Growth strategies demand solid innovation and marketing
Sunday, February 19, 2006
St. Louis Post-Dispatch Business E5
"Growth strategies demand solid innovation and marketing"
On Jan. 23, Ford announced plans to eliminate up to 30,000 jobs and close 14 facilities, including its St. Louis assembly plant. This closing will be a body blow to St. Louis workers. It will also be a wake-up call for St. Louis executives.
The Jan. 23 Wall Street Journal said,The central challenge at Ford is fixing the company‚ culture, which past and present employees describe with words like ‚"toxic" ‚"cliquish" and hierarchical.‚" True, a solid culture and people strategy are essential to a company's success, as is a business strategy that reflects its capabilities and competitive realities. They're essential but not sufficient.
My last seven columns have addressed these first two steps‚people strategy and business strategy‚ in creating a high-performance company. (They can be downloaded as a single Word file from www.thesearetherules.com.) In my next several columns I plan to focus on two additional steps.
They were articulated in 1953 by Peter F. Drucker: "The business enterprise has two‚ and only two‚ basic functions: marketing and innovation. Marketing and innovation produce results: all the rest are 'costs'."
Drucker, widely regarded as the greatest management thinker ever, is right. Innovation and marketing‚ working together‚ grow sales and profits. Innovation leads to differentiated products and services that provide superior value for customers. Marketing (which includes sales) communicates that superior value. They are Steps Three and Four in creating superior results.
Innovation is a huge opportunity, but few businesspeople have more than a fuzzy understanding of what it means. If you ask them to define innovation, most talk about R&D and product development, functions usually delegated to one or two departments in a company. True innovation, however, must pervade the entire organization.
Most executives admit their companies need to be more innovative. Yet, few have ever had a course in innovation. And few companies have an executive responsible for innovation in its broadest sense.
Over the years, I have given 18 management teams a survey that measures five dimensions of their current and desired corporate cultures. These management teams rate, Innovative‚ as the weakest part of their current culture. But they also rate it as the second highest trait of their desired culture.
Approaches do exist for becoming more innovative. Businesses in every industry'from commodities to technology to services‚have shown the way. Superb books suggest how every function‚ not just product development‚can produce breakthrough innovations. I will discuss these new insights into innovation over the next several months.
If innovation is Step Three, marketing is Step Four. A focus on marketing made companies customer-driven through the mid-1980s. During the mass-market era, marketers used, the four P's Product, Price, Place/distribution, and Promotion/advertising‚to drive growth. The first three Ps ensured consumer availability of desirable products. Promotion communicated that value. In the early 1980s, segmentation and positioning killed the mass market. A flood of new brands and line extensions used the four Ps to exactly meet the needs of each customer niche. The results were loyal customers and solid profits.
Today, however, marketing has lost its luster. Last year, Philip Kotler wrote, ‚The haunting truth is that traditional marketing is not working. Kotler of Northwestern‚ Kellogg School of Management is the Peter Drucker of marketing‚the undisputed academic authority.
Kotler‚ sentence is not just marketing‚ eulogy. It is also a call to action for its revitalization. Too many marketers focus on "branding", which Kotler says is about making ‚Äúa promise to customers about delivering a fulfilling experience and a level of performance.
Kotler says marketers must also ensure the brand promise is actually carried out. Marketers must ensure that the company is providing superior value to target customers.
Superior customer value means the best combination of product functionality and price. It means reliability and good service. Customer value is the main reason Toyota has a market value of $165 billion while Ford‚ is only $15 billion. Once you provide superior value, it‚ a lot easier for marketers to communicate that value.
Ford needs the right people strategy, culture and business strategy. But Ford will not survive without innovative cars that provide superior value: cars people want to buy! St. Louis companies should learn from Ford. To survive and thrive, they must move as quickly as possible to innovation and marketing.
My next several columns will focus on innovation and marketing.
I am excited about many new approaches in these areas. But I am also interested in hearing from you. What are the challenges that cause your stomach to churn? Which successful companies could provide valuable case studies? Who are the experts that can provide guidance on the do‚ and don'ts for successful innovation and marketing? Send me an email.
Bill Finnie, a business consultant and adjunct professor at Washington University, writes about the do's and don'ts for success.
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The St. Louis Post-Dispatch and William C. Finnie share the copyright on this column. Individuals and their organizations may use these columns for their internal use. Publication for use outside of your organization, however, requires written permission from the St. Louis Post-Dispatch or William C. Finnie.
The culture survey measures five dimensions of culture: Integrative (meeting employee‚ higher level needs), Static (doing things right), Innovative, Results (focusing on short-term results) and Caring. Summary statistics from the culture surveys with 18 top management teams support the assertion in the column that most companies are weak in innovation but want to get much stronger
- Current culture: The average scores on a 7-point scale for the other four dimensions cluster between 4.36 and 4.54. Innovative is a distant fifth at 3.99.
- Desired culture: Integrative (5.89) is #1 for all 18 companies. Innovative (5.33) is #2 for 16 of the 18 companies. Static (4.94), Results (4.85) and Caring (4.48) lag far behind.
- Change: Integrative and Innovative are tied with “desired increases” of 1.4. Increases for the other three dimensions are much smaller (0.12 to 0.55).