas effective people organization. Effective governance lead their lives and manage their is critical, and relies on good","WORKING WITH A VISION 227 teamwork and communication achieve. It is also committed to sustainable fashion common between the board and the CEO. A measuring and publishing its practice. Any company partnering board that has a de\ufb01ned structure progress against sustainability with Made-by must analyze the and a healthy culture of debate will targets and has a full-time \u201cgreen ethics of every aspect of operations, be more likely to recognize emerging guardian\u201d to focus on improvement. from the \ufb01bers used in products to problems and take timely, The company also has a \u201cConscience factory conditions for workers. appropriate action. Team,\u201d made up of people from Companies can also inspire across the organization, which is customers to act in a socially This was not the case at Enron, a responsible for addressing social, conscious way: some garments company that has become one of the environmental, and ethical issues. carry a symbol of a crossed-out most infamous examples of trash can, encouraging consumers unethical leadership. The Enron Ethical companies often to recycle them. Corporation started as a small gas- demonstrate ethical commitment by pipeline business in the US and partnering with organizations that Ethical business is also good grew to become the nation\u2019s can help them to improve their business. Customers are attracted to seventh-largest publicly held standards. Ted Baker is a member of companies they can feel good about, corporation. CEO Jeffery Skilling Made-by, a European not-for-pro\ufb01t more talented staff is attracted and actively cultivated a culture that organization that strives to improve stays longer, and shareholders are would push limits; his mantra was social and environmental conditions shielded from the type of share-price \u201cdo it right, do it now, and do it in the fashion industry and to make falls that overtook Enron. \u25a0 better.\u201d But despite a clear set of values for employees to espouse, Ethical trading depends on more than internal business practices and executives manipulated accounting culture: a company\u2019s materials, suppliers, and business partners must also rules and disguised enormous losses be ethically sound. To aid transparency, some companies and organizations and liabilities. Enron collapsed in publish data on aspects of their business, such as production locations, 2001; Skilling and chairman Ken Lay energy mix, recycling levels, and diversity among employees. were tried together on 46 counts, including money laundering, bank fraud, insider trading, and conspiracy. Doing the right thing Energy mix Disposal of waste Employee diversity British fashion brand Ted Baker began life as a shirt specialist in Glasgow, Scotland, in 1988, and now has stores in the Americas, Europe, Asia, and the Middle East. The company is known for its irreverent designs, but in contrast to its styling, it strives to be an exemplar in the way it runs its business. To make this a reality rather than just a statement on its website, Ted Baker strives to ensure that environmental, social, and ethical matters are integral to its business operations, so that employees are always in tune with its high standards. Ted Baker has set targets to continuously improve the overall sustainability of its collections, so employees know what they have to","SUCCES SELLING MARKETING MANAGEMENT","SFUL","230 INTRODUCTION B y de\ufb01nition, marketing Naturally there are dangers of the \u201cmarketing mix\u201d\u2014such as is the \ufb01eld of management inherent in trying to predict the product or service itself, the devoted to selling. It is the the future using this type of places where it is sold, its price, link between production and pro\ufb01t, forecasting. The marketer must and any promotional offers\u2014can providing the expertise for taking also be aware of changing tastes, be adjusted accordingly. Japanese a product or service through the technology, politics, and economic camera company Konica Minolta, most appropriate channels to \ufb01nd conditions, so that the business for example, uses specialized the people most likely to buy it. can adapt quickly, avoiding what technology to monitor sales data, To ful\ufb01l this goal, it is crucial to management scholar Theodore competitor activity, and market become adept at understanding Levitt famously called \u201cmarketing trends in real time so that the market. This means closely myopia.\u201d For example, as consumers it can respond effectively. studying the behavior and lifestyle have become increasingly reliant of the customer so that a product on mobile phones and tablets, Marketing strategies or service can be developed to be businesses with foresight have Arguably the product or service irresistible in every way, from the developed mobile-commerce offered is the most critical purpose, function, quality, and look channels and reaped the bene\ufb01ts. component of the marketing mix. of it, to the speed at which it is For most companies, each product delivered, the places it is sold, its In the quest to anticipate or service in its product portfolio price, and the level of customer customer needs and wants, some has its own cycle of growth, and service support offered. of the most progressive companies can be managed to maximize pro\ufb01t gather data and examine it on a by prioritizing the marketing Knowing the customer daily basis so that key elements spend. For example, for food group That is the theory. In practice, Mars, its best-selling namesake making your customers love you Marketing takes a day to chocolate bar has been a long- by always putting them \ufb01rst and learn. Unfortunately it takes standing source of pro\ufb01ts, funding ful\ufb01lling their needs and desires is the corporation\u2019s expansion into the biggest challenge of marketing. a lifetime to master. other areas, such as ice cream Collecting data about the purchase Philip Kotler and pet food. history of customers is a starting point. Combined with analyzing US marketing