Views of Academics on Strategy Development

It is generally accepted that marketing strategies are developed with assessments of the market, managerial expectations and organisational capabilities.

However, strategy and planning remain two of the most misunderstood words in the business lexicon.

Mintzberg described strategy development as having five attributes:

  • Planning – the direction of the organisation
  • Ploys – to deal with and outwit the competition
  • Patterns – a logical stream of actions
  • Position – how the organisation is located in the marketplace
  • Perspectives – Reflections of how the management team view the world.

Peter Drucker summarised these attribute as: What is our business? What should it be?

Mintzberg went on to describe eight types of strategy:

  1.  Planned strategies:  Deliberate and precise intentions
  2. Entrepreneurial strategies:  Emerging from a personal vision (emphasised by businessmen like Elon Musk and SpaceX)
  3. Ideological strategies:  The collective vision of the management team
  4. Process strategies: Which result from an organisation’s leadership taking control of a process
  5. Umbrella strategies: Based on objectives set by the organisation’s leadership.
  6. Disconnected strategies:  Set by organisational sub-units and only loosely connected.
  7. Consensus strategies:  Where members of an organisation converge on strategic patterns
  8. Imposed strategies:  Where the external environment dictates a pattern of actions upon an organisation.

The extent to which strategies are achieved is often determined by the way in which organisational resources are allocated.

The need for an organisation to plan is straightforward:

  1. Plan to co-ordinate activities
  2. Plan to ensure the future is taken into account
  3. Plan to be rational
  4. Plan to control

Richardson and Richardson (1989) found eight critical problems for planning:

  1. How best to manage and identify organisational stakeholders.
  2. How to anticipate the long-term.
  3. How to plan for the foreseeable things that can go wrong.
  4. How to turn product or market dreams into reality.
  5. How to create cost-cutting and contribution-creating opportunities.
  6. How to create a responsive team culture which combines resources to meet changing market conditions and to increase customer satisfaction
  7. How to create a base for innovation
  8. How to make the most of the unexpected; both opportunities and to survive shocks.

Over the decades academics have disagreed on the best approach to take when developing strategies.  Mintzberg describes the following strategic schools:

  1.  The Design School:  Where there is a focus on strengths, weaknesses, opportunities and threats (SWOT analysis).  This leads to clear but simple strategies and there is very much a top down approach to strategy development.
  2. The Planning School:  Where strategy is developed through formal distinct steps which are driven by planners and senior managers.
  3. The Positioning School: driven by academics like Michael Porter and the Boston Consulting Group.  Strategy development is an analytical process based on generic strategies with a focus on hard data.  This approach to strategy uses techniques like game theory and value chains.
  4. The Entrepreneurial School:  Where the focus is on the chief executive or another figurehead e.g. Richard Branson, James Dyson, or Elon Musk.  There can be real issues with this approach when the figurehead is no longer around.  Apple suffered when Steve Jobs left and there were concerns following his death. Similarly the death of Anita Roddick of the Body Shop.
  5. The Cognitive School:  Where the focus is on the mental processes underpinning strategy.  The focus is on cognitive biases and how information is processed e.g. SERVQUAL
  6. The Learning School:  where strategy is developed through a series of small incremental steps e.g. Kaizen.  Strategy and implementation are inter-related.
  7. The Power School:  Strategy development derives from those who hold power.  It results from the politicking of organisational players.  On the micro-organisational level this is the power plays of managers and union officials.  On the macro level it relates to joint ventures and both vertical and horizontal integration.
  8. The Cultural School – where strategy is based on common interest.  Social progress is created through the organisational culture.  This is best exhibited by Japanese management culture in the 1970s and 1980s.
  9. The Environmental School:  Strategy focuses on the demands placed on an organisation by its environment (‘contingency thinking’).  Environment limits strategic options.

Mintzberg argues that each of these schools only views a part of the strategic picture.  They are two-dimensional views of the strategic picture.  He proposes a further strategic school which creates a 3D image; The Contingency School; which combines the best aspects of all the other options.

Whittington (1993) describes four approaches to strategy formulation:

  1.  The Classical Approach:  Which is underpinned by economic theory.  There is a focus on profit maximisation.  This approach requires rigorous intellectual analysis and there is a view that the internal and external environment can be controlled.
  2. The Evolutionary Approach: Where strategy cannot control the environment.  Managers recognise strategic options and keep them open as long as possible.  Long-term strategies are seen as unproductive and you are better off using a series of short-term strategies.  An overall strategy emerges as short-term strategies succeed or fail.
  3. The Procession Approach:  Small steps turn into a strategic pattern.  One strategy builds on those which have come before.
  4. The Systematic Approach:  The focus on the implementation of strategies is crucial and is influenced by the organisational culture.  Strategy needs a social context.  No one strategic approach is suitable for all organisations.

