Tagged by: Strategy

Embracing Market Disruptions – the End of TV as We Know It

Market Disruptions Strategy

Many products, especially technology products, are marketed as revolutionary or game-changing. Most people know better than to trust marketers at face value on claims like these.

Disruptions to the market could be defined as those who alter the balance of an industry between supplies, consumers, existing and new competitors and alternatives – Porter’s five forces. These changes alter the industry’s profitability, growth rates and expectations for future growth.

Examples of true disruptions include when streaming TV and movies over the Internet (Netflix, Hulu) became a viable alternative to in-store rentals (RIP, Blockbuster) or when computer components enabled smaller companies (Dell) to compete at lower costs than industry leaders (IBM, HP).

Market leadership is not powerful enough to stop market disruptions

In the majority of cases, the new technology was available to industry leaders who chose to disregard it as a fad or inferior to their existing technology. There were clear signals of the market disruption, which leaders chose to ignore.

Sony ignored the digital music revolution, allowing Apple to dominate the market with the iPod and iTunes. Sony had everything to win: the company invented portable music with the Walkman a few decades ago. Sony owns movie and music publishers and distributors. Sony produces consumer electronics, computers, and mobile phones. The company’s mission is to innovate around content to deliver new experiences. And yet, Sony chose not to participate in the disruption.

Many products, especially technology products, are marketed as revolutionary or game-changing. Most people know better t...

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What is Growth Hacking and What Can Good Marketers Learn from It?

Growth Hacking is Good Marketing

The latest buzz in startups is Growth Hacking. It sounds like some secret formula to grow companies to billions in valuation. But what is growth Hacking? What does it mean for marketers and for businesses? Is it Marketing 2.0 (or 3.0 or whatever version we are on +1)?

I have found the definitions by those who created the term to be inaccurate or of little value.  At first glance, it could appear that growth hacking is a marketing buzzword about marketing created by non-marketers.

After taking a closer look and reading all I could about it, I found that in trying to learn from it, a pure definition would not be as valuable as an observation of Gowth Hacking characteristics are:

  • Typically found in early stage startups – with no formal marketing teams or budget
  • Where marketing is performed by engineers or non-career marketers
  • That uses smart, cheap and unconventional methods to grow the business
  • With a strong focus on analytics, metrics, virality and scalability

Advocates of the term call out DropBox, Twitter and even Hotmail as success stories that prove the value of growth hacking. This view is somewhat misleading as there are a hundred startups following growth hacking techniques that won’t survive to their next round of financing. Which only proves there is no secret formula or buzzword that guarantees success.

The only guarantee of success is to have a great strategy, a great product, a great team, and great execution.  But let’s focus on what marketers can learn from growth hackers:

The latest buzz in startups is Growth Hacking. It sounds like some secret formula to grow companies to billions in valua...

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12 Key Business Lessons from Steve Jobs

12 Business Lessons from Steve Jobs

How much can we learn from Steve on Innovation, Marketing and Business Strategy?

A few days ago I stumbled on this video where Guy Kawasaki shared 12 lessons he learned from Steve Jobs. Guy worked with Steve in the early days of the Mac. This presentation was delivered a few hours after Steve passed away. It is been viewed almost a half a million times, but it is 47 minutes long. I thought I should share a summary from my notes:

  1. Experts” are clueless – There are many people who will claim to be gurus and experts. Don’t trust them. They are more often mistaken.
  2. Customers cannot tell you want they need –” Back in 1984 they would have asked for a faster, cheaper Apple II (not a Mac). The day you hear Apple is using focus groups to create future products, that’s the day to short the Apple stock”. For more, here is a post on Steve Job’s Genius Ability to Innovate.
  3. The biggest challenges beget the best work – If you are going to change the world, you need to work on challenges no one else has solved before.
  4. Design matters. “Design is the product.” Especially for Apple, but true for more and more industries today. Another post on the importance of design.
  5. Use big graphics and big font in your presentations. Jobs was a master presenter. His slides make bold statements and don’t compete for attention with what he is saying.
  6. Jump curves, not better sameness – What Guy means is that Steve was not interested in incremental improvements, but on disruptions that completely change the game, Guy uses the example of the change from ice factories to having ice available in your refrigerator.
  7. It either works or does not work – “Don’t worship religions and fads. We did not care if it was ‘open’ or ‘closed’ only that it worked.”
  8. Value is different than Price. I could not agree more. Here are a few posts on the topic.
  9. Hire A players exclusively . A players hire A players. B players hire C players. As Jim Collins wrote: the most important thing is people – ‘who is on the bus’.
  10. Real CEOs can demo. Meaning executives need to be users of the products they sell, they need to be competent and demonstrate their passion.
  11. Entrepreneurs ship, not slip. Steve pushed his team to deliver on time. He did not wait for a perfect product (the first iPhone had many limitations) but it was developed in record time. Then there is time for continuous improvement.
  12. Somethings need to be believed to be seen. “If you wait for proof it will never happen.” This is so true

If you want to watch the entire video, you will find it here.