expert (1931\u2013) To help decisions about any available demographic and diversifying into such new markets, lifestyle statistics, such data can be companies can use a diagrammatic used to build a marketing model\u2014 tool such as Ansoff\u2019s Matrix, which essentially a mathematical formula plots existing and potential that indicates potential purchase products or services according rates for a given set of variables. to the risk factors involved. If a business decides to develop and","SUCCESSFUL SELLING 231 market something new, how it offers, sweepstakes, and price Companies found to have acted presents the offering and gets discounting\u2014can be deployed dishonestly or conveyed partial the message to consumers is an in the short term to garner initial truths about their eco-credentials important consideration. In planning interest. They can be especially can be accused of \u201cgreenwashing,\u201d a launch, another valuable tool, the effective for product launches in and will \ufb01nd it hard to win back AIDA Model, provides clear-cut areas where many rivals \ufb01ght for public opinion. In fact, no matter criteria for de\ufb01ning the features of shelf space, such as household how appealing a company\u2019s sales any new product or service: how it cleaning and candy. proposition, consumers increasingly grabs consumers\u2019 attention, holds want the people they buy from to their interest, generates desire, and One of the oldest strategies for have a social conscience. For this is perceived to be attractive. communicating with customers is reason, it is vital for management word of mouth. In the age of social to consider the role of ethics within Concurrent with developing a media, generating buzz about a the organization, and to develop the speci\ufb01c product or service for a new product or service increasingly company\u2019s code of behavior toward particular market, creating a brand relies on reaching speci\ufb01c groups suppliers, employees, consumers, is equally important. The goal through Facebook, Twitter, YouTube, and the community. Although should be to make the brand and other online means, and shareholders may see corporate synonymous with a set of unique encouraging them to spread the responsibility as the least important product qualities. In the words word. When a branded video goes commercial priority, it is now an of marketing expert Seth Godin: viral, the potential global reach runs integral part of the marketer\u2019s \u201cA brand is the set of expectations, into tens of millions. If relatively strategy for successful selling. \u25a0 memories, stories, and relationships low-cost communications methods that, taken together, account for a like this are effective, it can lead Don\u2019t \ufb01nd customers for your consumer\u2019s decision to choose one marketers to ask, why advertise? products, \ufb01nd products for product or service over another. But for long-term image building, your customers. If the consumer ... doesn\u2019t pay a and for reinforcing brand values, Seth Godin premium, make a selection, or advertising still has a role to play. spread the word, then no brand For example, a sustained advertising US entrepreneur (1960\u2013) value exists for that consumer.\u201d plan can take an audience from children to adults with recognizable Promoting the product slogans, jingles, and formats. Once the optimal product or service has been developed in conjunction Staying on message with brand identity, there is the Businesses must carefully consider question of how to get the word out the messages that they send to to potential customers. Promotions customers and their rivals, since the and incentives\u2014such as special marketplace can judge them harshly.","232 MARKETING IS FAR TOO IMPORTANT TO LEAVE TO THE MARKETING DEPARTMENT THE MARKETING MODEL IN CONTEXT Marketing is too This data can then be important to leave processed by the FOCUS to the marketing Marketing models marketing department department. to calculate a model of KEY DATES 1961 The Marketing Science potential product Institute is founded. performance. 1969 US academic Frank Bass It affects key It must be rational, publishes a seminal marketing decisions about based on data gathered model that can be used to products, planning, predict demand. and expenditure. from all areas of the business. 1970s Complex measurement models and decision-making C ompanies need to study buying patterns of consumers, models are developed. their customers\u2019 buying along with other variables relating habits carefully in order to to the product. These are entered 1980 The launch of in-store plan business marketing strategies. into a mathematical model or scanners at checkouts gives Using a mathematical model to equation programmed to make a marketers new data and plan product strategies and aid customized calculation. The results prompts the development of decision making is an integral part will help to quantify the potential sophisticated new models. of any modern marketing practice. performance of products in different Marketing computer programs use channels aimed at various market 1982 The journal Marketing sets of numerical data about the segments. By examining the data, Science launches, focusing on mathematical models for marketing purposes. 1990s Intelligent marketing- information systems computerize many routine modeling functions, providing daily updates and projections.","SUCCESSFUL SELLING 233 See also: Managing risk 40\u201341 \u25a0 How fast to grow 44\u201345 \u25a0 Organizational culture 104\u201309 \u25a0 Avoid groupthink 114 \u25a0 Good and bad strategy 184\u201385 \u25a0 Forecasting 278\u201379 \u25a0 Marketing mix 280\u201383 \u25a0 Bene\ufb01tting from \u201cbig data\u201d 316\u201317 Marketing is inherently data and the longer the historical team around the world confers once about producing results. period it covers, the more accurate a week to examine data and make the results will be. Models reassure decisions in response to buying Geoff Smith members of the business that every behavior. As McDonald says, \u201cit\u2019s scenario has been investigated. the data sources that help create VantagePoint Marketing (1962\u2013) Marketers can choose from the brand and keep it dynamic.