Strategic Market Based Planning

Strategic Market‐Based PlanningUniversity of Wisconsin Executive Education

1http://exed.wisc.edu/marketing/ © Linda Gorchels 2002‐2009

Strategic Market-Based Planning

Linda GorchelsDirector, Executive Marketing Programs

University of WisconsinUniversity of Wisconsin--MadisonMadisonExecutive EducationExecutive Education

UW Fluno Center for Executive [email protected]

(608) 441-7336

What Is Strategy?

• Strategy is a long-term plan of action to hi ti l lachieve a particular goal.

– Typical business goals include growth, market dominance, efficiency, etc.

• Strategy is sometimes viewed as the plan taken to win a war whereas tactics are the


© Linda Gorchels 2002-2009

actions taken to win a battle.



How long is “long-term?”

• It varies by company and industry. H h id liHowever, here are some guidelines.– product: 2-3 years– business unit: 3-5 years– company: 5-10 years– industry: 8-10 years or more



industry: 8 10 years or more

Growth Strategies

C t St t i

Inorganic growthMergers acquisitions etc Corporate Strategies

Business Strategies

Product/Service Strategies

Mergers, acquisitions, etc.

Product/Service Strategies

Field strategies

Organic growthProduct development,

increased sales© Linda Gorchels 2002-2009



Corporate Strategies Business Strategies Field Strategies

Core mission, vision, values

Mergers, acquisitions, divestitures

Strategic market alignment

Organizational structure

Product line acquisition

Operational strategies

New product development

Channel redesign

Functional strategies



Account selection

Lead generation

Selling, account management

Fulfillment

Sales support & service

What is “market-based” strategy?

• It is strategy that gives a balanced (or greater) emphasis on the externalgreater) emphasis on the external compared with the internal.

• It implies an obsession on creating and delivering customer value – but in a long-term sustainable way.St t i k t t b d i



• Strategic marketers must be domain spanners.



Why is it important?

• “The demand from CEOs is for foresight rather than hindsight, for innovators, not tacticians, and for marketing strategists, not marketing planners.”

• “In fact, most of the traditional activities under the control of marketing, such as market research, advertising, and promotions, are



, g, p ,perhaps the least important elements in creating customer value.”

Nirmalya Kumar, Marketing as Strategy (Harvard Press, 2004)

• “Leadership and management are two distinctive and l t t f ti M t icomplementary systems of action. Management is

about coping with complexity. Leadership is about coping with change. Leadership complements management; it doesn’t replace it. Companies manage complexity by planning & budgeting, by controlling & problem solving. By contrast, leading an

i ti b i b tti di ti li i



organization begins by setting direction, aligning people to the direction, and inspiring people to achieve a vision.”

» John P. Kotter



What Really Works (according to HBR)

• “Most of the management tools and techniques we studied had no direct causaltechniques we studied had no direct causal relationship to superior business performance. What does matter, it turns out, is having a strong grasp of the basics. Without exception, companies that outperformed their industry peers excelled at

h t ll th f i t



what we call the four primary management practices – strategy, execution, culture, and structure.”

– “What Really Works” (Nohria, Joyce, Robertson), Harvard Business Review, July 2003, pp. 43

Strategic market-based planning

• Day 1: Laying the d k

• Day 3: Implementation G id ligroundwork

– Environmental scanning– Preparing for strategic

leadership– Strategy philosophies

• Day 2: Developing

Guidelines– Aligning the organization– Establishing connections– Managing change



y p gstrategy– Company evaluation– Strategic growth options



Strategy FrameworkMission, values &

visionInternal & external

Environmental Scan inputStrategic

leadership

Strategic goals

Market “fit”Industries, countries

& segments

Where to compete

Resources, competencies

Products, services& solutions

How to competeEnvironment



Value creation Value creation

Framework, policies & inspiration for implementation

through business plans

Stage one: Laying the groundworkLinda Gorchels


UW-Madison Executive [email protected]

(608) 441-7336



Laying the groundwork

1. Environmental scanning• Working through a 4-step process

2. Preparing for strategic leadership• Understanding how cultures affect change

3. Strategy philosophiesCoalescing different approaches



• Coalescing different approaches

One …

Environmental scanningg



http://www.youtube.com/watch?v=8jWujAmLjS4&feature=fvsthttp://www.albinoblacksheep.com/flash/epic



Environmental scanning process

• Scan: search primary and secondary data f l (i d ksources for external (industry, market,

economy, etc.) and internal (company) issues that might affect your company

• Monitor: track absolute and relative changes on an ongoing basis



• Forecast: predict future directions of change or window of opportunity

• Assess: evaluate strategy implications

SCAN

• A good starting point could be a traditional SWOT (strengths, weaknesses, opportunities & threats) analysis

• Strengths and weaknesses refer to internal variables O t iti d th t f t t l



• Opportunities and threats refer to external variables

• (See appendix for a SWOT primer)



Rate internal SW

• Look for competences, capabilities, resources and assets that satisfy the DIVEresources and assets that satisfy the DIVEcriteria:– Durable– Inimitable/non-substitutable– Valuable

E ploitable



– Exploitable

What competence or capability drives each of the following?