Too many businesses do not consider their approach to strategy.  In SME’s, ‘the way we do things round here’ and the views of the business proprietor often dominate.  Many businesses would be best placed to employ an external expert to help them manage the strategy development process. This individual can identify and debunk organisational biases.

 

Why Market Segmentation is Important to your Business

Philip Kotler and other gurus of marketing science see three factors as central to world-class marketing:

  1. A deep understanding of your market.
  2. Correct market segmentation.
  3. Product development, positioning and branding based on that market segmentation.

Market segmentation is key to all successful marketing and the creation of sustainable competitive advantage and shareholder value.

These three factors, combined with:

  • Effective marketing planning
  • Long-term integrated strategies
  • Efficient supply chain management
  • Market-driven organisational structures
  • Careful recruitment, training and career management
  • Rigorous line management implementation

Leads to a successful, customer-focused business.

The marketing writer Ted Levitt once said, “If you’re not talking segments, you’re not talking marketing”.

Marketing segmentation is important because if you don’t understand how different parts of your market think, everything else you do is flawed.

If you aren’t segmenting your market and are treating it as a homogenous mass, you will only survive if your competitors are as equally ignorant.  Relying on your competitors being incompetent is not a sustainable business strategy.

Markets are not homogenous.  Consumers do not all have the same motivations and needs.  If your data shows a homogenous market, it is probably wrong or poorly analysed.

Segments should be distinct.  Consumers shouldn’t cross over between different segments.

Your chosen segments should be accessible.  There is not point targeting a segment if you cannot get your goods and services to it.  Segments should also be viable.  They should be big enough, stable and worthwhile entering financially.

Professor Malcolm McDonald examined the market for Global Tech and described the following market segments.

  1. Koala Bears – Like to use extended warranties and won’t repair tech themselves; they prefer to call a service engineer.  Often small offices.  28% of the market.
  2. Teddy bears  – Require lots of account management from a single service provider.  Prepared to pay a premium for service and attention. Larger companies. 17% of market.
  3. Polar Bears – Teddy Bears but colder. Will Shop around for cheap service.  Will use third-party engineers rather than those of the tech provider. Expects freebies e.g. training. Carries out ‘serious’ annual reviews of contracts. Requires a supplier who can cover several locations. Larger companies. 29% of the market.
  4. Yogi bears – A ‘wise’ Teddy Bear or Polar Bear.  Will train their staff to carry out their own service needs.  Needs a skilled product specialist via distance communication (probably on the phone 24 hours.  Requires different service levels in different parts of their business.  Can be large or small companies. 11% of the market.
  5. Grizzly Bears – Will bin tech rather than repair it.  Wants tech that is so reliable that when it breaks, it’s already obsolete. Won’t pay for training. Not small companies. 6% of the market
  6. Andropov Big Bears – Their business is totally dependent on your product.  Claims to know more about your product than you do.  You will do as they instruct.  Expect you to ‘jump to it’ when called. Not large or small companies. 9% of the market.

What is important to note about McDonald’s segments is that they are not based on traditional demographics or financial data.  They are based on attitudes and expectations.

It is also important not just to segment by product category.  For example, you may wish to segment by expected distribution channel.

Segmentation is matching your offer to meet consumer needs.  It is not easy.  It is a complex and critical task to appropriately define consumer groups, which can be fickle.

Going Global

Currently, the UK government is promoting the idea of exporting to small and medium-sized businesses.  This is a bit counter-intuitive as at the same time, the government is in such a mess with Brexit, it is highly likely that the conditions for exporting past 29 March 2019 will be such, and barriers to trade so high, that for many small businesses the costs of exporting may become prohibitive.

So what should a small business consider when looking to market their products abroad?

The world is, in many ways shrinking.  Faster communications occur the rise of the internet and cloud computing.  We have faster transport links through the development of faster aircraft and ships.  We have high-speed rail lines and improved road networks.  The result of this improved communications and logistics infrastructure has meant a boom in international trade.

Many companies now like to see themselves as ‘global firms’ which operate across countries, regions and continents.  Going global has allowed these firms to make gains in terms of research and development, production, marketing and financial structures.  They have been able to build cost and reputational advantages which are not available to firms which operate on a domestic basis.

However, to globalise successfully, companies need to ask themselves pertinent questions:

  • What market position do we want in a particular country or region?
  • Who are our competitors, in the chosen market and globally?
  • Can we operate on our own in a new market or do we need a strategic alliances?

If you are considering global expansion, you need to understand the frameworks under which trade will take place. Is there a free trade or cooperation agreement in place?  Are their tariff free quotas? Are you operating on WTO tariffs?  Does GATT24 apply to any trade deal? Do you know the status of the various international trading blocs such as the EU, Mercosur, SADC, TPP, NAFTA, etc.

The WTO developed out of the General agreement on Tariffs and Trade.  Over seven rounds of international talks, the WTO has lowered the average tariff for manufactured goods from 45% to 5%.  However, significantly high levels of tariffs still exist in certain goods classes, e.g. the tariff for motor vehicles and components is 12% and speciality foods can have tariffs of up to 40% on the importation value.