\u201d \u25a0 different models or design their own, but the key to making the model work is data. marketers and others in an Gathering and using data Market research is valuable, but it organization can measure projected Consumer goods maker Procter & can be very time consuming to gather product growth, or return on Gamble (P&G) has invested heavily data that is representative of the age, investment, and make informed in data gathering and modeling, gender, and background of consumers. decisions on how to optimize the implementing digital processes Computer models do the work faster. combination of factors most likely from the factory to the shelf in to generate market success. order to capture data and feed it back. The data can be used to Gathering the required data for make immediate adjustments to modeling is crucial. Information product planning and distribution, is needed from all areas of the as well as added to a massive business so that every step in the database for future use. According process of getting the product from to CEO Robert McDonald in 2011, the drawing board to the customer \u201cData modeling, simulation, and is factored in. When David Packard, other digital tools are reshaping the co-founder of Hewlett-Packard, how we innovate.\u201d said that \u201cmarketing is far too important to leave to the marketing P&G focuses on internal data- department,\u201d he was implying that gathering processes and also relies the plans made by marketers can heavily on market information from come to nothing if the rest of the external partners. The leadership organization is not fully engaged. In addition to getting approval on plans The origin of marketing models and budgets, marketers should communicate with all departments Models of consumer behavior is raised by one percent how to gather data and share it once date from the 1960s. They grew might this affect demand? Then decisions have been made. out of a need to make marketing in 1969 Stanford University\u2019s more scienti\ufb01c and less driven Frank Bass devised his Bass Using the data, the marketer by instinct or unproven ideas. model, which is still used to can simulate product tests and predict how fast new products input variations using different In the 1960s US scholar will be adopted and spread assumptions about elements of Robert Ferber advocated the through a market. the marketing mix, such as market use of mathematical simulation conditions and consumer behavior. techniques and models. These Decision Support Systems The greater the amount of relevant became known as measurement (DSS) use measurement models models because they were to project the outcome of new devised to measure demand decisions, adding variables\u2014 for a product as a function of such as previous outcomes in various independent variables\u2014 similar contexts\u2014to help for example, if the selling price marketers make optimal choices.","KNOW THE CUSTOMER SO WELL THAT THE PRODUCT FITS THEM AND SELLS ITSELF UNDERSTANDING THE MARKET","","236 UNDERSTANDING THE MARKET IN CONTEXT Every successful business... FOCUS ...gathers data about the ...assesses the market Focused marketing needs of its present and environment\u2014including competitors, distributors, KEY DATES potential customers. the economy, technology, 1920s The concept of market research emerges in the US. and social trends. 1941 Robert K. Merton invents It can then develop the idea of the focus group. the products that will solve customer problems, 1953 Peter Drucker says the \ufb01rst step for any business is to and so meet an ask: \u201cWho is the customer?\u201d existing demand. 1970 US economist Milton A product that \ufb01ts the Friedman puts forward the customer will sell itself. business model of shareholder maximization. 1998 Marketing professor Robert V. Kozinets coins the term \u201cnetnography\u201d to refer to the theory of ethnography as applied to Internet users. 1990 US professor Gerald Zaltman develops the \ufb01rst neuromarketing technology, ZMET, to analyze consumers\u2019 subconscious reactions to advertising imagery. T o be successful in a market, core of this market is the prospective that consumers are struggling an enterprise needs to customer, who will be in\ufb02uenced with. Once these are identi\ufb01ed, understand both the by many of those environmental a business needs to respond environment in which it wants factors, but will also be driven by innovatively, to deliver the products to do business, and the way individual needs and preferences, and services that will be seen as consumers in that environment which will affect what products perfect solutions. think and act. The marketing and services he or she buys. environment is the world beyond Gathering data the con\ufb01nes of the organization\u2014 This means that to understand This analysis may sound simple, the world that its customers live the market, a company must but given that any particular in\u2014and includes the state of the make sense of the \u201cbroad brush\u201d market might number thousands or economy, government regulations, of the external environment and, millions of individuals, how does a social attitudes, current issues, at the same time, fathom the marketer go about understanding competing companies, distribution psychological pro\ufb01le and how those people think and infrastructure and partnerships, personality of the consumer. The behave\u2014let alone what problems or and technological changes. At the end purpose of these investigations unful\ufb01lled wants they have, both is to identify the biggest problems","SUCCESSFUL SELLING 237 See also: Stand out in the market 28\u201331 \u25a0 Focus on the future market 244\u201349 \u25a0 Make your customers love you 266\u201369 \u25a0 Forecasting 278\u201379 \u25a0 Marketing mix 280\u201383 \u25a0 Maximize customer bene\ufb01ts 288\u201389 individually and collectively? The Being customer driven \u2026 advised that a business centered starting point is to fully explore the is about building a deep on the customer was the only sure world in which the customer lives. way to realize growth. \u201cThere is What are the basic motives that awareness of how the only one valid de\ufb01nition of business drive buying decisions? What value customer uses your product. purpose,\u201d he wrote, and that is \u201cto does the customer place on price, create a customer.