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Its enough to make you cry….

The Ig Nobel Prizes honour “achievements that make people laugh, and then think. The prizes are intended to celebrate the unusual, honour the imaginative — and spur people’s interest in science, medicine, and technology.

This year included the Economics prize, this time awarded to three academics from New Zealand for “Assessing the personalities of rocks, from a sales and marketing perspective”…… [Laugh]

The actual title of the research paper gives a slightly different slant, The Brand Personality of Rocks: A Critical Evaluation of a Brand Personality Scale” which implies the brand personalities that different rocks may hold in people’s minds…… [Think]

Which in turn made me think of recent events closer to home – in some of the best UK Business Schools.

In B School strategy departments, there is a trend towards ‘Resource-Based Strategy’ (RBS) or as recently described by PWC in their journal Strategy+, ‘Capabilities-Driven Strategy’ (CDS) (http://www.strategyand.pwc.com/cds). I honestly thought that we had moved on from the 1980s when companies were convinced that competitive advantage was derived internally so they made what they knew how to make best – and were constantly surprised when customers didn’t buy their gold plated offerings. Market-based Strategy (MBS), where the organisation invests in understanding what tomorrow’s customers will want to buy before making anything at all had seemed to be gaining ground, but we seem to be moving backwards again. An organisation’s ‘resource’ or ‘capability’ is only a competitive advantage if their customers value it…… [Don’t Think]

In marketing departments, the regression is even worse. The ‘Theory of Planned Behaviour’ (TPB) is now being taught. This theory is based on the idea that customers make rational decisions! This might be acceptable in classes on theoretical Economics but TPB neatly rips up all the work on marketing since before Levitt in the 1960s. Customers are emotional and irrational beings…… [Don’t Think]

In 2016, with Brexit possibly staring us in the face, and structural change slowly taking us into the ‘New Normal’ business environment, this is no time for business schools, or any of us in business, to move backwards…… [Its enough to make you cry]

Identity crisis at Yahoo

From Reuters 26/7/16:

When senior Yahoo executives gathered at a San Jose hotel for a management retreat in the spring of 2006, there was no outward sign of a company in crisis.

The internet pioneer, not yet a teenager, had just finished the prior year with $1.9 billion in profits on $5.3 billion in revenue. The tough days of the dot-com bust were a distant memory, and Yahoo Inc, flush with lucrative advertising deals from the world’s biggest brands, was enjoying its run as one of the top dogs in the world’s hottest industry.

But for one retreat exercise, everyone was asked to say what word came to mind when a company name was mentioned. They went through the list: eBay: auctions. Google: search. Intel: microprocessors. Microsoft: Windows.

Then they were asked to write down their answer for Yahoo.

“It was all over the map,” recalled Brad Garlinghouse, then a Yahoo senior vice president and now COO of payment settlement start-up Ripple Labs. “Some people said mail. Some people said news. Some people said search.”

The lesson here is simple – if you don’t know what business you want to be in, your customers will never work it out. Organic food had exactly the same problem so suffered badly when the Recession hit. The result of Yahoo’s indecision resulted in an agreement this week to sell the company’s core assets to Verizon Communications who will probably blend it with its existing AOL division.

Yahoo’s lack of clear focus on what business it needed to be in, and the subsequent customer confusion led to a number of missed opportunities (because they couldn’t be sure if they were opportunities or distractions) described in the Reuters article as a failed bid to buy Facebook for $1 billion in 2006. A 2002 dalliance with Google similarly came to nought. A chance to acquire YouTube came and went. Skype was snapped up and Microsoft’s nearly $45 billion takeover bid for all of Yahoo in 2008 was blocked by Yahoo’s leadership.

There is nothing new here and we can travel right back to Levitt’s ‘Marketing Myopia’ in 1960 for insight. It might be an exercise that top management don’t like doing but lack of a crystal clear business definition means that Yahoo’s customers didn’t understand Yahoo’s business. In addition, Yahoo didn’t understand which customer needs it should be satisfying, where it should be investing for growth, the boundaries for effort (what it should stop doing or do more of), who it was competing with and, most dangerous of all, who was its core market – that it had to look after above all others.

Do you know what business you are in?

What’s new?