Guy Kawasaki Lessons from Steve Jobs

How much can we learn from Steve on Innovation, Marketing and Business Strategy? A few days ago I stumbled on this video...

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Innovation – How Silvercar is Disrupting the Car Rental Business

Disruptive Innovation Example

It is a cycle we see too often: companies grow successful; an industry matures adopting many common practices, some good and some bad. Then these companies get complacent and fall asleep at the wheel. They stop innovating and often try to take advantage of consumers because of their position. And by doing so, they and create an opportunity for new entrants to disrupt the market.

It is easy to point at history and study how companies that were market leaders fell in this trap: Blockbuster, Motorola, Circuit City and Radio Shack are good examples. It is a lot harder to predict which markets or companies will be disrupted. But it is much more interesting to observe when it is actually happening in front of us.

This week I witnessed disruption in the rental car industry. I traveled to Dallas for a day and decided to give Silvercar a try. I am glad I did. How is the Silvercar experience better than the established companies who are asleep at the wheel? Let me recap my experience:

It is a cycle we see too often: companies grow successful; an industry matures adopting many common practices, some good...

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Marketing Should be the Value Engine of your Company

Marketing the Value Engine of Your Company

This post originally appeared as a guest contribution in the Blog for the Austin chapter fo the American Marketing Organization

Peter Drucker, the father of modern business thinking, said that only marketing an innovation create value – everything else is basically overhead. He also said that marketing is the distinguishing function of an organization. Quite an endorsement about the Marketing function – but also a great responsibility.

In contrast, many people consider marketing to be deceptive, superfluous and buzz-wordy. Unfortunately, some marketing is one or all three of these. Unfortunately, marketers rank right next to used car salesmen in terms of reputation and trust. Interesting dichotomy.

What other teams in your company think about the marketing department: is it creating value for the company or spending money on funny ads? Maybe more importantly, we should ask ourselves, was Drucker wrong?

This post originally appeared as a guest contribution in the Blog for the Austin chapter fo the American Marketing Organ...

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Strategy or Tactics? It’s a Trick question!

Strategy and Tactics

You may have heard the question many times:

What is more important, Strategy or Tactics?

It’s a trick question. It assumes you can have without the other when in fact, the answer is that what is more important is the alignment between strategy and tactics:

Strategy should be based in  your tactical ability to execute (which includes your core competency, as the thing you can execute on better than anyone else) and tactics should support the  strategy

What is really important about this point of view is that it is not uncommon to find a disconnect between strategy an tactics in many companies:

  • The strategy is unclear for the teams executing, or
  • While the strategy is clear, how it should impact and guide tactical work for each member executing is unclear
  • Strategies are developed in a vacuum by executives that are not connected to the front lines, or worse, by top-dollar consulting companies that bring junior MBAs to craft a strategy with no real context of the business

Part of the problem is that there are very few people who can span both: who can think strategically but can also guide (and roll up their sleeves) to execute. Employees who can bridge strategy and tactics can add incredible value to an organization, when employed properly.

How do you do that? The first step is to take a dose of reality, we need to be self-aware of how strategic we really are. Most marketers consider themselves strategic, but do we even know what that means? Here are some questions to help you assess your strategic ability:

  • Do you understand the fundamental metrics of your company? Have you read the latest quarterly report and do you understand the fundamentals, and how marketing can influence the key metrics that influence shareholder value?
  • Do you understand how your company generates profits, cash and customers?
  • Do you understand the medium-term strategy for your competition? Have you reviewed their IR presentations?
  • Do you understand your core competency as a company? What are the things your company is really good at and which ones you should avoid?
  • Do you understand your customers, how they are evolving and how their needs and purchase behaviors are evolving over time? What is the gap between you and your customer expectations and what you deliver today?
  • Have you modeled the market and competitive landscape, using tools like Porter’s five forces or a simple SWOT model?  and, if you have done this consistently, have you been able to predict market evolution?
  • Do you know exactly how your marketing tactics and the work you are doing today contribute to the long-term success of your company?

