Tilt: Shifting Your Strategy from Products to Customers

195 Pages·2013·0.9 MB·English

by  Niraj Dawar

Copyright
Copyright 2013 Niraj Dawar All rights reserved No part of this publication may
be reproduced, stored in or introduced into a retrieval system, or transmitted, in
any form, or by any means (electronic, mechanical, photocopying, recording, or
otherwise), without the prior permission of the publisher. Requests for
permission should be directed to [email protected], or mailed to
Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston,
Massachusetts 02163.
First eBook Edition: November 2013
ISBN: 978-1-4221-8717-3
Contents
Copyright
Preface
Introduction: Tilting Downstream
Part One Your Center of Gravity
1. Finding the New Locus of Competitive Advantage
2. Slashing Your Customers’ Costs and Risks
3. Seizing the Downstream Advantage
Part Two The Perch
Mapping Market Networks
4. Seeing New Value in Your Customers
5. Extracting Value from the Big Picture
Part Three The Deep Dive
The Competitive Playing Field Inside the Customer’s Mind
6. Scoping Out the Playing Field
7. Taking Control of Criteria of Purchase
8. Knowing Who Your Competitors Are
Part Four The Bottom Line
9. Busting Myths in the Marketplace Wars
10. Understanding Why Downstream Competitive Advantage Is Sustainable
11. Tilting Your Strategy and Organization
Notes
About the Author
Preface
Why do marketers get so little respect? The CEO wonders how marketers spend
their time; the chief financial officer (CFO) wonders how they spend the
company’s money; the sales folks think marketers are too conceptual, too
abstract, and not sufficiently focused on the immediate business; and what the
production and supply-chain folks think is not fit to print. The root of the
problem is that for a couple of decades now, marketing hasn’t been seen to be
delivering competitive advantage. Since the heyday of mass media and mass
brands, marketing’s strategic contribution has progressively diminished. The
function has become increasingly tactical, moving the needle on share points,
only to lose them within a quarter or two. Think of the reasons your company is
(or is not) reliably and consistently more profitable than its rivals in the industry.
How many of those reasons are marketing reasons?
And yet, there are signs of a marketing resurgence in some industries. The
new giants—Google, Amazon.com, Facebook, and Apple—are all marketing
companies: both their value proposition and their competitive advantage are
about customer information, and their success is underpinned by formidable
brands. Indeed, you could argue that having been through its hardware, software,
and Internet phases, Silicon Valley, that bellwether of the next frontier, is now in
its marketing phase. But the marketing renaissance is not limited to the
technology industry. Its effects are far-reaching and are redefining a wide range
of industries in all geographic areas. Business leaders everywhere are grappling
with rapidly commoditizing products and production and increasingly important
customer management activities.
This book is for C-level executives involved in setting the strategic direction
of a business. It is for CEOs who think they deserve to get a more strategic
contribution from marketing, for CFOs who think they can get more bang for
their marketing buck, and for marketing and brand managers who would like to
regain some respect in the organization by contributing to the building of its
sustainable competitive advantage.
Over the past twenty years, I have had the privilege of working with
management teams in organizations in a wide variety of industries, from start-
management teams in organizations in a wide variety of industries, from start-
ups to multinationals, in various parts of the world. Today, many of the
organizations are facing a new competitive landscape, where their traditional
sources of competitive advantage are being neutralized as the world becomes
flatter, and where new technologies rapidly erode product and production
advantages that formed their bulwark against competition for decades. This book
takes managers in these organizations back to basics, asking fundamental
questions such as, Why do your customers buy from you rather than from your
competitors? Answers to these questions reveal new opportunities to create both
value for customers and new sources of competitive advantage.
Most books are written with a lot of help from friends. This one is no
exception. In the preparation of this book, I have had the unwavering support of
my wife, Chantal, who is also my idea vetter, my first-draft critic, and an all-
around morale booster. I thank my sons for their patience as this book was being
written—we’ll go back to our canoeing and cycling trips soon.