In recent years, the progress of the WTO has stalled.  The eighth round of trade talks, the Doha round, stalled.  Several countries, particularly the Trump administration have distinctly protectionist policies which have weakened the WTO.  In particular, Trump is refusing to appoint members to the WTO council and looks to implement punitive tariffs against individual countries, particularly China, in breach of WTO rules.  Such moves are threatening the viability of the WTO and increasingly it is seen as a failing organisation.

International trading blocs, such as the EU and NAFTA, have been major drivers of trade internationalisation.

This is one of the fascinating things about the Brexit debate.  Brexit supporters shout that they want a global Britain; but the EU record on international free trade is astonishing.

The EU/EEA has 31 member states.  The EU also has 54 FTAs with both countries and trading blocs such as the Southern Africa Development Council.  On top of those deals, the EU offers unilateral free trade to the world’s poorest 48 nations under the Everything but Arms policy.  The WTO has 164 member nations and the EU has free trade arrangements with nearly three-quarters of them.  In addition to full free trade agreements, the EU has a number of cooperation agreements with nations, many of which allow for tariff free quotas for certain products.  For example, the EU has a tariff free quota arrangement with New Zealand for lamb meat.  New Zealand hasn’t exceeded this quota level for a number of years.

The EU is currently in the process of negotiating trade deals with Morocco, Egypt and the South American trade bloc Mercosur.

It is highly unlikely that the UK post-Brexit, will be able to quickly negotiate trade deals equivalent to those of the EU and simply due to market size, it is unlikely that the UK alone will be able to obtain the levels of commitment included in EU deals.

To succeed in international markets, you need a deep understanding of the regional and national attributes of your chosen market.

Firstly, what type of economy is your target market?

There are four basic categories of economy:

  1.  Subsistence Economies:  Where the majority of the population work in basic agriculture and where most output is consumed domestically.  This large parts of Africa.
  2. Raw Material Exporting Countries:  A country or region that is rich in a particular raw material resource, e.g. The Democratic Republic of Congo which has large cooper reserves and which supplies much of the world’s cobalt.
  3. Emerging ‘Industrialising’ Economies:  This includes the BRIC economies.  These countries have a rapidly growing middle class where there is increased demand for Fast-Moving Consumer Goods.
  4. Industrialised Economies:  Which often had lower levels percentage of GDP growth (but actual value of that economic growth can be far more that of emerging economies).  This category includes the USA, most of Europe and Japan.  These countries export manufactured goods and professional services.  They are rich markets for all types of goods.

It is interesting to note that many Brexiters see Africa and the UK’s former colonies as a solution to the trade lost with the EU due to leaving the bloc.  However, you have to consider that the GDP of the whole continent of Africa is less than half that of France.

Secondly, what is the income distribution of your chosen international market?

Developed nations often have a mix of high medium and low-income households.  Developing nations tend to have a small rich elite class and the mass of the population have low incomes, so if you sell products aimed at the ‘middle ground’ such a market may not be viable.  Much of the interest for exporters in the BRIC nations is their growing middle class.

You need to consider a countries legal and political environment of your chosen international market.  For example, China has few intellectual property laws and enforcement of the laws that do exist is poor.  So do you want to sell your designer goods in a market where counterfeiting and trademark breaches are common?

Some nations are open to foreign firms; some are less welcoming.  India bothers foreign firms with import quotas, currency restrictions and other hindrances.

On the other hand, Singapore is a market which looks to attract foreign firms with extensive incentives and favourable tax and trading conditions.

Some countries, such as Canada, are extremely politically stable.  Others, the most prominent current example being Venezuela, are not.

You need to examine the cultural environment of your target market.  You need to ask how certain countries treat certain products.  For example, some Indian states have strict laws on the sale of alcohol and the quantity that can be bought (you may have to register with a certain retailer to be able to buy alcohol)). Until recently, it was illegal for women to drive a car in Saudi Arabia; yet in Western Europe many small family cars are directly marketed to women.  Italy has proven to be a difficult market for the large coffee shop chains.  How you drink coffee, and what and when you drink coffee, have strong cultural meaning in Italy.

You need to be aware of a countries folkways, norms and taboos if you are to successfully market your products and services in that market.

There have been some horrendous mistakes made by large firms where they have not taken into account cultural norms.

For example, in Africa, the norm is to label product packaging with the contents of the container.  For example, you show a chicken on tins of Chicken soup. Nestle made a huge mistake when they labelled packs of infant milk formula with the picture of a baby.

Burger King had to pull adverts when the showed a ham sandwich in the hand of a Hindu God (With the strap-line ‘the snack which is sacred’).  Hindu’s are vegetarian.  So a meat product being advertised through the image of a Hindu god was seen as highly blasphemous.  The advertising campaign had to be withdrawn

In many Arabic countries, using the left hand to hold or eat food is seen as highly insulting.  Traditionally, in lands where water and vegetation is scarce, the left hand is traditionally used for cleaning yourself after being to the toilet.