Amid the carnage on Europe’s high streets, Ian Cheshire, CEO of Debenhams department stores (UK) held the opinion that “It is still possible to make money out of clothes, but only in certain precise categories; at the high end, at the discount end and in specialist brands. The rest are getting hammered”. (The Economist 18/6/16)

This has always been the case but all of a sudden companies are starting to notice that the ‘middle market’ – so beloved of lazier organisations has become the 21st century’s killing ground. If you are searching for cash flow and profits, you won’t find it by reducing prices to increase sales, that just doesn’t work any more – the middle ground is empty.

Today the money goes to offers that are different for the rest and the best profits go to those who stand out

Recessions – the Silver Lining

“When the oak is felled the whole forest echoes with its fall, but a hundred acorns are sown in silence by an unnoticed breeze” Thomas Carlyle

Recessions and more rarely Depressions are not all bad – they are just ‘different’ from the normal run of things, and we are sometimes frightened by different things. Downturns and Upturns are a wholly natural phenomenon and regardless of what world leaders might like to think, they are not in control.

Let’s look at another wholly natural phenomenon that our 24-hour news service also inevitably labels as a ‘disaster’. The UN says that over 350 million hectares of land worldwide are affected by fire annually so we should be used to it by now. Fire can be an important land management tool as well as a ‘disaster’, so let’s try and look at things a different way.

If we follow the natural stages of forestation we will find the young forest that is light and airy and supports a wide range of trees, shrubs and undergrowth. Everything seems to grow vigorously spurred on by the light, water and space. Soon, we see the evidence of this success.

The mature forest is dominated by the successful tall trees and the high canopy becomes more and more dense. Before long growth on the forest floor is stunted and little survives in the dark apart from ferns and fungi that can live off the death of other plants. The trees have battled for the light and have won; they have all the light and a clear run to the nutrients from the forest floor too. Theirs is now the only show in town and they have established the ‘only’ way to win. When a single tall tree eventually dies, a hole is ripped in the canopy and light pours to the forest floor – and the race to succeed the ancestor begins, only the strong survive and soon the hole in the canopy is filled with another tall tree playing the same game to survive.

Then comes the catastrophe, the forest fire consumes all in its path. No single hole in the canopy this time, the canopy is gone. Now the light and the air circulates freely and the laws of survival themselves have been changed. This time it’s not just the tall trees who can win, this time the race is more open, this time the ground plants might cover enough territory to stop the trees gaining control and keep the clearings open. Over the years new seeds and species may have arrived but been controlled by the lack of light and nutrients and now their day has come. This time the tall tree game is not the only game in town.

Sometimes the forest really needs a cleansing fire. Nothing can, or should last forever; that isn’t good for the forest or even for the trees. Success breeds complacency and arrogance and weaknesses creep into the genes. When an old tree fails the hole is still in a very high canopy and only another tall-growing tree is designed to fill it. New species can appear but they had better be fast growing and tall enough to reach the light, if not…

But after the fire, all things are possible. While the tall trees are bewailing the loss of the past and the status quo, the new arrivals are busy claiming the light for themselves.

Life goes on, at least for those with the eyes to see new ways of succeeding.

Cargo Cult Marketing

Welcome to the beginnings of the Paul Fifield essays/blog.  Before we begin with any new content, I have précised one of my previous essays, the first in my book “Collected Essays in Marketing Strategy”

CARGO CULT MARKETING (précis)

On a recent business trip, I came across a reference to the cargo cult Indians of Papua New Guinea.  Various cargo-cults exist, including one on a Pacific island with a memory of Red Cross aid where the islanders dance in front of red-painted crosses and wait for food and other gifts to descend from the sky.  On other islands natives worship at an office-like shack where holy men exchange pieces of paper just like bureaucrats.  In every case the locals have a similar belief – just continue faithfully carrying out the rituals that they have witnessed and one day the materialist Gods will reward them and bestow upon them all the things that they need.

We may not dance in front of red painted crosses, well not quite, but are we really acting differently to the cargo cult islanders of the Pacific?  I wonder.

Red-painted Cross No1 – Costs: 

As soon as the business looks like turning down, get in the cost cutters.  The time and money spent on cost cutting exercises is vast but rarely stimulates revenue generation.  But we have danced round the cross – and been praised for it.

