Change

Change, not stability, is the only constant. Companies today have to run faster to stay in the same place. Some say that if you remain in the same business, you will be out of business. Note that companies such as Nokia and Hewlett-Packard gave up their original businesses. Survival calls for self-cannibalization.

Your company has to be able to recognize Strategic Inflection Points, defined by Andy Grove of Intel as “a time in the life of a business when its fundamentals are about to change.” Banks had to make changes with the advent of automated teller machines (ATMs), and major airlines have to make changes with the new competitors coming from low-fare airlines.

Jack Welch at GE admonished his people: “DYB: Destroy your business. ... Change or die. When the rate of change inside the company is exceeded by the rate of change outside the company, the end is near.”

Tom Peters’ advice: “To meet the demands of the fast-changing competitive scene, we must simply learn to love change as much as we hated it in the past.”


I have noticed that American and European business people respond differently to change. Europeans see it as posing a threat. Many Americans see it as presenting opportunities.

The companies that fear change most are many of today’s leading companies. As incumbents, they have invested so much in their present tangible assets that they tend to either ignore or fight the insurgents. Because they are big, they think they are built to last.

But being big is no guarantee against becoming irrelevant, as Kmart, A&P, and Western Union discovered. If companies don’t want to be left behind, they must anticipate change and lead change. The ability to change faster than your competitors amounts to a competitive advantage.

Richard D’Aveni, the author of Hypercompetitive Rivalries, observed: “In the end, there will be just two kinds of firms: those who disrupt their markets and those who don’t survive the assault.”

But how do you change a company? How do you get your employees to adopt a new mind-set and give up their comfortable activities and learn new ones? Clearly top management must develop a new compelling vision and mission whose benefits for the various stakeholders appear far greater than the risk and cost of change. Top management must gather support and apply internal marketing to produce change in the organization.

The best defense in the face of change is to create a company that thrives on change. The company would see change as normal rather than as an interruption of the normal. And it would attract people who have positive attitudes toward change.

It would institute open discussions of policy, strategy, tactics, and organization. The worst thing is to be a company that dislikes change. Such a company will attract people who dislike change, and the end is inevitable.

As Reinhold Niebuhr stated: “God, give us grace to accept with serenity the things that cannot be changed, courage to change the things that should be changed, and the wisdom to distinguish the one from the other.”

Communication and Promotion

Among the most important skills in marketing are communication and promotion. Communication is the broader term, and it happens whether planned or not. A salesperson’s attire communicates, the catalog price communicates, and the company’s offices communicate; all create impressions on the receiving party.

This explains the growing interest in integrated marketing communications (IMC). Companies need to orchestrate a consistent set of impressions from its personnel, facilities, and actions that deliver the company’s brand meaning and promise to its various audiences.

Promotion is that part of communication that consists of company messages designed to stimulate awareness of, interest in, and purchase of its various products and services. Companies use advertising, sales promotion, salespeople, and public relations to disseminate messages designed to attract attention and interest.

Promotion cannot be effective unless it catches people’s attention. But today we are deluged with print, broadcast, and electronic information. We confront 2 billion Web pages, 18,000 magazines, and 60,000 new books each year.


In response, we have developed routines to protect ourselves from information overload. We toss most catalogs and direct mail unopened into the wastebasket; delete unwanted and unread e-mail messages; and refuse to listen to telephone solicitations.

Thomas Davenport and John Beck point out in The Attention Economy that the glut of information is leading to attention deficit disorder (ADD), the difficulty of getting anyone’s attention. The attention deficit is so pronounced that companies have to spend more money marketing than making the product.

This is certainly the case with new perfume brands and many new films. Consider that the makers of The Blair Witch Project spent $350,000 making the film and $11 million to market it.

As a result, marketers need to study how people in their target market allocate their attention time. Marketers want to know the best way to get a larger share of consumers’ attention.

Marketers apply attention-getting approaches such as high-profile movie stars and athletes; respected intermediaries close to the target audience; shocking stories, statements, or questions; free offers; and countless others.

Even then, there is a question of effectiveness. It is one thing to create awareness, another to draw sustained attention, and still another to trigger action. Attention is to get someone to spend time focusing on something. But whether this leads to buying action is another question.

Companies

It has been observed that there are four types of companies:

1. Those that make things happen.
2. Those that watch things happen and respond.
3. Those that watch things happen and don’t respond.
4. Those that didn’t notice that anything had happened.

No wonder the average company disappears within 20 years. Of the companies listed as best in the Forbes 100 of 1917, only 18 survived to 1987. And only two of them, General Electric and Eastman Kodak, were making good money.