\u201d By this he quality, and design? Among all Ranjay Gulati meant that a customer\u2019s willingness the social, cultural, \ufb01nancial, to pay for goods or services is the and technological forces in the Harvard business professor catalyst that propels businesses to environment, which ones turn raw materials and resources particularly affect the customer? all of the major economies of the into products for sale. Without the A marketer wants to know the West, bringing to an end the upward customer\u2019s desire or need, there is practical details of the customer\u2019s growth that had, with the exception no impetus for commercial activity; daily life. How does that person live of a few slow years, persisted since and conversely, without commerce, on a day-to-day basis? Does he or the end of World War II. Everyone in nothing can be produced to meet she have tasks that could be made business was thinking about how the customer\u2019s demand. easier? What other kinds of problems to survive the lean times ahead. could the company potentially Drucker suggested that when solve? The goal of all this research, Recession struck in the very customers buy something, they according to in\ufb02uential management same year that Drucker published are not thinking about the product thinker Peter Drucker, \u201cis to make the work that would later be hailed or service itself, but about the selling unnecessary.\u201d as a masterpiece, Management: usefulness of it to themselves. Tasks, Responsibilities and For them, value lies in the problem- Beating the recession Practices (1973), in which he solving ability of the purchase. In 1973, Drucker advised business leaders to \u201cknow and understand Although Drucker\u2019s idea is the customer so well the product or now at the core of most modern service \ufb01ts him and sells itself.\u201d At marketing theory and practice, that time, the corporate world was in at the time it was a counter to the turmoil as recession took hold across prevailing management approach of the 1970s, which advocated the maximization of shareholder value. \u276f\u276f Peter Drucker One of the most quoted experts in unfolding, he moved to England management and marketing, Peter as the Nazis rose to power, Drucker was exposed to big ideas before settling in Los Angeles, during his childhood years in where he became a professor of Vienna, Austria. Born in 1909, politics, and later a professor his father was an economist and of management. Drucker wrote lawyer, and his mother was one of 39 books on the subjects of the \ufb01rst women in Austria to study economics, leadership, and medicine. The couple regularly management. He died in 2005. held salons in their home and the young Drucker was encouraged to Key works sit in on these discussion evenings, which were regularly attended by 1946 The Concept of the prominent professionals. Corporation 1954 The Practice of Armed with a degree in Law Management from Hamburg University, and 1973 Management with a budding journalistic career","238 UNDERSTANDING THE MARKET Skaterboarders are a niche market, and have a speci\ufb01c set of requirements from equipment and fashion brands. Micromarketing can help businesses reach niche markets such as this one. This theory placed the wealth of the because the corporate-centered insulted one of his own products, corporation, rather than the needs strategy has proved no guarantee joking that its low price was and wants of the customer, at the of longevity. Business in the 21st possible due to its poor quality. core of a business. It held that century has become more people- Offended customers abandoned business should be run solely to centered with a number of huge the store and $800 (\u00a3500) million increase pro\ufb01ts, which would boost success stories helping to sway was wiped off the value of the the value of stock prices and allow management further toward company, which nearly went under. the company to return value to the customer-oriented strategies. This notorious example shows how shareholders\u2014who, after all, own businesses who treat customers the business. This way of thinking In 2010, business professor with contempt can pay a very had been introduced by economist Richard Martin wrote an article for high price. Milton Friedman in an article he the Harvard Business Review, wrote for The New York Times in heralding \u201cThe Age of Consumer Knowing the market 1970, and it was later developed Capitalism.\u201d He claimed that we are Since Drucker\u2019s initial proposition further by business professors now living in an era in which that a business must get to know Michael Jensen and William shareholder value is no longer the the customer intimately, the market Meckling in their paper, \u201cTheory of primary goal. \u201cFor three decades, place has matured, making the task the Company.\u201d As the title implies, executives have made maximizing of understanding the consumer, Jensen and Meckling\u2019s thesis was shareholder value their top priority,\u201d customer groups, and the market not generally concerned with the he wrote. \u201cBut evidence suggests as a whole, far more complex. One world beyond the company\u2014it that shareholders actually do better of the reasons is fragmentation, focused on the relationship between when \ufb01rms put the customer \ufb01rst.