So what are the indicators of market potential:

Demographic Characteristics

  • Levels of Education
  • Population size and growth
  • Population age composition

Sociological Factors

  • Consumer lifestyles, beliefs and values
  • Business norms and approaches
  • Cultural and social norms
  • Languages

Geographic Characteristics

  • Climate
  • Country size
  • Population density
  • Transportation infrastructure and market accessibility

Political and Legal Factors

  • National priorities
  • Political stability
  • Government attitude to global trade
  • Government Bureaucracy
  • Monetary and trade regulations

Economic Factors

  • GDP size and growth
  • Income distribution
  • Natural resources
  • Financial and human resources

When deciding how to enter a market you need to consider whether to export directly or indirectly.  Do you use joint-ventures through licensing or contract manufacturing, management contracting or full joint ownership.  Some countries may require you to have a domestically based partner if you are to operate within their borders.  Do you invest directly in production facilities in the state.  Do you assemble products in those facilities or do you carry out full manufacture from raw materials?

Each of the above options increase the levels of risk in an expansion.  They may require increasing levels of control but equally profit potential may be increased.

You also need to consider whether to follow a global marketing plan where there is little variation in your offer between countries; or whether you develop specific marketing mixes for individual countries or regions.

Brexit – A Project Management Perspective

I have tended to shy away from Brexit in this blog and have concentrated on Marketing and Business Strategy.  However, with ten weeks until the UK leaves the EU, I think it is worth looking at the way government has handled Brexit over the last two years.  To do this, I am taking a project management approach.  As anyone who has read some of the articles I have written about Brexit, or indeed anyone who follows my twitter feed, you will understand that I am no fan of the policy.  I see Brexit as a self-inflicted wound on the UK economy.  Indeed, all economic projections on Brexit see it as doing significant harm to the UK economy.  It is estimated that a Brexit deal, as negotiated by Theresa May in the draft withdrawal agreement, will cause a 5% drag effect on the UK.  A no deal Brexit is calculated as causing a 9% drag.  Brexit is the UK economy hobbling itself.  HMS Britain is about to drop a heavy drag anchor which will slow growth and hinder international competitiveness; all for the nebulous concept of ‘sovereignty’.

I say nebulous because those who shouted loudest about parliamentary sovereignty are now the first to shout foul when that parliamentary sovereignty is exhibited.

But this blog entry isn’t about political views or whether there is support for Brexit.  It asks whether the project is being appropriately managed.

Dennis Lock defines the stages of a project in his book, Project Management, the standard text for all business students on that subject.  Perhaps by listing those stages and factors for success and failure given by Lock, we get an idea of how the Brexit project is proceeding and its likely outcome.

The stages of a project listed by Lock are:

  1.  Project Definition
  2. Preparation and Planning
  3. Project Design
  4. Purchasing
  5. Fulfilment
  6. Completion and handover

It is utterly clear that the Brexit project is badly defined.  The referendum question asked one question; whether the UK should remain a member of the EU or Leave the EU.  The result, narrow as it was, was that the UK should leave.  But that answer didn’t provide a single possible outcome.  There was a range of options available and those on the Leave side of the argument didn’t present a single solution.  Britain could leave in a ‘hard Brexit’ or no deal.  Britain could retain close ties with the EU, the EEA model as shown by Norway; or Britain could decide to have a limited relationship: The Swiss model.  It seems that no one in government can decide and cabinet ministers to this day still present different potential outcomes.

Nor was there space left for compromise in the negotiation process, as Mrs May’s ‘red lines’ severely limited the options available.  Clearly Brexit was a poorly defined project.

Lock then describes success and failure factors in project definition:

  1.  Project Scope needs to be clearly stated and understood
  2. Technical requirements are not vague
  3. Estimates of timescale, costs and benefits are not over-optimistic.
  4. Risk Assessments are not incomplete of flawed
  5. The intended project strategy is inappropriate.
  6. Insufficient regard is given to cash flows and the provision of funds required to complete the project
  7. The interests and concerns of stakeholders are not taken into account.
  8. Undue regard is given to the motivation and behaviour of the people who will execute the project
  9. Insufficient regard is given to how those affected by the project will adapt to change
  10. Approval of the project plan is given for political, personal or intuitive reasons without due consideration to the business plan.

Where to start with this list in respect of Brexit!

As stated above, the project scope was vaguely defined.

Technical requirements as a result were vague.  If a soft Brexit was chosen, the technical requirements were completely different to those of a no deal Brexit.