And not all existing companies are truly alive. Companies fool us by merely breathing day to day. General Motors and Sears have been losing shares for years even though their hearts are still ticking. You can enter some companies and tell within 15 minutes whether they are alive or dead, just by looking at the employees’ faces.

I no longer know what a large company is. Company size is relative. Boeing, Caterpillar, Ford, General Motors, Kellogg, Eastman Kodak, J. P. Morgan, and Sears are giant companies. But in early 2000 Microsoft Corporation achieved a market value that exceeded that of all eight companies combined.


What makes some companies great? There’s a whole string of books ready to tell us the answer. Tom Peters and Bob Waterman started the guessing game with In Search of Excellence in 1982. Of the 70 companies they nominated, many are moribund today.

Then we heard from Jim Collins and Jerry Porras in Built to Last (1994), Michael Treacy and Fred Wiersema in The Discipline of Market Leaders (1995), Arie De Geus in The Living Company (1997), and most recently from Jim Collins again in Good to Great: Why Some Companies Make the Leap . . . and Others Don’t (2001).

These books point out the many correlations of successful companies. But I have a simple thesis: Companies last as long as they continue to provide superior customer value.

They must be market-driven and customer-driven. In the best cases, they are market-driving. They create new products that people may not have asked for but afterwards thank them for. Thanks to Sony for your Walkman, your smaller storage disks, your incredible camcorders, and your innovative computers.

Customer-oriented companies make steady gains in mind share and heart share, leading to higher market shares and in turn to higher profit shares.

Tom Siebel, CEO of Siebel Systems, has a simple but comprehensive view of what creates great companies. “Focus on satisfying your customers, becoming a market leader, and being known as a good corporate citizen and a good place to work. Everything else follows.” (See Customer Orientation.)

Competitive Advantage

Michael Porter popularized the notion that a company wins by building a relevant and sustainable competitive advantage. Having a competitive advantage is like having a gun in a knife fight.

This is true, but today most advantages don’t stay relevant and few are sustainable. Advantages are temporary. Increasingly, a company wins not with a single advantage but by layering one advantage on top of another over time.

The Japanese have been masters at this, first coming in with low prices, then with better features, then with better quality, and then with faster performance. The Japanese have recognized that marketing is a race without a finishing line.

Companies can build a competitive advantage from many sources, such as superiority in quality, speed, safety, service, design, and reliability, together with lower cost, lower price, and so on. It is more often some unique combination of these, rather than a single silver bullet, that delivers the advantage.


A great company will have incorporated a set of advantages that all reinforce each other around a basic idea. Wal-Mart, IKEA, and Southwest Airlines have unique sets of practices that enable them to charge the lowest prices in their respective industries. A competitor that copies only a few of these practices will not succeed in gaining an advantage.

Recognize that competitive advantages are relative, not absolute. If the competition is improving by 30 percent and you by 20 percent, you are losing competitive advantage. Singapore Airlines kept improving its quality, but Cathay Pacific was improving its quality faster, thereby gradually closing the gap with Singapore Airlines.

Competitors

All firms have competitors. Even if there were only one airline, the airline would have to worry about trains, buses, cars, bicycles, and even people who might prefer to walk to their destinations.

The late Roberto Goizueta, CEO of Coca-Cola, recognized Coke’s competitors. When his people said that Coke’s market share was at a maximum, he countered that Coca-Cola accounted for less than 2 ounces of the 64 ounces of fluid that each of the world’s 4.4 billion people drank every day. “The enemy is coffee, milk, tea, water,” he told his people. Coca-Cola is now a major seller of bottled water.

The more success a company has, the more competition it will attract. Most markets are brimming with whales, barracudas, sharks, and minnows. In these waters, the choice is to eat lunch or be lunch. Or, using computer scientist Gregory Rawlins’ metaphor: “If you’re not part of the steamroller, you’re a part of the road.”

Hopefully your company will attract only good competitors. Good competitors are a blessing. They are like good teachers who raise our sights and sharpen our skills. Average competitors are a nuisance. Bad competitors are a pain to every decent competitor.


A company should never ignore its competitors. Stay alert. “Time spent in reconnaissance is seldom wasted,” noted Sun Tzu in the fourth century B.C. And your allies should stay alert. If you are going to be an effective competitor, you must also be an effective cooperator.

You are not a solo business but a partnership, a network, an extended enterprise. Competition today is increasingly between networks, not companies. And your ability to spot faster, learn faster, and work faster as a network is a key competitive advantage.

In the short run, the most dangerous competitors are those that resemble your company the most. The customers can’t see the difference. Your company is a toss-up in their mind. So differentiate, differentiate, differentiate.