• Honda: engines

• 3M:

• Kimberly-Clark:

polymer chemistry adhesives

paper mills



be y C a

• Proctor & Gamble: consumer marketing



Canon

Understanding competencies

CanonOptics and lens grinding



Photo-lithography

Cameras Copiers

Source: Michel Robert, Strategy, Pure & Simple (NY: McGraw-Hill) pp. 78-82

Honda


Multilevel cylinder heads with self-adjusting valves

Power



Motorcycles Cars Lawn mowers

Power generation equipment




3M


Polymer chemistry

Coatings Adhesives

Overhead Floppy Post-it Electrical




Overhead transparencies

Video tapes

ppydisks

Compact disks

notes

Masking tape

tape

Sandpaper

Assessing a firm’s resources

Resource Example indicators*Financial resources Debt to equity ratio

Credit ratingPhysical resources Resale value

Scale of plants Technological resources Patents

R&D staff



Reputation Brand recognition Price premium

Human resources Qualifications Turnover rate

*See appendix



TIMES Reflection for external OT

• Technological (science IT innovation)• Technological (science, IT, innovation)

• Industry/competitive (general & specific)

• Market (defining relevant markets)

• Economic/environmental (macro & micro issues)



• Socio-cultural (demographic, social)

Technology analysis

• Describe technology, science & innovation i i d t d i i il i d t iin your industry and in similar industries. – Can technologies from other industries be

adapted?– Are novel applications possible?

• What technological changes are expected



g g por anticipated?



Technology’s dance with society

• Technology’s speed matches society’s• Technology s speed matches society s speed.– How are you? Good (80s) Great(90s) Busy (now)– Gift cards more popular than gifts.– Speed dating on the Internet– Energy drinks are a $5 billion category



– Energy drinks are a $5 billion category– Disney has 5-minute bedtime stories

Industry & competitive analysis

• Strategic competitors their competencies• Strategic competitors, their competencies, and their strategies– See appendix for example worksheets

• Key success factors• Changes in industry structure



g y– Porter’s Five Forces Model (see appendix)



Market analysis• Is your primary market stable, growing, or

declining?declining?• How might it change in the future?• What articulated or unarticulated needs

must you prepare for?• Have you saturated your existing market?



• What geographic opportunities are emerging?

• What are your most relevant markets?

Market statistics examples

• Segment characteristics• Size & projected growth rates• Market share (yours & the competition)• Profitability• Entry barriers



• Cost structure• Distribution systems



Economic & environmental

• What pending legislation might affect your future?

• Are there existing laws or requirements that pose opportunities or threats?

• What governmental and political changes might happen?



g pp– World affairs, politics, and public policy

• What environmental or sustainability issues should you consider?

Socio-cultural analysis

What social and cultural trends might impact

– lifestyles– values

– education– environmental

i

your customers, your employees, or your competitors?



– religion– leisure

issues– health issues



The generational continuum1945 1963 1979

SeniorsBoomers

Gen X



Gen X

Upstream business goals

• In addition to the SWOT, if the strategy is b i d f b i itbeing prepared for a business unit or a product line (as opposed to a corporate strategy), the scan should assess upstream business goals.

• Are your goals determined or affected by



Are your goals determined or affected by higher-level corporate, division or business unit goals?



Strategic goals should be linkedCorporate head officeCorporate

strategy

Division A Division B

HR

R&D

Finance

HR

R&D

Finance

Business strategy

Functional strategies



Production

Marketing/Sales

Production

Marketing/SalesContemporary Strategy Analysis, by Robert Grant, (Blackwell Publishers, 1998) p. 20.

MONITOR

• While the initial scan is a beginning step of t t i l i it i istrategic planning, monitoring is an

ongoing part of strategy implementation





FORECAST

• The intent of this step is to determine the b bilit d ti i f f t tprobability and timing of future events

– Which technologies will be disruptive?– When will patent expirations (either yours or

the competition) occur?– How quickly will markets transform due to



q ydemographic or other shifts?

