Tag Archives for Business

2 Reasons for Apple’s Distortion on Tech Sector Profitability

I received the below chart from Business Insider Monday, which highlights that without Apple the technology sector profits would be down 3% this year vs. with them profits are up 7%.  Why is Apple out performing and at such a degree against the back drop of all other technology sector companies?

Source: Chart of the Day from Business Insider
Without Apple, the tech sector's profits would have been off by 3% in 2011, according to this chart from Barclays Capital. With Apple, profits are up 7%.

There are many possible explanations and many have come before me trying to explain either the “Steve Jobs effect” or that the Apple  brand is the main component. Two points I think are at play are 1) differentiation and 2) marketing capabilities (the Big “M” marketing not marketing communications). And yes, brand is at play and I will show you that too.

First consider this statistic on differentiation, 80% of managers say their company is strongly differentiated but only 10% of customers agree (C. Zook and J.Allen, “The Great Repeatable Business Model”, Harvard Business Review, November 2011).  I think this is more true than most technology executives would allow themselves to admit. Unfortunately for those companies, this is within any organizations full control to find relevant differentiate in their respective markets.

Source: Chris Zook and James Allen, “The Great Repeatable Business Model”, Harvard Business Review, November 2011

The second is marketing capabilities, Keen’s body of academic research we know that a 1% increase in market orientation and marketing capabilities yields a 6% increase in return on assets. This coupled with a brand impact for Technology firms where 1% increase in brand equity drives over $650 million in additional cash flow the next year or over $1.3 billion in market capitalization.

Source: Keen Strategy Research

The bottom line is Apple is excelling at creating meaningful differentiation and has built the right market orientation and capabilities to manage the business and as a result the brand. Apple is also taking advantage of arbitrage (whether they realize it or not) because in the technology sector companies just are not as good on these dimensions and hence there is more upside for a firm that can get this formula right.

Can We Save Marketing?

indecision dice

Image by snigl3t via Flickr

Over the last six years, I have had a personal interest on the verge of a crusade to better understand and study lead marketers and CMOs across industries. My concern, after meeting well over 300 leaders, is marketing is lacking influence and at some companies is considered “damaged goods”.

How do we fix it? The question I hope to answer over the coming months. There are three areas of concern, which I believe highlight the main issues.

1. Communications heavy, impact light

Historically, marketers and our peers in the executive ranks have been hyper-focused on communications – the latest ad, hot new website or now how many people “like” us on Facebook. We have lost substance and, in some cases, lack the will and determination to educate our organizations on what marketing is and is not. Traditional marketers seem to be less likely to hold the CMO post. In many of the companies I have spoken with, it is more likely that someone from sales, product or operations to be in the CMO role. The stinging reality… they are doing a better job. Why? Probably because they have a broader perspective on what is driving the business and how to harness it.

2. Losing influence, merging functions

Marketing leaders have lost influence. A recent IBM study of 1700 CMOs, show that less than half of the CMOs surveyed have much sway over key parts of the pricing process, and less than half have much impact on new product development or channel selection. Being a Marketing leader is such a herculean task of political gamesmanship to drive a cohesive strategy there is now wonder that the average tenure is still less than ½ that of the CEO. Despite these odds there is still hope as it seems a trend is growing in combining posts like Chief Commercial Officer or Chief Sales & Marketing Offer or Chief Marketing and E-commerce Officer. Although a great recognition on part of CEO and board that greater ownership is needed, they still lack the strategic focus on marketing in its potential long-term impact.

3. All-stars abandoning ship, lack of pride

My gravest concern is our very best are abandoning ship. The “best of the best” marketers that I have spoken to, rarely self-identify themselves as a marketer but rather opt for a “business leader”, “business executive”, “driver of the business”, etc. When I have asked do you consider yourself a marketer, their voice gets quiet and they say “no.” Despite the fear of being pegged a marketer, almost all agree that marketing is at the core of how they approach their jobs and that marketing with a big “M” is what more organizations desperately need.

Depressed yet. There is hope.

We have to start thinking about what matters again. We need to learn from those we think of as magicians of the practice. At the heart of what marketers are trying to accomplish is meaningful differentiation and capturing uncontested demand. “Meaningful differentiation” is difference that matters and customers are willing to pay for. As for “uncontested demand”, this term comes from Blue Ocean strategy and is the whitespace source of new demand we all seek that allows our products and services to occupy a new space that satisfies a real need not previously addressed.