I thank my colleagues at the Ivey Business School for conversations and draft
reviews, for their support and flexibility. In particular I thank Mark
Vandenbosch for his insights and incisive commentary. The dean, Carol
Stephenson; the associate deans Roderick White and Eric Morse; and the
director of the MBA program, Fraser Johnson, kindly gave me flexibility in
scheduling my teaching to allow me the time to work on this book. I am grateful
to my colleagues in the marketing area group for continual support.
My editor, Jeff Kehoe at Harvard Business Review Press, has a knack for
crystallizing feedback in a way that immediately makes the end product better,
and the editorial team at HBR Press holds manuscripts to the highest standard. It
is also a genuine pleasure working with my agent, Esmond Harmsworth, of
Zachary Schuster and Harmsworth. I am grateful for his insight into the
publishing world, his ability to cut through the clutter to get at what matters, and
his sense of humor.
Colleagues at INSEAD (in Fontainebleau and Singapore) kindly hosted me
during my sabbatical years. In particular, I thank the faculty of the marketing
area group for brilliant conversations over the years. My colleagues at Vlerick
(Belgium) kindly hosted me during my sabbatical when the idea for this book
was germinating, and in particular, I thank Philippe Haspeslagh, Steve Muylle,
Marion Debruyne, and Frank Goedertier for discussions we have had on the big
picture and cognitive competitive advantage. Thanks also to Flanders District of
Creativity for funding and to Livia Pijakova for research assistance on the big-
picture project, which fed into chapter 4.
I am grateful to John Bradley for ongoing discussions about the history of
marketing and for the joint manuscript we developed many years ago in A
Future History of Marketing. Dr. Neil Duggal provided support and insights that
strengthened the backbone of this book.
Thanks to PhD students Charan Bagga, Theodore Noseworthy, and Jodie
Whelan for conversations and their helpful comments on earlier drafts. I am
grateful to a group of close and supportive friends who acted as advance readers
for early chapters.
Courtney Hambides and Kierra Clemens kept various versions of various
drafts of this book organized, formatted, numbered, and accessible so that I
could find my way around them. Thank you.
And finally, to the managers at the companies where I led workshops,
conducted interviews, and participated in meetings: thank you for your openness,
suggestions, and other help. This book is for you.
Introduction
Tilting Downstream
“So, what business are you in?” is a classic cocktail party question to which
most of us have a quick and well-practiced answer. Over the years you, like me,
have probably heard many responses to the question, but in my own experience,
the most common invariably describe the product, or the production facilities:
“I’m in the business of PVC window frames,” “I work for a company that makes
risk management software,” or “We are a bank.” These concise, descriptive
responses reveal more than we realize about how the manager sees his or her
business and about its strategy.
Fifty years ago, in his seminal Harvard Business Review article “Marketing
Myopia,” Ted Levitt demonstrated the perils of too narrow a response to the
innocuous cocktail party question. Many railroad companies, he argued, were
driven out of business by upstart competition from new forms of transportation
(trucking on the new interstate highways, and airlines), because they failed to
recognize that railroad companies were in the transportation business, not merely
in the railway business. Today’s organizations are no less prone to the same
myopia, and Levitt’s insight is as applicable today as it was then. In recent years,
Eastman Kodak Company endured a long and difficult decline that culminated in
bankruptcy because, despite having invented digital photography, the company
failed to grasp or manage the market’s shift to the new technology. Levitt would
say that the company mistakenly saw itself as being in the film business rather
than in the imaging business. Similarly, Xerox got mired in the prosaic business
of document handling, when its access to customers and its trove of research
could have taken it to dominance in the information processing business, among
the fastest-growth industries of the past forty years. And file BlackBerry in the
category of “lessons not learned.” The company became so wedded to a product
feature—the physical keyboard—and overestimated its strength among
enterprise customers so much that it missed the shift to touch-screen
smartphones and lost its once-impregnable lead in the consumer market, and