\u201d meaning that consumers are now upper management and shareholders, divided among many small markets rather than the relationship between An example of a serious failure that are constantly in \ufb02ux, and may management and the market. to prioritize the customer is that of suddenly emerge from nowhere. the British jewelry company, Ratners. These micromarkets are de\ufb01ned by 21st-century thinking By the late 1980s, Ratners was the the common aspirations, likes, or The concept of shareholder world\u2019s biggest jeweler, with 2,000 needs of the consumers within maximization was a dominant force stores on two continents. The them. Each consumer is subject to in the last few decades of the 20th stores sold jewelry at low prices century, but the importance of and were very popular\u2014until the Whether it\u2019s Google or Apple understanding the market and of disastrous speech by the company\u2019s or free software, we\u2019ve got customer-centered management chief executive, Gerald Ratner, at some fantastic competitors has gradually gained favor, partly the Institute of Directors in 1991. In and it keeps us on our toes. his talk, supposedly about the Bill Gates company\u2019s success, he instead CEO of Microsoft (1955\u2013)","SUCCESSFUL SELLING 239 Research is formalized most important in the marketing Marketers have developed new curiosity. It is poking and environment. These encompass strategies for online information gender, life stage, income, trends, gathering, such as personalized, prying with a purpose. current issues, and the in\ufb02uence of or one-on-one, marketing, in which Zora Neale Hurston key individuals in the public eye. a single consumer\u2019s interests and wants can be recorded and US anthropologist (1891\u20131960) The challenge for the marketer compiled to create a detailed pro\ufb01le. is \ufb01nding out how all of these a wide spectrum of external factors, things in\ufb02uence customers and, Psychographic pro\ufb01ling is one so it is crucial to understand these consequently, what motivates them way that marketers attempt to to get to their hearts and minds. to buy. The obvious starting point make sense of diverse consumer is to ask questions. This basic interests, by corralling individuals Price cutting by competitors, for premise developed during the 1960s with shared interests and example, can divide the customer\u2019s and 1970s into a formal process motivations into groups that can attention, providing enticement but of question-and-answer known be targeted. Whereas businesses also potentially damaging a brand\u2019s as market research. Researchers used to de\ufb01ne their customers value in the eyes of the consumer. gathered both quantitative evidence demographically, for example as A business therefore needs to know (from simple questions directed Baby Boomers or Generation X, how sensitive their existing and toward a large audience) and a psychographic pro\ufb01le is much potential customers are to price. qualitative evidence (through direct more detailed. It is put together observation or in-depth discussion by using information about a The distribution system, which with a small sample of individuals). consumer\u2019s daily habits; favorite determines how products and Qualitative research is usually brands, music, and athletic services get to potential buyers, is regarded as the more valuable of personalities; media habits; also a vital aspect to consider. A the two in getting a grasp of why leisure activities; vacation business should \ufb01gure out how to a customer accepts or rejects a destinations; and much more. deliver products and services in a product, and in understanding the way that best suits purchasers. The realities of customers\u2019 lives. Social media and online Internet has transformed how this communities have encouraged happens, and customers now Personalized marketing people to de\ufb01ne themselves by an expect sellers to understand where, Since the 1990s, business has forged ever-more speci\ufb01c set of when, and how they want to buy. a direct path of communication characteristics, likes and dislikes. with the customer via the Internet. At the same time, the Internet has allowed businesses to glean \u276f\u276f Types of research The state of the economy, level of interest rates, regulatory law, and technological change can sway customers, while social and cultural forces are arguably the Focus groups were used extensively in the late 20th century to gather informal comments and opinions on products, as shown here in a scene from the TV show, Mad Men.","240 UNDERSTANDING THE MARKET MUSIC SPORTS VACATION LEISURE Personalized marketing makes use of Consumer A information gathered from social media and other platforms to create tailor-made advertising. Consumer A is an active, athletic individual, and would respond to marketing that speaks to this lifestyle. Customer relationship marketing Consumer B makes use of historical data to produce individual marketing. Consumer B is an avid TV watcher; an online retailer could make recommendations for DVDs based on previous purchase history. Psychographic pro\ufb01ling allows Consumer C marketers to \ufb01nd common ground among a diverse group of individuals. A canny marketer aiming for consumers A, B, and C could use their shared taste in music as a way forward for a campaign. access to much of this information, useful in the 1990s with the increase (CEM), because it captures the providing companies with copious in call centers. Management can customer\u2019s immediate interaction amounts of data for marketing divert calls from customer with the seller, whereas CRM uses purposes. Software that tracks and service\u2014or listen in\u2014to learn what a customer\u2019s history. analyzes customer preferences via issues consumers may be having, their online and mobile activities what could be improved, and what The \ufb01eld of neuroscience has has enabled companies to engage problems they have that need to be taken the idea of customer in what is called customer solved. Marketers have dubbed this understanding to the next level, relationship marketing (CRM)\u2014 \u201ccustomer experience management\u201d advancing Drucker\u2019s premise that using the data extracted about businesses needed to drill down customers and their preferences People are unlikely to know into the customer psyche and to sell more products and services that they need a product discover how decisions are made. to them. Amazon, for example, uses which does not exist. Several studies by branding guru a customer\u2019s shopping history to John Harvey Jones