The two year timescale is wholly insufficient to achieve Brexit.  The officials who drafted the Article 50 clause admit this.  But given the short timescale of the article 50 process, it was wholly inappropriate for the government to trigger that clause with absolutely no contingency planning in place.  A better proposal would have to been to do the contingency planning, then trigger Article 50 for the negotiations.  At least with contingency plans in place, the government’s position would be informed and appropriate red lines set.

The government’s Brexit plans completely fail to stand up to any interrogation based on the above list.

With only weeks to go until the Brexit deadline, arguments are still ongoing about factors in the above list.  We should have moved on to the delivery aspects of the Brexit plan by now: project fulfilment.

Lock lists the success and failure factors at the project fulfilment stage:

  1.  Good definition of the project and a sound business case
  2. An appropriate choice of project strategy
  3. Strong support for the project amongst management, in particular those managers responsible for managing the plan
  4. Firm control of changes to the project
  5. Technical competence
  6. Strong quality culture
  7. Appropriate regard for health and safety of all those affected by the plan
  8. Good project communication
  9. Well-motivated staff
  10. Quick and fair resolution of conflict.

Again, where do you start with this list!

The Brexit project has been poorly defined and there is no sound business case for it.  We are actually in a position of a government with a solemn duty to do the best for the country and its people is actively engaged on a mission which does nothing but harm to those interests.

The choice of project strategy, particularly the choice to trigger Article 50 prematurely has been appalling.

Those put in charge of driving May’s Brexit plan have been hard Brexiteers wholly opposed to it.

Fulfilment has been technically incompetent.  We have had ferry contracts awarded to a company with no ships and a port lacking the necessary infrastructure for HGVs.  We have had a trial at an airport designed to hold 5000 HGVs where only 87 HGVs turned up.  It appears we have a government which cannot plan a traffic jam.

Project communication has been appalling.  No deal preparation papers were short, vague and lacking necessary detail.  Risk assessments were incompetently produced and their content was held as secret.  Even when MPs demanded access to them, there was no appetite to share their content.

Staff motivation is clearly absent.  DExEU has the highest staff turnover of any government department.  It is seen by many as the death knell of a civil service career.  Currently the department is advertising for staff who ‘don’t panic’ in the face of pressure.

It is clear that the government, in particular ministers, put in charge of fulfilling the Brexit project simply aren’t up to the task.

Lock explains that in project management there is a direct relationship between cost, time and performance.

It is estimated that Brexit is already costing the UK government around £600 million per week.

The performance and quality of project delivery has been appallingly poor.

Most critical is the time objective.  A project not started in time can hardly be expected to finish on time.  To paraphrase Napoleon, “There is one kind of robber whom the law does not strike at and who steals that which is precious; time”.

It is utterly clear that the Brexit project has been managed horrendously and that it has run out of time.  In such circumstances the best option is probably to abandon the project entirely.

 

More on Organisational Culture

A few blog entries ago, I discussed the issue of organisational culture and how business and marketing planning can be affected by the culture of an organisation.  Organisational culture is a critical element in the success of business plans so I have no reservations in returning to the subject.

So how do you recognise the dominant culture in your organisation?

Well, as discussed in previous blog entries, there are several factors to an organisation’s culture including:

  • Organisation’s purpose and goals;
  • The external environment;
  • Organisational policies;
  • Rules and procedures;
  • Organisational structure;
  • Employees skills and attitudes:
  • Use of technology:
  • Decision-making mechanisms:
  • Communication channels:
  • Societal norms.

Organisations get into difficulty when they try to impose an organisational culture over pre-existing cultural norms.  A good example is when American banks opened offices in Spain.  The banks tried to enforce the American working day (usually 8 am to 6 pm) on their Spanish employees.  They ignored the Spanish tradition of the siesta.  The banks soon found that employees were falling asleep at their desks.  This had nothing to do with the staff being lazy.  In Spain, the working day is different.  Most people in Spain start work at around 7am.  They stop work at noon and go home for the siesta.  They then return to work at 4pm and work through to 7pm.  Most Spaniards eat their evening meal at around 10pm.  Then they socialise, either with friends or at a local club or bar.  They usually don’t retire until after 1am.

The Spanish pattern of life means that the hottest part of the day is avoided.  The workers at American banks worked an eight to six-day, but outside work they continued the hours expected in Spanish society.  Not having the siesta meant they were collapsing with tiredness.  The American banks had to change their working hours to meet Spanish culture.

In creating business and marketing plans, you need to ask some probing questions:

  1.  Is your organisational culture represented in your mission statement; the over-riding statement on the direction of your business and its purpose?
  2. What are the symbols of your organisational culture?  Who/what are your organisation’s heroes, rituals, values?
  3. What are the core values that define your organisation?
  4. Do your managers have cultural awareness? Do managers know the likely effect of organisational culture on the rules, procedures and technologies you want to implement?