ASSESS

• Try to determine– If the event or trend from the prior step

occurs, how significant will be the impact on your firm?

– How should the events and trends be prioritized?

– How might I build on strengths resolve



How might I build on strengths, resolve weaknesses, exploit opportunities and minimize threats?

• Need to obtain commitment and buy-in



Two …

Preparing for Strategic p g gLeadership



Strategic marketing leaders …

. . .must be domain spanners!p





What is the role of strategy?

• Strategy is the art and science of attaining t i bl titi d tsustainable competitive advantage

through the most appropriate utilization of resources and assets. It starts with an internal and external scan, then requires leadership in defining a company’s future



direction, making trade-offs, and structuring an implementation plan.

• Vision without action is a daydream.Action without vision is a nightmare.

• Japanese proverb





• Strategic leadership requires both vision and action. Leaders may need to be change agents.



• “If we could predict the future with certainty, it would mean that the future could not bewould mean that the future could not be changed. … Yet this is the main purpose of studying the future: to look at what may happen if present trends continue, decide if this is what is desirable, and if it’s not, work to change it. … The ability to see and create the future is the



yessence of leadership.”

• From literature of the World Future Society



Change agents are able to …

• Shape the vision• Determine and understand the need for

change– Gather market knowledge– Predict the future

• Demonstrate leadership commitment



Demonstrate leadership commitment– Establish strategy– Align structures, systems and incentives– Implement strategy

Leaders shape the vision

• Core values– Beliefs your firm’s members hold in common

• Mission– Defines why your firm exists

• Strategic vision– A description of the desired future state of your



– A description of the desired future state of your firm



Core values

• Are enduring principles that guide the “ lt ” f fi“culture” of a firm

• May be part of the mission statement or a separate pronouncement

• Generally link to your positioning and brand identify



brand identify

Example core values

Walt DisneyNo cynicismNurturing and promulgation of “wholesome American values”Creativity, dreams, and imaginationFanatical attention to consistency and detail



Fanatical attention to consistency and detailPreservation and control of the Disney magic



Example core values

SonySonyElevation of the Japanese culture and national statusBeing a pioneer -- not following others; doing the impossible



Encouraging individual ability and creativity

Example core values

NordstromNordstromService to the customer above all elseHard work and individual productivityNever being satisfiedExcellence in reputation; being part of

thi i l



something special



Mission

• Communicates the essence of your i ti t t k h ldorganization to your stakeholders

• Generally includes– A purpose statement (why your firm exists)– A business statement (what your firm does to

achieve its purpose)



achieve its purpose)• May also include the core values

Core purpose: examples

3M: To solve unsolved problems innovatively3M: To solve unsolved problems innovatively

Nike: To experience the emotion of competition, winning and crushing competitors

Sony: To experience the joy of advancing and applying technology for the benefit of the public



Source: Collins, James C., and Jerry I. Porras, “Building Your Company’s Vision”, Harvard Business Review, September-October 1996, p. 38.

public

Walt Disney: To make people happy



Mission statement -YMCA• The YMCA of San Francisco, based in

J d Ch i ti h it [ l ] k tJudeo-Christian heritage [values], seeks to enhance the lives of all people [purpose] through programs designed to develop spirit, mind and body [business].



Source: VolunteerMatch website, January 2008 (descriptors – values, purpose, business – added).

Dow Chemical, Inc.

MissionMission• To constantly improve what is essential

to human progress by mastering science and technology.

» Corporate website, February 2009





Dow’s Essential Elements



Source: Corporate website, Feb. 2009

OneAmerica Financial PartnersMission• The essence of the OneAmerica enterprise however• The essence of the OneAmerica enterprise, however,

is to help protect the future of our customers. We help individuals and businesses create and protect assets through trusted advisors.

Our Values• Being a mutual holding company organization allows

us to focus first on the needs of our companies’



us to focus first on the needs of our companies’ policyholders.

Corporate website, February 2009



Strategic vision

Strategic vision is the “mental picture” of what the company will be in the future. It is the answer to the questions:– Where is the company going?– What will it “look” like?– What will we do differently to attain

f ?



profitable competitive advantage?Martin Luther King, Jr. started his vision

statement with, “I have a dream …”

Strategic vision example

• Komatsu– Encircle Caterpillar

– Date Corporate Challenge Activities– 1960s Protect home market Licensing deals

Begin quality efforts Quality programs



– 1970s Build export markets Industrializing nations– late 70s Create new products Future and Frontiers

markets program



W.W. Grainger

Our Vision• To be the leader in the distribution of

maintenance, repair, and operating supplies and related information to commercial, industrial, contractor, and institutional customers.