Let’s all get back to what matters, which should deliver the impact, influence and pride marketers are lacking today. Help save marketing!

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Leading Outside the Lines – enabling change and transformation

Möbius transformation
Image by fdecomite via Flickr

Through my previous research with 60+ CMOs on the evolution of lead marketers — transformative leadership has emerged as a path forward. The question now on my mind is how does change take root and what can leaders do to foster the acceleration and permanence behavior  change.

Luckily yesterday, I was turned on to The Katzenbach Center by David Garrison, former CMO of Indaba Music. David was a consultant with Katzenbach before it became a part of Booz & Co. The Katzenbach Center is focused on innovative approaches to organizational change and culture.

The link to the video below is a must see and I have purchased the book. Katzenbach has honed in on one significant element at play — the informal structure and operations of an organization. Many change initiatives I have seen struggle to find the right balance of formal and informal mechanisms to effect change initiatives. What have you seen that works? Do you think informal mechanism are significant? Please comment.

Link to Leading Outside the Lines Video

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Mobile banking in emerging markets

Capturing the promise of mobile banking in emerging markets a new article and work by Christopher P. Beshouri and Jon Gravråk of McKinsey talks about the promise of mobile to bank the unbanked populations of developing and emerging economies.

I completed a project in 2005 with RTI, First Data, Whirpool, Microsoft, Yum! Brands and Humana looking at the possible future business models for emerging markets. This was a novel project bringing NGOs and Private Sector together for a hybrid economic development effort. Mobile banking was one of our more interesting recommendations and a very real possibility to drive economic growth and create/open new markets.

The McKinsey analysis is interesting and puts numbers to a real situation in the Philippines by sizing the opportunity and describing mobile banking providers. Most important and interesting was the willingness and interest of unbanked consumers in mobile banking. Definitely check this article out.

Developing countries excluding LDCs (Least Dev...
Image via Wikipedia
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Microsoft: leading by following

John Hodgman as PC and Justin Long as Mac
Image via Wikipedia

Microsoft must be doing some damage to Apple based on Adage report, which Apple is asking Microsoft to pull their laptop hunter ads. Being a commodity must be working out for Microsoft….

“We’re just going to keep running them and running them and running them,” — Kevin Turner, Chief Operating Officer, Microsoft

More disturbing, is the mention at the end of the Adage report that Microsoft plans to open retail stores right next to Apple Stores.

“We’re going to have some retail stores opened up that are opened up right next door to Apple stores this fall” – Kevin Turner, Chief Operating Officer, Microsoft

The Bottom Line

Having a follower strategy has worked for lots of businesses, especially those that are market leaders and have the most to loose. What should be of more interest is the impact on investors (see stock performance chart).

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Failure: Don’t hide it, celebrate it

Panic room.
Image by LunaDiRimmel via Flickr

Failure is not the end of the world. With GM now restructured and the financial crisis coming to an end, should we be celebrating?

Yes, IF you have learned from your mistakes.

Fail fast and move on

Many business people I know, have worked with or read about in the press, shy away from talking about failure. Failure is an opportunity. Failure should be expected some percentage of the time no matter what business you are in. The trick to capturing this opportunity is to quickly learn from the act of failing and move quickly to what is next — someone I know coined the phrase “fail fast and move on”.

Ask “why”

Companies and business people usually get blinded by the negative side of failure and do not critically ask “why”. Why did this failure occur? Was it a breakdown in our analysis, strategy, execution, management or the team culture?  What ever the reason without delving deeper you have eliminated one of the most important opportunities to understand your performance and whether you or the organization has the foundation to succeed in the next opportunity.

The power to unite or divide

Experiencing failure can be one of the most positive drivers of unity or division. I think about my dad’s experience in Vietnam or other vets that have great stories of how challenging moments can bring a team or a unit closer together. This can hold true in business as well, given the right foundation is in place. The foundational element that is absolutely a must is that everyone in the team shares the pain. I have seen team leaders call out team member failures and destroy an individual and their own ability to lead the next team. On the flip side, I have also seen great leaders share the pain or even take more of the heat in tough times. It is these leaders that inspire dedication and motivate those that work for them to jump higher and achieve more. I would caution that no leader can or should take all the “heat”. The team needs to feel the pain or you miss the opportunity to unite.

How will you celebrate your next failure? Please comment!

