The 1980s: a Turning Point for Marketing And Strategy

Posted by 17 March, 2008 Comments Off on The 1980s: a Turning Point for Marketing And Strategy

MARKETING AND STRATEGY
Using Tested Concepts and New Ideas for Marketing Strategy.

 

THE 1980S: A TURNING POINT FOR MARKETING AND STRATEGY

If any single factor can be blamed for the death of strategic planning, it must be the failure of the U.S. economy to compete globally during the 1980s. This economic bot­tleneck in the United States forced a reexamination of every aspect of business man­agement. And even though the economy rebounded in the 1990s, that examination revealed too many warts for anyone to want to return to business as usual. The failure of conventional strategies and management methods became painfully obvious in the 1980s as the trade imbalance in categories such as autos, machine tools, consumer electronics, semiconductors, and textiles took a nasty turn for the worse on the econ­omist’s charts. A report from MIT’s Commission on Industrial Productivity summed up management’s initial response to the problem:

The decline of the U.S. economy puzzles most Americans. The qualities and talents that gave rise to the dynamism of the postwar years must surely be present still in the national character, and yet American industry seems to have lost much of its vigor. In looking for ways to reverse the decline, it is only natural to turn to the methods that succeeded in the golden years of growth and innovation. Many business managers have adopted just this strategy. The results, unfortunately, are rather like those of a man who keeps striking the same match because it worked fine the first time.
This failure to measure up to global competition left the people at Xerox look­ing through their pockets for another book of matches. Xerox’s story is an excellent il­lustration of what is happening to planning in U.S. businesses at this critical turning point in history. In 1974, Xerox had a stunning 86 percent world market share for photocopiers. What could possibly go wrong? As discussed shortly, conventional plan­ning models assume that strength and profits flow from strong market shares. But as new competitors, such as Ricoh and Canon, entered the market, Xerox fell back, all the way to a 17 percent market share in 1984.8 If strategic planning really was king, Xerox’s managers would have been beheaded! The company began to climb back out of its hole in the latter half of the 1980s, regaining lost share and improving quality. Along the way, Xerox invented new ways of planning and implementing strategy, and adopted many of the best techniques used by its Japanese competitors. We’ll start with a quick review of the planning models that led companies such as Xerox into so much trouble.
It is easy to dismiss the old approach to planning as worthless, but this is not fair. Managers today cannot ignore the old wisdom, but they also cannot rely on it to provide competitive advantage. One must know yesterday’s techniques to play the game, and must pioneer tomorrow’s techniques to win it. One must realize that the changing environment requires new tools, and the old tools by nature lose their edge when everyone learns to use them. As this lesson’s opening quote suggests, there is a sort of arms race in strategy, with the advantage going to the innovators. But, al­though “smart missiles” may now carry the day, it would still be folly to enter the bat­tlefield without a rifle. Business strategy is similar: Today’s planners must master both the old and the new. (And then, most likely, invent something of their own any­way. But more on that later!)

Categories : Marketing Tags : , , ,

 

Marketing And Strategy

Posted by 17 March, 2008 Comments Off on Marketing And Strategy

MARKETING AND STRATEGY
Using Tested Concepts and New Ideas for Marketing Strategy.

 

If the purpose of strategy is to gain competitive advan­tage, then by implication theories of strategy should be continually in flux. Any new insight that obtains wide currency. . . loses value in providing additional com­petitive advantage . . . This self-destructive aspect of strategic insight. . . has received limited attention, as has the attendant need to be continually innovative and creative.

Paul Schoemaker,
Graduate School of Business.
University of Chicago

If there’s a hell for planners, over the portal will be carved the term “cash cow.”

Stephen Hardis,
Vice President of Planning,
Eaton Corporation


If theories of strategic planning should be “continually in flux,” as Paul Schoemaker observes in the first of our opening quotes, then all is well with the world, Because there cannot be any field more turbulent or unstable in the entire management panoply than strategic planning and its alter ego, marketing planning.
“Strategic planning is dead; long live strategic planning!” seems like an appro­priate way to begin this lesson, for it is necessary both to mark the passing of the old strategic planning and to note the exciting emergence of entirely new approaches, much as the succession of kings was once heralded. But the problem is, nobody seems quite sure who the rightful heir to the throne will be.
Since its birth in the 1950s and 1960s, strategic planning reigned by giving managers a new and exciting set of more marketing-oriented tools for analysis, plan­ning, and control. Innovators such as the Boston Consulting Group and General Elec­tric discovered the wisdom of identifying opportunities based on market analysis rather than solely on financial analysis, and their philosophy and techniques spread rapidly throughout the 1970s and into the 1980s. But strategic planning’s growth stalled in the 1980s, with many companies abandoning their large planning staffs and forsaking more complex analytical methods and planning processes, and by the begin­ning of the 1990s, it was moribund. When Gary Reiner of the Boston Consulting Group wrote in 1989 that “planning is passé,” it was clear that a succession was immi­nent. The problem was that the old king had left no legitimate offspring, so managers must find their own. They face the daunting task of planning in the face of great un­certainty and rapid change, and without any simple prescriptions guaranteed to do the trick. As Michael Porter of the Harvard Business School sees it, “The state of practice in this area is very primitive.”
What has replaced the orderly strategic planning cycles of the 1980s? The ex­perts offer many answers, but no single approach has been sufficiently successful to rein in peace for very long. David Aaker of the Haas School of Business at UC. Berkeley believes that strategic market management displaced strategic planning in the mid-1980s because “the planning cycle is inadequate to deal with the rapid rate of change that can occur in a firm’s external environment.” And he characterizes this new market-driven approach to strategy as being highly responsive to the “strategic surprises and fast-developing threats” of the modern marketplace.
Strategic market management is like a new, faster, and more flexible strategic planning in that it encourages “real-time” response to external changes, rather than tying an organization’s rate of change to its annual planning cycle. In theory, at least, this rapid-response approach to strategy should keep businesses on or above the pace of change in their markets, allowing them to anticipate, even lead change.
But the most popular form of business strategy in the 1990s is the massive “re­structuring” that is generally accompanied by a major downsizing and a closing of fa­cilities and/or sell-off of subsidiaries or brands. The daily financial news should provide you with fresh examples whenever you read this lesson. Here’s just one typ­ical example from The Wall Street Journal on the day we wrote this paragraph:Tool and hardware maker Stanley Works swung to a second-quarter loss because of a charge for a restructuring program that includes closing 53 of its 123 plants and elimi­nating about 4,500 jobs, or 24 percent of the company’s workforce.The popularity of this sort of massive restructuring, with its deep cuts of prod­uct lines, divisions, facilities, and people, is the strongest possible evidence that strategic planning as practiced today is unable to anticipate and prepare for change. If companies grew and changed along with their markets, they would never get so profoundly out of alignment as to necessitate closing a third of their plants or firing a fourth of their people.
The failure of formal planning processes to anticipate important changes and align the organization with them in advance led Henry Mintzberg, a strategy expert from McGill University, to title his major review of the field The Rise and Fall of Strategic Planning. The king is dead. Long live the new king.., whoever he may be!

Why split hairs? Because many people and many managers think U.S. organiza­tions have already adopted the marketing concept, whereas in fact its essence is still missing at most companies.

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