Martin Lindstrom have caused a recommend similar products and sensation by proposing that, no to show online browsers what other UK industrialist (1924\u20132008) matter how consumers may answer customers with the same interests in face-to-face research, the only have recently bought. way to know what subconsciously motivates them to buy is to measure Real-time data changes to their brainwaves when Telephone customer service sits at exposed to certain images, sounds, the other end of the spectrum from and smells. According to Peter social media. Pioneered in the Drucker, \u201cthe main objective of 1980s, it began to prove even more neuromarketing is decoding the process that take place in the","SUCCESSFUL SELLING 241 customers\u2019 mind, in order to Did Alexander Graham Although Peter Drucker emphasized discover the desires, wishes, and Bell do any market the importance of knowing the the hidden causes of their options, research before he customer, he did not narrow this to so that there is a possibility to get just asking the customer what they them what they want.\u201d invented the telephone? want; he intended that business Steve Jobs should also think ahead and \ufb01nd Neuromarketing is one way of ways to innovate. \u201cThe \u201cwant\u201d a understanding the customer, and doesn\u2019t mean we don\u2019t listen to business satis\ufb01es may have been it is actively used by companies customers, but it\u2019s hard for them felt by the customer before he was such as Google and Disney to test to tell you what they want when offered the means of satisfying it,\u201d consumer impressions. However, it they\u2019ve never seen anything he reasoned. \u201cIt remained a is not in itself a solution to knowing remotely like it.\u201d potential \u201cwant\u201d until the action what customers want to buy. A of businessmen converted it into broader perspective is needed to Steve Jobs instinctively effective demand. Only then is truly understand a market and the understood what the consumer there a customer and a market.\u201d elements that shape it. In some wanted because he had the same cases it is pure innovation, driven problem: the lack of a well-designed, Professor Ranjay Gulati by a desire to transform the way portable device that would make maintains that the \ufb01rst step in people live through technology, that communication and information- understanding the new, highly gives customers something they gathering fun and easy. competitive market of the 21st didn\u2019t realize they wanted, though century is asking customers the the need for it was there. Apple\u2019s right questions; the most important iPad is an example of how forward ones being what problems and thinking about what customers issues they are dealing with. But lives could be like can lead to he says that a business must make market success. a creative leap to \ufb01gure out the innovations that will serve those Innovative solutions customer needs, if they want to When the iPad was unveiled in survive in the market place. \u25a0 2010, investors and the press were sceptical, wondering who would want one, given that a laptop computer had more functions and was only slightly bigger. The iPad was a sellout because customers loved using it\u2014it was fun and fast, and allowed them to do all the things they enjoyed on their iPod touch but with a bigger screen and a keyboard that was easier to use. Apple CEO Steve Jobs claimed in an interview with Fortune magazine never to have done consumer research. \u201cIt isn\u2019t the consumer\u2019s job to know what they want,\u201d he reportedly said. \u201cThat Steve Jobs of Apple encouraged the company to consider the changing technological world and people\u2019s existing daily habits to provide an innovative solution to an unfelt need: the iPad.","242 ATTENTION, INTEREST, DESIRE, ACTION THE AIDA MODEL IN CONTEXT T he AIDA model is the be used to create desire, before foundation of modern \ufb01nally laying out a simple way for FOCUS marketing and advertising that desire to be met\u2014the means Marketing models practice. It outlines the four basic to buy. On website advertising, this steps that can be used to persuade might be a direct link; on TV, print, KEY DATES potential customers to make a or billboards it may be a website, 1898 E. St. Elmo Lewis purchase. The \ufb01rst three steps lie store name, or telephone number. describes the principle that in creating attention (A), developing would become AIDA. interest (I), and building desire (D) Commercial potential for the product, before the fourth In the movie industry, the stages of 1925 US psychologist Edward step\u2014the \u201ccall to action\u201d (A)\u2014tells AIDA are used to great effect. Movie Kellogg Strong Jr. refers to them exactly how and where to buy. studios often begin their marketing AIDA in The Psychology of campaigns months in advance with Selling and Advertising. AIDA is often expressed as giant billboard posters to attract a funnel, because it channels the attention to the new movie. Short 1949 US marketing executive customer\u2019s feelings through each \u201cteaser\u201d trailers follow, which provoke Arthur F. Peterson expresses stage of the communication process interest by offering a tantalizing AIDA as a sales funnel, in toward reaching a sale. glimpse of the movie without Pharmaceutical Selling, giving too much away. Desire is Detailing and Sales Training. AIDA in practice instilled by the release of the full Attracting the customer\u2019s attention trailer, which is carefully crafted to 1967 US professors Charles is the \ufb01rst challenge, and this may show the highlights of the movie, Sanclage and Vernon be achieved by using an arresting from big explosions and special Fryburger propose the EPIA catchphrase, offering a discount or effects to witty lines of dialogue. model: Exposure, Perception, something for free, or demonstrating On the opening weekend, Integration, Action. how a problem can be solved. Once advertisements in newspapers and someone\u2019s attention has been on television spotlight the movie\u2019s 1979 US academics Robert seized, it must be turned into release, provoking action by L. Anderson and Thomas genuine interest. This is best done inviting the consumer to go and E. Barry propose adding by providing a succinct assessment buy a ticket. brand loyalty to the various of the product\u2019s bene\ufb01ts to the hierarchy of effects models consumer, rather than simply One of the movie hits of 1999, based on AIDA. listing the product\u2019s main features. The Blair Witch Project, had an Problem-solving claims, results- innovative approach to AIDA that based advice, or testimonials can made use of new viral marketing","SUCCESSFUL SELLING 243 See also: Stand out in the market 28\u201331 \u25a0 Creating a brand 258\u201363 \u25a0 Who invented AIDA? Promotions and incentives 271 \u25a0 Why advertise? 