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Lust, fear and greed: The business version

George is Keeping an Eye On You!
Image by peasap via Flickr

This post is a tribute to a mentor of mine, Alan “Big Al” Johnson. Big Al should be credited for the idea of lust, fear and greed… at least that is how I remember it. Big Al was ahead of his time in understanding human behavior in the business world or maybe just too raw in his explanation, but that is what you get from a poet.

Lust, fear and greed are three of the most powerful drivers of people in business and thus business itself. If you are someone are trying to created action or movement inside an organization, this framework/theory may help.  I will explain each component of lust, fear and greed and then describe how the conceptual framework could help.

Lust

Have you ever been in a meeting when someone says, “I love that idea” or “We HAVE to do this”. Well witness the lust of a business professional. The object of lust could be noble like a competitive advantage or differentiation or could be that my peer CEO has a corporate jet, so I want one too. What ever the object, one thing holds, this is a powerful force of human behavior and drives both rational and irrational business decisions.

Fear

Fear is most likely the reaction to competitive pressures like missing out on an opportunity or being trampled — “The competition is close to locking up an exclusive on a technology for 6 months, we have to move faster!” Fear can also be related to costs overruns as well — “costs are increasing faster than expected, we need to figure this out before it gets out of control.” Fear can also be personal, such as fearing that your management will see you in a bad light because of a recent failure.

Greed

Greed is the easiest to comprehend and see in action. Most of the time it is related to the accumulation of wealth either for the company or personally. There is also the greed of power, which can either manifest in infighting of business units or actual managers.

The bottom line:

The take away is that these are very power forces individually, but I have a theory that nothing really happens until at least two of these forces are at work in the same situation. As an example, for a project to get funded “greed” must be at play (ROI or positive NPV), but it will not be initiated unless either lust or fear are present. You might see this manifest with a competitive response to a competitor’s move or an executive that wants badly to be in a new market. What I have found helpful is in using the simple terminology of lust, fear and greed to understand and deal with a situation. If I am trying to drive action or change, then I know that at least two forces need to be at work.

What are your thoughts? Do you have a great example or story to share? Please comment.

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Dashboard AND Gut

This is the seventh and last in a series of short posts related to The CMO Agenda research. Informed by recent CMO conversations and CMG Partners‘ collective experience helping top marketers develop marketing strategy, we have compiled a list of seven ideas or jump starters for further conversation. These are meant to spark discussion, ideas, and action as we all enter a difficult 2009.

Over the past few years, measurement of marketing has dominated the vernacular of lead marketers and marketing literature – ROMI, ROI, campaign tracking and management, etc.. The reality is that not everything worthwhile can be measured and it takes an equal or greater effort to generate insight from measurement.

Watch out… As the pendulum swings back, companies are re-evaluating the right mix of measurement and management. When they do, will your staff’s talent and skills be seen as they key to decision-making or a weak link in the connection between metrics and action?

Skills of successful top marketers and marketing executives are evolving. More business orientation and holistic approach to decision making are a must to continue to demonstrate value. This means marketers are adopting revenue as a measure and some are responsible for a P&L.

What is your next move?

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Differentiate or be commoditized

This is the second in a series of short posts related to The CMO Agenda research. Informed by recent CMO conversations and CMG Partners‘ collective experience helping top marketers develop marketing strategy, we have compiled a list of seven ideas or jump starters for further conversation. These are meant to spark discussion, ideas, and action as we all enter a difficult 2009.

True differentiation is increasingly hard with faster moving markets and better-educated shoppers. This means the task of constantly exploring whether your products and services stand out in the mind of the consumer is critical.

How will you differentiate for the long-term?

Forecasting the “death of the American Brand” as one CMO said, forces you to think about the private label explosion and house brand strength by the likes of Target and big chains. These house brands are successful because very little separates them from the old standards.

This trend is happening in everything from CPG to Computers to Insurance. Dell rode the wave as it commoditized the PC market, which now tries to find a sure footing again. Even service markets like insurance are seeing this trend as GEICO and Progressive lead the charge to commoditize auto insurance and drive down prices — even large cost-ridden competitors are following them in this practice.

In this tough economic market, for many the first reaction is to discount or attempt to push value and rationale messaging, but marketers need to understand the long-term impact. It is time to reassess the market and understand current strategic impacts to make decisions and trade-offs on how your company can differentiate in a unique way.

Mirror post at cmgpartners.com/blog

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