• Corporate website January 2008



Corporate website, January 2008

Interface Inc.Vision• To be the first company that by its• To be the first company that, by its

deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits — by 2020 — and in



doing so we will become restorative through the power of influence.




DuPont

• Our vision is to be the world's most d i i tidynamic science company, creating sustainable solutions essential to a better, safer and healthier life for people everywhere.





American Physical Therapy Assoc.• By 2020, physical therapy will be provided by

physical therapists who are doctors of physicalphysical therapists who are doctors of physical therapy, recognized by consumers and other health care professionals as the practitioners of choice to whom consumers have direct access for the diagnosis of, interventions for, and prevention of impairments, functional limitations, and disabilities related to movement function



and disabilities related to movement, function, and health.

Association website, February 2009



Determine the need for change

• Marketing is charged with the task of i fl i d d i th t ill h linfluencing demand in a way that will help your firm achieve its objectives– Gather market knowledge – Predict the future



• Marketing leaders demonstrate leadership commitment.–Establish strategy–Align structures & incentives

Implement strategy



–Implement strategy



Establish strategy

• Build on firm’s core strengths & core b ibusiness

• Establish market-based goals that help accomplish firm goals– Which customers to target– Which competitors to target



Which competitors to target– What problems and opportunities to leverage– How/when to compete and collaborate

Align structures & measures

Strategic goals Tactical plans Operational activities

Marketing effectiveness

Sales Profitability Marketing mix

Performance standards Customer satisfaction

• Structural alignment with strategic customers

• Customer retention

• Profitability activity and

• Customer satisfaction index

• Timeliness of response



g

•Long-term brand equity

• Growth & profitabilitytrends

• Profitability, activity and productivity ratios

• Actual to budgeted performance

• Timeliness of response

• # calls per week



Strategy implementation

• People need to know– How is this change relevant to what I do?– What, specifically, should I do?– How will I be measured and what

consequences will I face?– What tools & support are available?



pp– What’s in it for me?

The purpose of strategy is to p p gyhelp individuals choose among

competing priorities.





Three …

Strategy Philosophies & Goalsgy p



Strategic Goals

• Leaders set strategic goals based on the environmental scan and on knowledge of theenvironmental scan and on knowledge of the mission, vision and values. Different “gurus” have presented different approaches as catalysts to this strategic thinking.– Growth from the core– Seeking competitive advantage



Seeking competitive advantage– Seeking untapped market space– Anticipating disruption



Growth From The Core• Develop strategies that strengthen and grow your core

business– Profit from the Core (Chris Zook)– Beyond the Core (Chris Zook)

• Move toward BHAGs that build on core ideologies and identity– Built to Last (James Collins & Jerry Porras)– The Soul of the Corporation (Hamid Bouchikhi & John Kimberly)

• Leverage core competencies



• Leverage core competencies– Competing for the Future (Gary Hamel & C.K. Prahalad)

Seeking Competitive Advantage

• Define the competitive structure of an i d t id tif th k f tindustry, identify the key success factors, and work to either change the structure in your favor or gain superiority in the key success factors– Competitive Strategy (Michael Porter)



p gy ( )– Market-Driven Strategy (George Day)



Seeking Untapped Marketspace

• Move away from the boundaries of ti titi d l k fcomparative competitiveness and look for

products and services to fulfill a yet unmet demand– Blue Ocean Strategy (W. Chan Kim & Renee

Mauborgne)



– MarketBusters (Rita Gunther McGrath & Ian C. MacMillan)

Anticipating Disruption

• This is another look at new marketspace, b t f th ti f ti tibut from the perspective of estimating when an emerging trend will take off, and building a strategy to take advantage of it– The Tipping Point (Malcolm Gladwell)– The Innovator’s Solution (Clayton Christensen



( y& Michael Raynor)



From Goals To Strategies

• After strategic thinking, leaders must move to strategic planning i e move from goalsto strategic planning, i.e., move from goals to strategies.

• Where to compete:– Target industries, accounts, countries, etc.

• How/when to compete:



– Focus on specific products, opportunities– Build specific competencies and skills– Choose appropriate timing

Laying the groundwork - summary

1. Environmental scanning• Working through a 4-step process

2. Preparing for strategic leadership• Understanding how cultures affect change

3. Strategy philosophiesCoalescing different approaches



• Coalescing different approaches

Strategic Market Based Planning

Business

executive education

executive education

kotter university of

marketbased strategy

strategy harvard press

years business unit

market dominance

years company