According to marketing guru Theodore Levitt: “The new competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.”

The way to beat your competitors is to attack yourself first. Work hard to make your product line obsolete before your competitors do.

Watch your distant competitors as well as your close ones. My guess is that your company is more likely to be buried by a new disruptive technology than by nasty look-alike competitors.

Most fatal competition will come from a small competitor who burns with a passion to change the rules of the game. IBM made the mistake of worrying more about Fujitsu than a nobody named Bill Gates who was working on software in his garage.

As important as it is to watch your competitors, it is more important to obsess on your customers. Customers, not competitors, determine who wins the war. Most markets are plagued by too many fishermen going after too few fish. The best fishermen understand the fish better than their competitors do.

Consultants

Consultants can play a positive role in helping companies reappraise their market opportunities, strategies, and tactics. Consultants provide a client company with an outside-in view to correct the company’s tendency to take an inside-out view.

Yet some managers say: “If we are successful, we don’t need consultants. If we are unsuccessful, we can’t afford them.”

We need fewer consultants and more resultants. Too many consultants give you advice and fail to grapple with the difficult problem of implementing the recommendations. Keep the consultant and pay him or her according to results.

Here is a test for finding a good consultant. Ask each consultant, “What time is it?”

• The first consultant says: “It is exactly 9:32 A.M. and 10 seconds.” Hire him if you want an accurate, fact-filled study.
• The second consultant answers: “What time do you want it to be?” Hire him if you don’t want advice so much as corroboration.
• The third consultant answers: “Why do you want to know?” Hire him if you want some original thinking, such as defining the problem more carefully. Peter Drucker says that his greatest strength as a consultant is to be ignorant and ask a few basic questions.

There is a lot of cynicism about consultants. As early as the first century B.C., Publilius Syrus, a Latin writer, noted: “Many receive advice, few profit by it.” Robert Townsend, former CEO of Avis Rent-A-Car, described consultants as “people who borrow your watch and tell you what time it is and then walk off with the watch.”

William Marsteller, of Burson-Marsteller public relations, added: “A consultant is a person who knows nothing about your business to whom you pay more to tell you how to run it than you could earn if you ran it right instead of the way he tells you.”

The cynicism simply means that there are good and bad consultants and your task is to be able to tell the difference.

Corporate Branding

There is great payoff in building a strong corporate brand. Sony can put its name on any electronic device and customers will prefer it to the competition. Virgin can enter almost any business and be successful because its name means brings a fresh approach to that business.

The major requirement for corporate branding is for the company to stand for something, whether it is quality, innovation, friendliness, or something else. Take Caterpillar, the heavy construction equipment manufacturer.

Caterpillar’s brand personality triggers such associations as hardworking, resilient, tough, bold, and determined. So Caterpillar has been able to launch Cat jeans, sandals, sunglasses, watches, and toys, all designed with the same traits in mind.

A strong corporate brand needs good image work in terms of a theme, tag line, graphics, logo, identifying colors, and advertising dollars. But the company shouldn’t overrely on an advertising approach.

Corporate image is more effectively built by company performance than by anything else. Good company performance plus good PR will buy a lot more than corporate advertising.

Creativity

Companies formerly won their marketing battles through superior efficiency or quality. Today they must win through superior creativity. One does not win through better sameness; one wins through uniqueness. Winning companies such as IKEA, Harley Davidson, and Southwest Airlines are unique.

Uniqueness requires developing a culture that honors creativity. There are three ways to increase your company’s creativity:

1. Hire more naturally creative people and give them free rein.
2. Stimulate creativity in your organization through a myriad of well-tested techniques.
3. Contract for creativity help. Go to Brighthouse in Atlanta, Faith Popcorn in New York, or Leo Burnett in Chicago, for example, and get help in finding a breakthrough idea.

Some of the leading creativity techniques that can be used in-house:

• Modification analysis. With respect to some product or service, consider ways to adapt, modify, magnify, minify, substitute, rearrange, reverse, or combine.
• Attribute listing. Define and modify the attributes of the product. For example, in seeking to build a better mousetrap, consider ways to improve bait, method of execution, method of hearing execution, method of removal, shape, material, price.
• Forced relationships. Try out new combinations. For example, in trying to build a new type of office furniture, consider combining a desk and a bookcase, or a bookcase and a filing system.
• Morphological analysis. Play with the basic dimensions of the problem. For example, in trying to move something from one point to another, consider the type of vehicle (cart, chair, sling, bed), the medium in which/by which the vehicle operates (air, water, oil, rollers, rails), and the power source (compressed air, engine, steam, magnetic field, cable).
• Product problem analysis. Think of all the problems that a specific product has. For example, chewing gum loses its flavor too quickly, may cause dental cavities, and is hard to dispose of. Think of solutions to these problems.
• Decision trees. Define the set of decisions that are to be made. For example, to develop a new grooming aid, decide on the user (men or women); type of aid (deodorant, shaving product, cologne); type of package (stick, bottle, spray); market (commercial, gift); and channel (vending machines, retailers, hotel rooms).
• Brainstorming. Gather a small group and pose a problem, such as, “Find new products and services that homes might need.” Encourage freewheeling thinking, stimulate a maximum number of ideas, try new combinations, and avoid criticism at the beginning.
• Synectics. Pose a generic problem, such as how to open something, before posing the real one, hoping that it broadens the thinking.

A major source of ideas can come from futurists such as Alvin Toffler, John Naisbet, and Faith Popcorn and the trends they have spotted. Faith Popcorn became famous for her creative labeling of trends, including anchoring (religion, yoga), being alive (vegetarianism, meditation), cashing out, clanning, cocooning, down-aging, fantasy adventure, 99 lives (multitasking), pleasure revenge, small indulgences, and vigilant consumers.

She would consult on how aligned a company’s strategy is with these major trends, and often tell a company that it is off-trend in several ways.

Smart companies set up idea markets. They encourage their employees, suppliers, distributors, and dealers to offer suggestions that will save costs or yield new products, features, and services. They establish high-level committees that collect, evaluate, and choose the best ideas.

And they reward those who suggest the best ideas. Alex Osborn, the developer of brainstorming, said: “Creativity is so delicate a flower that praise tends to make it bloom, while discouragement often nips it in the bud.”

It is sad that creativity probably peaks at age 5 and then children go to school only to lose it. The educational emphasis on left brain cognitive learning tends to undernurture the creative right brain.

Customer Needs

Customer Needs

Marketing’s original mantra is to “find needs and fill them.” The company finds needs by listening to or interviewing customers and then prepares an appropriate solution to each need.

Today, however, there are few needs that companies don’t know about or address. Pietro Guido, an Italian marketing consultant, wrote a book called The No-Need Society to make this point.

But there is another answer to the “no-need society”—that is, to create new needs. Sony’s Akio Morita, in his Made in Japan, said: “We don’t serve markets. We create markets.” Consumers never thought of videotape recorders, video cameras, fax machines, Palms, and so on, until they were made.

Of course, new needs will emerge even if the old ones are satisfied. Events can create new needs. The tragedy of September 11, 2001, increased the need for greater security in the air, food supply, and transportation and the country rapidly responded with new security measures.


Trends can create new needs, such as the interest in “Down-Aging.” As people get older they want to feel and look younger, and this leads to buying sports cars, having plastic surgery, and using exercise equipment.

So we can distinguish between existing needs and latent needs. Smart marketers will attempt to anticipate the next need and not only confine their attention to today’s need.

Sometimes a need is obscured because a company has taken too limited a view of customers. Certain dogmas get set in concrete, such as the cosmetics industry dogma that women basically use cosmetics in order to be more attractive to men.

Along came Anita Roddick, who started The Body Shop with the assumption that many women want products that will give good care to their skin. She added another value: that many women care about social issues and will patronize a company that cares.

Greg Carpenter and Kent Nakamoto have challenged a core assumption of marketers that buyers initially know what they want. Instead they learn what they want. And companies play a strong role in teaching buyers what to want.

Different brand competitors add new features to their computers, cameras, and cellular phones that buyers may not have known of or asked for, and in the process, buyers form a better idea of what they want.

Such companies are not just market driven (by customer needs), but are market driving (by innovation). In this sense, competition is less a race to meet consumer needs and more a race to define these needs.

One reason that early market entrants (such as Xerox or Palm) often gain sustained market leadership is because the attributes they initially build into their products define the wants that were otherwise ill-defined.

Consumers see the attributes as defining the category. Late-entry competitors are forced to supply the same attributes at a minimum as well as innovate new ones.

Customer Orientation

How do you get your whole company to think and breathe customer? Jan Carlzon, former CEO of Scandinavian Airlines System (SAS), wrote Moments of Truth, in which he described how he got his whole work-force to focus on the customer.

He would emphasize at meetings that SAS handled 5 million customers a year and the average customer met about five SAS employees in connection with a single journey. This amounted to 25 million moments of truth, moments to deliver a positive brand experience to customers, whether delivered in person, over the phone, or by mail.