272\u201373 \u25a0 Generating buzz 274\u201375 Management expert Philip techniques. Before the movie\u2019s \ufb01rst moviegoers were urged to buy Kotler references Edward showing, the \ufb01lmmakers created a tickets before those few showings Kellogg Strong Jr.\u2019s book The website that offered an intriguing sold out. The movie cost just $35,000 Psychology of Selling and insight into the background to the to make, but generated revenues of Advertising (1925) as the movie. It presented snippets of more than $280 million worldwide. source of AIDA. However, movie as \u201cfound \ufb01lm footage,\u201d and Strong\u2019s book gives credit for left viewers wondering whether E-marketing and AIDA the idea to advertising pioneer the story of the movie was \ufb01ction The advent of e-commerce prompted Elias St. Elmo Lewis (1872\u2013 or reality. The website grabbed award-winning UK copywriter Ian 1948), maintaining that Lewis attention, and continued to gain Moore to suggest NEWAIDA as a formulated the slogan \u201cAttract interest as more video clips and more relevant model for e-marketing: attention, maintain interest, audio \ufb01les were added. The buzz AIDA preceded by navigation, ease, create desire\u201d in 1898 and around the \u201cmyth\u201d of the Blair Witch and wording. It seems that as that he later added the fourth grew, creating further desire to see markets have become more complex, term \u201cget action.\u201d the movie. The call to action came marketers require ever-clearer ways in the form of a very limited release; of perceiving the customer journey. \u25a0 The \ufb01rst use of the AIDA acronym is commonly The AIDA model attributed to C. P. Russell\u2019s article \u201cHow to Write a ATTENTION Sales-Marketing Letter,\u201d Make the customer aware of the product or service using an published in the US advertising trade magazine Printers\u2019 Ink in eye-catching advertisement or an arresting offer. 1921\u2014Russell was also one of its editorial staff. He outlined INTEREST the basis of the four-step Hold the customer\u2019s interest by providing infomation process and pointed out that about the advantages of the product or service and \u201creading downward, the \ufb01rst letters of these words spell the its bene\ufb01ts to the customer. opera Aida.\u201d He advised, \u201cWhen you start a letter ... say \u2018AIDA\u2019 to yourself and you won\u2019t go far wrong ...\u201d DESIRE Generate the customer\u2019s desire to buy by convincing them that the service or product will meet their needs. ACTION In practice, few messages Make it as easy as take the consumer all the way from awareness to purchase, possible for the customer to make but the AIDA framework suggests the qualities of the purchase. a good message. Philip Kotler US marketing guru (1931\u2013) SALE","MARKETING MYOPIA FOCUS ON THE FUTURE MARKET","","246 MARKETING MYOPIA Demand for Product A dries up and growth slows. IN CONTEXT The company cuts Product B is already in FOCUS production costs and development; customers Customer service boost pro\ufb01ts. say this will suit them KEY DATES better than Product A. 1874 French mathematical economist Leon Walrus Demand for Product A Production of recognizes that small changes continues to fall. Product A is replaced in consumer preferences have a big impact on business. by Product B. 1913\u20131914 Henry Ford, US The company struggles The company continues industrialist, installs the \ufb01rst to survive. to grow. production line, and informs companies that cheaper per-unit costs are the key to their sustained growth. 1957 US marketing theorist Wroe Alderson stresses that a business needs to grow and adapt to changes in order to survive and thrive. 1981 US marketing thinkers Philip Kotler and Ravi Singh coin the term \u201cmarketing hyperopia\u201d to describe the problem of businesses having a clear view of distant issues but not of close ones. W hen a company has a needs to look ahead and constantly changes, and \ufb02exible enough to \ufb01xed idea of what evaluate new openings in the adjust, it can \ufb01nd ways to tempt products or services it market. If it does not, growth will customers and prosper. The astute wants to sell, and a narrow idea of stagnate and, ultimately, decline. approach, Levitt said, is to build a who it is selling to, it runs the risk business around the customer, of failure because it is not easily In Levitt\u2019s view, when a rather than around the company. able to adapt to changes in market business is concentrating on how He proposed that \u201can industry is a conditions. It will miss opportunities to sell its products and is blind to customer-satisfying process, not a to expand and conquer new market the changing circumstances and goods-producing process.