Strategy Myopia

Are you having an unsettling feeling of not gaining market shares or are you losing growth pace, despite heavily investing in marketing?

First; what does “Marketing” mean for you? Reading various definitions as “Marketing is the process of communicating the value of a product or service to customers or ”Communicating products or services in a multi-channel environment”, I’m confused about why we never learn.

Borg

The year was 1991, the place Monte Carlo. Björn Borg, the world famous tennis player; “Mr. Five-Wimbledons-in-a-row” and one of the best players in the tennis history, steps out onto the Centre Court for his comeback at the Tour. In his hand he held the wooden racket Donnay Borg Pro. When Borg won his fifth Wimbledon title in 1980, nobody questioned his choice of a wooden racket. In 1988, Donnay went bankrupt overtaken by its competitors. His antagonist, Jordi Arrese, was playing with a new material graphite racket, weighing 25% less.

Borg lost his comeback match and retired shortly afterwards.

A large enterprise developing and selling accounting systems for PC’s based in my hometown said in 2001, internet based accounting systems is just a fly and that people wouldn’t dare to put business critical accounting information on the net. The same year the Swedish company Fortnox also headquartered in my hometown introduced accounting systems as a web service paid per month. Today, Fortnox has 40,000 customers, each with several users.

Why?

As early as in the 60’s, Harvard Business Review published Marketing Myopia by Theodore Levitt. This article is one of my favorites all these years and I read it every now and then to get the right perspective when I’m feeling blinded by fantastic business ideas or products. The essence in the article is that we were, and in my perspective still are, so focused on our own products that we can’t see our customers’ needs or misinterpret them.

We are suffering badly from Strategy Myopia, defining our market too narrow. Levitt is discussing examples like train companies that in the 60’s narrowly defines themselves as being in the “Train Industry”, but should being in the “Transportation Industry”, and by that be able to catch new opportunities along the road when customer needs changes.

My recent examples from the tennis courts or accounting should also redefine their markets. Donnay was not lucky defining themselves as the market leader in Wooden Tennis rackets, while the large accounting system enterprise should redefine their market to be more like “Accounting Industry” or similar, not “PC and Mac” making it completely of no matter what platform the customer intend to go for. Why are they giving away 40,000 potential customers?

I think it’s because we are so tied up in our existing strategies, coming from myopia in marketing, sales, finance, R&D and supply chain.

On one side Marketing invests billions of dollars in campaigns explaining why people should buy your product and we are continuing asking our customers what they think about our product, followed by massive investments in R&D aiming only to fulfill the results in our own-defined questionnaires.

We train Sales reps learning key features, USP’s and selling techniques to convince buyers like what is supposed to fit into our templates. We go as far as creating KPI’s only to consolidate they only sell what they are told to. Why on earth would we have to convince buyers if they really need our product or service?

Further down the chain we configure our Supply chains to produce the products at increasingly lower costs, see Håkan Bernhardsson’s blog post Is your company customer driven?

This in turn, will even more cement our ambition to produce a larger number of them – and exactly those produced products, even if they aren’t compatible 100% of the customer needs. And above all, Finance controls that no risk is taken, cost is on an acceptable level and the sales forecasts are delivered timely and accurate on detailed article level.

The last thing we do is to put a huge wet blanket above our existing business model by delivering all necessary reports to the stock markets or owners and then we can’t change anything.

Sorry Stock Market. Five years later we may be bankrupt, like Donnay. They didn’t realize they should fulfill a core customer need – tennis rackets, or even just “rackets” if people intend to play more badminton instead in the future.

I certainly realize it’s not possible not to plan for a demand of an article or product area, invest in supply chains, R&D, train sales forces and let finance do the risk management. But we really need to look into how we can incorporate customer need in our strategies. The Marketing Myopia article was written by Theodore Levitt fifty – 50! – years ago. And still it’s easy to find examples of narrowly defined market strategies.

Just to be sure; start with the definitions. What is a “customer need”? Don’t misinterpret with “customer demand”, which I define as a demand for a certain product or service we already have defined by adding features or functions. A typical core customer need can be the ability to go downhill a skiing slope (containing all products providing just that – carving, snowboard, etc), windows (products letting light into spaces).

Even if your supply chain currently only can manufacture a certain type of, for example, wooden windows, make sure you look into the ability to produce plastic windows as well. How do you know it would not be a hit, in say, eight years? Why give away that market?

Incorporation of customer need means more than just gathering of knowledge. In a recent blog post Håkan Bernhardsson raises some thinkable comments about using Big Data. If your organization is not ready, it may be very risky business to lean on Big Data to get knowledge about core customer need. If you are ready, it may provide some valuable knowledge.

The real problem is instead your long-term strategy, your processes, your culture and your people. You need to drive change management from strategy to tactics, down to operational levels and processes. Aim long-term – five years or even longer horizon, but act agile. Take decisions, but use decision points; fixed dates when you have to take decisions, see my blog post about decision making in an agile world.

Early warnings comes with heavy marketing budgets, too rigid supply chains, upcoming competition, decreasing market shares, powerful R&D department and too much cost focus on existing product articles.

It’s not bad branding narrowly, but can you afford the risks doing only that? It’s one thing what you currently tell your customer, a completely different thing what you are preparing.

Best Regards,

Stefan

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