The sociologist Charles Handy describes four generic types of organisational culture:

  1. Power Culture: Control emanates from the centre. Organisations can be very political but also very entrepreneurial.  Power from the control of resources and personal power predominate.  Often power is in the hands of a figurehead (who may not be the nominated head of the organisation).
  2. Role Culture:  This is the classical organisational culture and can it can be bureaucratic in nature.  Roles are more important than people.  Position power predominates; expert power is tolerated.  Culture serves the power of the structure.
  3. Task Culture:  The focus is on completing the job at hand.  Expertise is valued and predominates.  Personal and positional power is also important.  A unified focus on the task means collaboration and teamwork is highly valued.
  4. Person Culture:  The organisation is a loose collection of individuals, usually professionals, who share common facilities.  The individuals own goals dominate.  Power is not an issue and the culture serves the need of individuals.

We can all think of examples where the four organisational cultures described by Handy exist.   His power culture reminds me of many UK businesses in the 1970s where power over the organisation’s direction existed with union and staff representatives rather than nominated managers; Many local authorities and central government departments exhibit role culture;  The arrival of Japanese car makers in the UK shifted the industry to a task culture; an organisations such as medical practices, barristers’ chambers, architectural practices have a person culture.

Following Handy, there has been significant subsequent research into organisational cultures.  Hofstade found that cultural differences were often exhibited within the practices of competing organisations rather than the values of those organisations.  He found that cultural practices had six dimensions:

  1. On an axis between process orientation and results orientation where culture is focused on means at one end of the spectrum and the culture is focused on results at the other.
  2. On an axis between employee orientation versus job orientation; where the concern is for people at one end of the spectrum as opposed to task results at the other end.
  3. Parochial versus professional: do the members of the organisation see themselves as individual professionals or are they simply another cog in the machine, part of an organisational group?
  4. Open social system versus a closed social system: Is the organisation open to newcomers or does their arrival raise suspicions? Is the organisation inward-looking or does it have an external view.  Is the organisation secretive or is information open to all?
  5. Local control versus tight control from the centre:  Are strict observance to matters such as costs and timelines required or is there a more relaxed attitude to such issues?
  6. Do you have a narrative or pragmatic approach to customers?  Do you always require strict adherence to rules or will you bend them to meet the needs of customers.  Do you impose a strict code of ethics or is it flexible to meet the wants of customers?

Turner (1997) described four organisation types based on person focus or task focus; egalitarian attitude or hierarchical structure:

  • Incubator:  Such organisations are person orientated and egalitarian.  These organisations dislike hierarchies and prefer role equality.  Spontaneous relationships develop and creativity is engaged.  This equates to Handy’s person culture.
  • Family:  These organisations are people-oriented but hierarchical.  |There is a culture of paternalism and power is exercised through members of the organisation rather than over them.  This model equates to Handy’s power culture.
  • Guided Missile:  Egalitarian but task-orientated.  Such organisations thrive on successful teamwork and problem-solving.  Members of the organisation have pride in themselves and their professionalism. Equates to Handy’s task culture.
  • Eiffel Tower:  Bureaucratic where tasks and roles sit within a defined hierarchy. Hierarchical but task-orientated.  Relates to Handy’s Role Culture.

“The organisational architect must take account of the informal culture; the norms, values and behaviour patterns that employees collectively support and believe in” (Mumford)

Cultures evolve over time and therefore they can be shaped.  Culture is often a response to organisational problems.

If you are intentionally trying to change an organisation’s culture leadership is key.

To successfully change an organisational culture the following tactics are key:

  1.  Recruit like-minded people
  2. Socialise to instil and sustain ideologies
  3. Use cultural communications in your internal marketing
  4. Use resource allocation the mould culture
  5. Set clear criteria for rewards and discipline
  6. Examine your structure.  Is it a good fit for your desired culture?
  7. Look at your building design.  Are staff in an open plan office or are they hidden away in separate offices creating a silo culture.  Do managers sit amongst the staff or are they hidden behind security doors on the fifth floor?
  8. Describe your desired culture in your mission and goal statements.  Use these statements to form a belief system which provides basic values and a common direction for the organisation and its employees.

 

The Challenger Credo

Business is about competition.  It is therefore often compared to sport.

Take the Premier League in football.  You have leaders, teams which year after year compete for the English title.  These are teams like Manchester United, Liverpool, Chelsea and Arsenal.  If they do not win the league, they usually obtain the qualification spots for European competitions.

Also in the league, you have ‘Strivers’.  These are teams who are competing not to get relegated.  Their goal is survival.  Some succeed and stay in the league another year: Others fail and exit the league.

There is a third category of team in the league.  These are teams who look to challenge the established order by becoming one of the league leadership group.  In recent years such teams include Watford, Leicester and Bournemouth.  Often these are teams previously seen as unfashionable but which have received significant financial power through a new billionaire owner.

In business the term challenger is often used to describe businesses ‘in the middle of the league’.  Such a general description is an incorrect definition of the concept of a challenger firm.  There is more to being a challenger than being ‘of the middling sort’. Being a market challenger is as much a state of mind as it is a statement of intent.