\u201d areas. Harvard Business School desires of customers, it will not be professor Theodore Levitt dubbed prepared for shifts in the market. Grow or die this lack of foresight \u201cmarketing For example, a sudden change in Underlying Levitt\u2019s idea is the myopia,\u201d a term he \ufb01rst used in an the economy or government policy, inevitable growth pattern of a article of the same name, published a new technology, or a social crisis business. At \ufb01rst a business enters in the Harvard Business Review in can have an almost immediate the market with a product or 1960. He stressed that a company effect on the buying public. If a service and may enjoy rapid company is prepared for such","SUCCESSFUL SELLING 247 See also: Finding a pro\ufb01table niche 22\u201323 \u25a0 Make your customers love you 264\u201367 \u25a0 Maximize customer bene\ufb01ts 288\u201389 \u25a0 Feedback and innovation 312\u201313 growth. But all growth eventually Selling is not marketing.... the Detroit (General Motors, Ford, and tapers off because the market has entire business process [is] a Chrysler) dominated the domestic already bought enough of the and global markets. They produced product or service, or develops tightly integrated effort to 93 percent of the automobiles sold different priorities. The company discover, create, arouse, and in the US, and controlled 48 percent with marketing myopia turns of world sales. One-sixth of the US inward to see how it can trim the satisfy customer needs. work force was employed directly or costs of manufacturing or make Theodore Levitt indirectly by the industry. other internal cost-saving measures. Nevertheless, cracks were These tactics may offset a decline era for several decades, Levitt\u2019s beginning to show. in pro\ufb01ts for a while, but eventually idea may not have seemed very they will not be enough to save the relevant at the time. Still, he cited In 1955, the Big Three had business from failing. Levitt, convincing examples in US industry enjoyed a record year. However, however, reasoned that an industry to support his case. In particular, he demand fell dramatically in 1956 can continue to grow long after the accused automobile manufacturers and 1957 because so many obvious marketing strategies have of marketing myopia. consumers had already bought been used, if the management is cars. This sales slump was partly totally focused on the customer. The automobile industry responsible for the recession of On the surface, the US auto 1958, during which manufacturing Levitt asked the corporate industry appeared unstoppable. By as a whole declined. This was heads of America in 1960, \u201cWhat 1960 the \u201cBig Three\u201d in the city of the \ufb01rst economic downturn in business are you in?\u201d, demanding the US since the Great Depression. that they shift their focus from Meanwhile, car manufacturers in manufacturing to customer Germany, the UK, France, and satisfaction. This concept is taken Japan were threatening the for granted in the current age dominance of the Big Three. geared to customer analysis and niche marketing, but given that the \u201cDetroit never really researched US economy had boomed in the the customer\u2019s wants,\u201d alleged 1950s, enjoying its most prosperous Levitt. \u201cIt only researched the kinds of things which it had already decided to offer.\u201d By the time US carmakers realized what had happened, they found it dif\ufb01cult to adjust. After a series of dud models and marketing failures, they \ufb01nally rebounded in 1965 with the ubiquitous \u201cmuscle\u201d cars such as the Ford Mustang\u2014but they would never again have such an iron grip on the market. Before Theodore Levitt\u2019s groundbreaking article in 1960, marketing was not considered a \u276f\u276f Abandoned automobile factories in Detroit are a reminder of the US economic downturn in the late 1950s. Theodore Levitt argued that carmakers failed to adapt to their customer\u2019s needs.","248 MARKETING MYOPIA Shortsighted marketing focuses on current customers and their needs but overlooks potential new markets, leading to missed opportunities and more modest pro\ufb01ts. Farsighted marketing is adaptable, allowing businesses to shift their focus to reach a wider range of consumers with a broader product offering. Returns can then be much greater. serious endeavor worthy of the \ufb01rst book to take a scholarly and Express to take up the position management attention; instead scienti\ufb01c approach to marketing. of CEO at struggling car rental it was a formulaic task left to the Kotler\u2019s key teachings are that the company Avis. He rebuilt the sales or production departments. customer should be at the center of business by focusing on two But \u201cMarketing Myopia\u201d prompted any business, and that pro\ufb01t is interdependent principles: put both the corporate and academic derived not merely from selling but customers \ufb01rst; and create a worlds to start thinking differently. from delivering satisfaction to working environment in which customers: thinking which is still at employees love what they do. For Taking marketing seriously the core of most MBA programs. the \ufb01rst time the business began to Around the same time that Levitt make a pro\ufb01t. was writing that pivotal article, he The effect of Levitt and Kotler\u2019s inspired a student, Philip Kotler, ideas on the corporate world was Customer service who would take his proposition almost immediate. In 1962, By 1964 Avis was expanding. The further to cement a fundamental executive Robert Townsend had man appointed as manager of change in the way managers just been lured from American operations in Europe, Africa, and approached business. Kotler the Middle East, Colin Marshall, studied at Harvard in 1960 for his The entire corporation must was another believer in Levitt\u2019s postdoctoral work in mathematics, be viewed as a customer- customer-centered approach, and having already completed a PhD in creating and customer- deployed it with great success. economics at the Massachusetts Within ten years he was running Institute of Technology (MIT). satisfying organism. the entire company from New York, Exposed \ufb01rsthand to the ideas of Theodore Levitt overseeing innovations that gave Levitt and other marketing customers better service, and professors, he began to develop a making Avis the market leader. In rigorous outline for the role of 1981, when he was recruited to help marketing in any organization. The save British Airways (BA), he result was published in 1964, and turned around the fortunes of the Marketing Management is still airline in a tough environment, regarded as the seminal textbook on creating a successful model of the subject. It is credited with being service-oriented business. His"]