When cost cutting fails to produce better profits………. see cross No 6

Red-painted Cross No2 – Systems: 

Systems are “a good thing”; they make us more “efficient”; because they can generate a “management information system” to tell us how well we are doing.  But they don’t sell and, more often than not, they don’t play a major part in satisfying customers’ needs either, but we spend valuable time creating internal upheaval to “upgrade” or installing new systems.  We know the painted cross and how to dance round it – it helps us take our minds off the difficult problems for which we have no answers “How do we better satisfy our customers’ needs and so attract more business and make more profits?”  Nevertheless, we “know” that as soon as the new systems strategy is in place, we will be awash with business again.  So that’s all right isn’t it!

When we are not awash with business……….see cross No 6

Red-painted Cross No3 – Databases

Some businesses have almost been taken over by The Database and the Data Warehouse and countless hordes of acolytes exist purely to satisfy its unquenchable thirst for more data.

This red-painted cross has been growing at an unspeakable rate.  But what is it all for?  Spending all week hunched over the computer is not the same thing as meeting and talking to real, thinking, breathing customers who can tell you, face to face, why they bought what they bought and what they will want from you in the future.  Unfortunately, until the business depends on satisfying the needs of machines rather than human beings, the organisation is better off employing people who can do more than just spell “empathy”.

When the Perfect Database fails to improve profits……….see cross No 6

Red-painted Cross No4 – Capacity

How often have you seen the numbers manager push for major investment in plant, production capacity or people based on meticulously researched and prepared financial forecasts (technically known as “a wing and a prayer”), and without any attempt to assess likely customer demand?  Just like the office/shack in the mountains, let’s build the capacity and, as if by magic, the new business required to fill it will turn up just because the capacity has been created – neat!

When the capacity turns out to be a cost; not an investment……….see cross No 6

Red-painted Cross No5 – Fad Surfing

And “Management by Objectives” begat “Management by Walking About” begat, begat, begat CRM, begat….. – and each would solve all our ills.  And of course they didn’t.  How can this have happened?  It has happened, quite simply, because most fads concentrated on measuring the easy things like standards, controls and internal customers that can be classified, processed and boxed rather than difficult things like external customers who don’t always know exactly what they want but do pay all our salaries.  This red-painted cross says that working hard to create change internally will, somehow, give the customer exactly what he wants – if only.

Ah yes but it’s not our fault it didn’t happen……….see cross No 6

Red-painted Cross No 6 – Blaming those who are doing the business

It we are giving prizes for longevity, this must be the oldest Red-painted Cross in the clearing.  For thousands of years, managers (those who stay at home) have been successfully laying off the blame for non-performance on the poor grunts who have to do the work.  The biggest problem is that dancing in front of this particular cross, is not a ‘neutral’ activity, it can actually do harm.  As the people in the business realise that, in spite of the elegant mission statements and quality promises, what really matters round here is not the customer but the internal System, they either:

  1. Leave, or more likely,
  2. Dump the customer; spend more time in the office and get down to some serious politicking.

THE MORAL

Like smoking, there is never a good time to give up dancing in front of the Red-painted Crosses.  You have to believe it is better for you and that eventually you will be rewarded.  Common sense alone says that it must be more profitable to concentrate on looking after the customer rather than the Internal System, because that is where the revenue comes from.  Nevertheless, you can be sure that the way will be strewn with obstacles; you should bear in mind the following.

  • Never forget the customer is the business
  • Never let anyone else forget the customer is the business
  • The business will survive by what it does outside, not inside the business
  • The internal System can stop you succeeding, but cannot make you succeed
  • If the old ideas didn’t work, try something different
  • Don’t be infected by the panic of the non-visionaries
  • Those that shout loudest typically know least
  • Don’t confuse motion with progress
  • Allow yourself to be distracted from your customers and you will have lots of free time to spend dancing in front of Red-painted Crosses.

——–o0o——-

The full text of this article, and others, including:

2  Customer Strategy

3  Snake Oil

4  Marketing Dogma

5  A Nice Pair of Wings!

6  Do You Feel Lucky?

7  Jack in the Box

8  Excess Stone

9  The Rain Dance

10  The Shape of Things to Come?

11  The Management of Customer Expectations

12  Net-nonsense?

13  The Road to Brighton Pier

14  Market Segmentation in the Services sector–The interview

15  Going Down?

16  Generation Brand Strategy

17  Harder than Baked Beans

18  Market Strategy – the “SCORPIO” Approach

19  Strategic Marketing and Scenarios

20  Mediocrity Kills!

.. Can be found in “Collected Essays in Marketing Strategy” by Paul Fifield (ISBN 978-0-9554241-0-6) available at http://www.Fifield.co.uk