I can think of sport’s clubs who are happy to maintain a mid-league position.  Owners want a club which breaks even financially and meets its role as a form of entertainment but who do not want to incur the significant costs associated with being in a leadership position.

Similarly there are businesses who do not want market leadership as being a leader costs in terms of defending that position.  Being a market leader is often not a position in which profits can be maximised. It costs to be a leader.

To be a market challenger, is to have ambitions which exceed your conventional marketing resources.  This means being strategically and tactically bold to overcome the resource gap.

So what are the core challenger characteristics?

  1.  Challengers embrace intelligent naivety.  They do not accept the historical norms of a market or its traditional process models.  The rules written by others aren’t the challenger’s rules.
  2. Challengers build a ‘lighthouse identity’.  They take and communicate their own position and they are clear where they stand on issues affecting the market.  They project that sense to target consumers like the beam of a lighthouse.
  3. Challengers take thought leadership of their category.  Apple isn’t the leader in the mobile phone market; Dyson aren’t the leader in the vacuum cleaner market; but both these companies lead their sectors in terms of design and thought.
  4. Challengers create symbols of re-evaluation.  They seek to continually shake up the consumer’s view of the market or brand category.  So Apple and Dyson continually add functionality and features to their products which alter the consumer’s expectations of the category.
  5. Challengers are willing to sacrifice.  Rejection isn’t the fear of challengers.  They fear indifference.  Be willing to sacrifice that which does not present a strong position to your target audience.
  6. Challengers are willing to over-commit to build a market position.  This over-commitment could be in the form of guerrilla marketing or to go a step further than your competitors to gain a market foothold.
  7. Challengers use PR and social networks to enter social culture.  the use of communications is strategic.
  8. Challengers become ideas-centred.  they need to continually come up with new ideas to keep their presence fresh.  They don’t do the same thing over and over again.

Research has shown ten potential challenger narratives.  These are:

  1.  The Feisty Underdog:  This is the classic challenger narrative.  It’s David versus Goliath.  It is often the position of the initial market disruptor.
  2. The Peoples’ Champion:  Challengers can develop a market position where they are seen as fighting to make the consumer the real winner.  They fight against the market’s ‘cynical fat cats’.  Take the mobile phone network Giff Gaff as an example.
  3. The Missionary:  These challengers want to bring a new way of thinking to a market category.  An example is The Body Shop which promoted natural and environmentally sound cosmetics manufacturer.
  4. The Democratiser:  This is the Robin Hood challenger wanting to take from the few to give to the many.  For example, H & M, the fashion retailer looks to give high fashion looks usually only available to those who can afford designer prices, to the mass market.
  5. The Enlightened Zagger:  These are challengers who divert from the cultural current in a market.  When competitors ‘zig’, they ‘zag’.  This is a brand by opposition to expected norms not matching the propositions of others.
  6. The Real and Human Challenger:  These challengers are clear to show that there are people behind the brand, not just AI and algorithms.  They promote human to human communication.  They aim to make a human and emotional connection.  There is personal commitment to quality and service.
  7. The Visionary:  These challengers aim to transcend the category.  An example is Whole Foods, the American grocery chain which uses the vision statement “Whole Foods, Whole People, Whole Planet”.  This statement reflects the triple bottom line of People, Planet, Profit. That business is more than the aggregation of wealth.
  8. The Next Generation:  These challengers look to get consumers to re-evaluate the market.  Tesla are an example as it gives an image of the future through alternative energy production and electric vehicles.
  9. The Game-Changer: These challengers offer a significantly different proposition that changes the market.  Such challengers have included Airbnb, and budget airlines such as Ryanair.

As challengers often lack the resources to compete against market leaders head on, they have a duty to be flexible, fleet-of-foot and imaginative.  As the  nuclear physicist Sir Ernest Rutherford said or UK scientific research, “We have no money, therefore we are obliged to think”.

 

Market Breakpoints

Predicting the future is the easy part. It’s knowing what to do with it that counts”.

Faith Popcorn, 2001

A fundamental aspect of any competitive marketing strategy should be the anticipation of major environmental or structural change. Today marketers are operating in an environment which is increasingly volatile – and potentially malevolent.  Just look at recent ‘megatrends’.

  1.  The explosion in information and communication technologies and their increasing power.
  2. Market globalisation.
  3. A shift from manufacturing and the exploitation of natural resources to economies based on knowledge, information, innovation and added value.
  4. The decoupling of the physical economy from the virtual economy of financial markets.
  5. Geographic rebalancing and the emergence of a new world order, particularly China.
  6. The twilight of government.  This is clearly evidenced by the current political chaos in the UK.
  7. Sector convergence
  8. The growth in new forms of business organisation e.g. social enterprises.
  9. The shift of the economic centre of gravity from multinational conglomerates to smaller, nimbler, more agile firms.
  10. The increasing influence of environmentalism.
  11. The increasing speed, complexity and unpredictability of change.