Carlzon went further. He embarked on changing the company’s structure, systems, and technology to empower the workforce to take any steps necessary to satisfy its target customers.

Today’s CEOs must show employees, in financial terms, how much more affluent they and the firm would be if everyone focused on delivering great value to customers. The customers would spend more and cost the firm less to serve. Everyone would benefit, and special rewards would go to employees who rendered outstanding customer service.


The task begins with hiring the right people. You have to assess whether job candidates have not only the right skills but also the right attitudes. I was always struck by the fact that most people chose to fly Delta Air Lines from Chicago to Florida when they could have chosen Eastern Airlines, which offered the same flight schedule.

The difference: Delta hired its flight crews from the Deep South where friendliness is the norm; Eastern hired its flight crew from New York City.

Those whom you hire need good training. Disney runs a training program that lasts a week in order to convey what experience the company wants customers to have at Disneyland. A customer mind-set doesn’t just happen. It has to be planned, implemented, and rewarded.

Yet companies tend to give two conflicting messages to their people. L. L. Bean and other companies train their people to value every customer: The customer comes first. Meanwhile they recognize that customers differ in their value to the company (i.e., what they add to revenue) and should therefore receive different levels of treatment.

The conclusion: Treat every customer with care but not necessarily equally.

To be truly customer-oriented, the firm should be run by customer managers (or customer group managers), not brand managers. They will find out the set of company products and services that their customers would care about and then work with the product and brand managers to deliver them.

Too many companies are product driven rather than customer centered. Their thinking goes like this:

Assets → Inputs → Offerings → Channels → Customers

Being product driven and heavily invested in assets, they push their offerings to every conceivable customer and fail to notice customer differences and values. Not knowing much about individual customers, they cannot efficiently cross-sell or up-sell.

Both processes require capturing transaction and other information on individual customers and inferring what else they might be interested in. A customer-oriented company visualizes a different approach, called sense and-respond marketing:

Customers → Channels → Offerings → Inputs → Assets

By starting with an understanding of customers, the company is in a much better position to develop appropriate channels, offerings, inputs, and assets.

Customer Relationship Management (CRM)

Everyone is talking about customer relationship management (CRM) as the new panacea. Yet it is an empty term until it is defined. Some people define it as the application of technology to learning more about each customer and being able to respond to them one-to-one.

Others don’t see it as a technology issue but rather a humane issue: treating each customer with empathy and sensitivity. One cynic said that CRM is an expensive way to learn what otherwise might be learned by chatting with customers for five minutes.

Customer relationship marketing, in practice, involves the purchase of hardware and software that will enable a company to capture detailed information about individual customers that can be used for better target marketing. By examining a customer’s past purchases, demographics, and psychographics, the company will know more about what the customer might be interested in.

The company will send specific offers only to those with the highest possible interest and readiness to buy, and will save all the mailing or contact costs usually lost in mass marketing. Using the information carefully, the company can improve customer acquisition, cross-selling, and up-selling.




Yet CRM has not worked out that well in practice. Large companies sometimes spend $5 million to $10 million on CRM systems only to find disappointing results. Less than 30 percent of CRM-adopting companies report achieving the expected return from their CRM investments. And the problem isn’t software failure (only 2 percent of the cases).

CRM-Forum reported the following causes of failure: organizational change (29 percent), company politics/inertia (22 percent), lack of CRM understanding (20 percent), poor planning (12 percent), lack of CRM skills (6 percent), budget problems (4 percent), software problems (2 percent), bad advice (1 percent), other (4 percent).

Too many companies see technology as a silver bullet that will help them overcome their bad habits. But adding new technology to an old company only makes it a more expensive old company. Companies should not invest in CRM until they reorganize to become customer-centric companies. Only then will they and their employees know how to use CRM properly.

Frederick Newell goes further and accuses CRM of falling far short of the answer to serving customers well. CRM puts the company in the driver’s seat with a hunting gun instead of putting the customer in the driver’s seat with a hunting gun. He wants companies to empower customers, not target them.

Instead of companies just sending mailings to sell their products (a product-centered approach), they need to ask their customers what they are interested in (and not interested in), what information they would like, what services they would want, and how, when, and how often they would accept communications from the company. Instead of relying on information about customers, companies can rely on information from customers.

With this information, a company would be in a much better position to make meaningful offers to individual customers with much less waste of company money and customer time. Newell advocates replacing customer relationship marketing (CRM) with customer management of relationships (CMR).

My belief is that the right kind of CRM or CMR is a positive development for companies and for society as a whole. It will humanize relationships. It will make the market work better. It will deliver better solutions to customers.