Such industry or sectoral changes are often referred to as industry or market breakpoints.  The consequences of such breakpoints can be extensive and as a result existing strategies become obsolete.  Look at how many traditional retailers have failed to adjust to the impact new technology has had on their business.

In developing forecast strategies to take account of breakpoints you must clearly understand the definition of an industry breakpoint.

Strebel (1996) describes a market breakpoint as:

A new offering to the market that is so superior in terms of customer value and delivered cost that it disrupts the rules of the competitive game: a new business system is needed to deliver it.  The new offering typically causes a sharp shift in the industry growth rate whilst the competitive response to the new business system results in a dramatic realignment of market shares.”

Note the use of the word ‘disrupts’.  This is the source of the term ‘disruptors’ which is so commonly used to describe new tech start-ups.

Once a breakpoint has occurred, existing market players need to respond, often dramatically, or recognise the significant negative implications on their position and performance in the market.

There are numerous examples of market breakpoints.  Consider:

  • The impact of the internet on the package holiday market
  • The arrival of low-cost carriers on the airline industry
  • Kodak’s failure to recognise the implications of digital camera technologies (despite the fact they invented the imaging sensor).

Despite the impact of such breakpoints, you will still find business managers ignoring the impact of such change with the assumption that their industry will carry on as before.  However, in today’s commercial environment, no industry is safe from such breakpoints.

Strebel defines two types of breakpoints:

  1.  Divergent Breakpoints:  There is a sharp increase in the variety of competitive offerings and consequently more consumer choice.
  2. Convergent Breakpoints:  These develop from changes and improvements in the systems used to deliver offerings which result in lower delivery costs.

Breakpoint are created through:

  • Technological breakthroughs
  • The economic cycle causing a radical rethink of product or service delivery.
  • New sources of supply at reduced cost
  • Changes in government policy
  • Shifts in consumer values/expectations
  • Identification of new business opportunities and the divergence of competitors’ responses and behaviour as a result.
  • Shifts in distribution networks and the changing power balance between marketers and retailers.
  • New market entrants with different perspectives
  • Declining returns forcing a radical rethink in how a business should develop into the future.

Marketing planners need to identify where breakpoints are most likely to occur and in what form they will take.

In your planning you need to be proactive, not just reactive.

No manager should operate within a closed environment.  They all need to look beyond the internal environment of their organisation.  They shouldn’t just rely on historical financial data.  All managers need to take account of potential future trends.  But how many managers are provided with incentives or rewards for the redefinition of products, processes or company attitudes?

The competitive cycle tends to fluctuate between convergent and divergent breakpoints.  Divergent breakpoints are the creation of variety in the market. Convergent breakpoints are survival of the fittest.

  1.  Divergence of offerings in an attempt to be different
  2. An emphasis on innovation and creation of variety develops
  3. Breakpoint
  4. Some innovative products succeed, others fail.
  5. Focus develops on the successful products
  6. There is a convergence of offerings to match the successful products
  7. Breakpoint
  8. Products become so similar there is little choice in the market.
  9. There is divergence of offerings in an attempt to be different.

A good example is video tape.

In the 1970s, if you wanted to see a film, you went to the cinema or you waited for the film to appear on television.

Then the video tape industry developed smaller, cheaper tape and the home video market took place.  There was an explosion in home video technologies, the most prominent being Betamax and VHS.  Betamax failed and VHS became the industry standard.  Then along came DVDs.  These were technologically superior.  For a while VHS and DVD co-existed but it didn’t take long for VHS tapes to disappear from the market. DVD and then Blu-ray became the standard.  Today the market for DVDs is under threat due to downloads and streaming services such as Netflix and Amazon Prime.

How you watch movies has gone through several market breakpoints.  Cinemas have also reacted with the rise of the IMAX screens, immersive sound systems and special events such as fan preview screenings.

Faced with increasingly rapid change and the ever-faster breakpoint cycle, marketers are faced with a series of issues:

  1. Balancing short-term and long-term goals
  2. Increasingly needing to be both market-orientated and customer-driven
  3. Higher customer expectations
  4. Creative and strategic segmentation
  5. Achieving leadership in chosen segments
  6. How best to add value and differentiate market offers from those of competitors
  7. Pricing for competitive action
  8. Increasing the effectiveness of distribution channels
  9. New technologies
  10. Shifting market boundaries and globalisation
  11. Improving marketing and control systems

Hamel and Prahalad (1994) offer three rules on future planning:

  1.  Step off the corporate treadmill.  Don’t become preoccupied with day-to-day issues.  Focus on the few really important issues which contribute to competitive advantage.
  2. Compete for industry foresight and learn to forget.  Learn how the market is changing and forget some of the traditional roles and patterns of behaviour in the market.
  3. Develop a new strategic architecture.  Concentrate and leverage strategy to make better use of marketing assets.