These questions are not perfect or comprehensive, they are a start.

You may have heard the question many times: What is more important, Strategy or Tactics? It's a trick question. It assum...

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Microsoft’s Missed Opportunity to Take a Leap in the Tablet Market

When Microsoft announced the Surface there was a lot of expectation of the market. Since I got mine, almost every time I send an email with the signature “Sent from my Surface RT” or every time I use it in a group setting, I get asked about it – they have the market’s attention, or at least curiosity.

The device is not perfect. No device is. Even the iPad 4 has its own share of limitations and bugs. I love mine and I think it is a much more complete and usable device than the iPad. But this post is not about my opinion aout the device, which you can read here on Quora. My observation is that every Surface user I have heard from has generally the same reaction: “Compared to the Surface, the iPad is a toy.” or “Since I got my Surface, my iPad is in a drawer”. The point is not to say the device is better – every customer has to make that decision on its own. The point is that Microsoft has a real fighting chance.

The device launched just in time for the Holiday season. It still did OK, in my opinion, selling a million units in its launch month against 14 million units sold by Apple. Yet the opporuntity was much larger. The problem (or a problem) is that a 32Gb iPad costs exactly the same, $499. This forces buyers to make a concious decision of buying the Surface versus the iPad. Here is the opportunity:

Copyright(C) 2013 Gerardo A. DadaWhat would have happened it Microsoft had launched the Surface at a price of $275?

There would be no comparison against an iPad at $499. It would make the competitive decision much easier for customers who were not already sold on iPad. A large chunk of the market made of people who don’t want to spend $499 for a tablet wuld probably jump in. It would be a no-brainer compared to a 16Gb iPad mini at $329.

At $275. the Surface would certainly be a better buy than the Kindle HD, which sells for $299, and was selling at a rate of a million units per week at the peak of the holiday season.

The economics make sense

The cost to manufacture a Surface RT with 32Gb of memory, according to iSupply, is $271. Let’s assume Microsoft sells 5 million Surfaces instead of one million, just for the sake of the conversation. If we take $224. of profit from each of these four million units, that would have decreased $896 million in profits for Microsoft.But in reality it only sold a million, so te actual los in profits would only be $224 million.

That would have taken its operating income from $7.77 billion for Q3 2012 to ‘only’ $7.55 billion. hardly a dent, and well above the $6.6B from the same quarter last year. More importantly, it would have added $1.1 billion in extra revenue to bring the quarter from $21.46B to $22.56B, avoiding a miss of expectations (see stock price for the impact of that).

My point: reducing the price of the Surface to $275. would have had virtually no impact to profits and would have had a large impact on revenue. Microsoft could have opted to make this a promotional, limited-time offer, creating a sense of urgency for consumers.

Even at the $275. price, Microsoft would have a profit opportunity in the lucrative accesories market. An installed base of millions of devices creates a large opporutnity to sell keyboards, cases, mice, applications and other accesories. they could have charged a nominal monthly fee for Office.

Microsoft’s opportunity to earn a solid footing in the post-PC era is surely worth more than a 3.5% decrease in profits.

Besides the neglible impact to profits, the only other downside I can think of is the impact to OEM partners. This is an important point, but one on which Microsoft should have decided on when they decided to enter the hardware business. Would Acer and Dell be upset our would they have been thankful for the creation of a market, acceleration of the application base and pressure to be more competitive?. Yet, the upside for Microsoft could be very big:

  • $1.1 Billion in increased revenue for the quarter, bringing revenue not only in line with expectations, but probably exceeding it.
  • Creating a product line with $4 Billion in revenue, esentially overnigt would be an incredible business success by any measure.
  • The stock is near the bottom of its 52 month range at $27.55 as I write this. I can’ speculate the actual impact to the stock price, but I think it is reasonably to expect a jump if microsoft had sold 5 million Surfaces. Every dollar increase in stock price creates $8.3 billion in stockhohlder value. The stock has hovered around  $30 for a decade despite very large increases in sale and profits. You could argue an event like this could generate positive momentum.
  • Microsoft would have earned significant economies of scale, bringng the costs down for them and OEM partners, providing a long-term economic advantage.
  • It would have eliminated any doubts of the consumer adoption of Windows 8 which would have lifted the entire ecosytem incluidng sales of Windows Phone and PCs, resulting in a benefit to OEM and accelerated porting of applciations to Windows 8. Maybe we would have Instagram on Win 8 by now.
  • Apple would have sold less iPads. Let’s assume out of the 4 million incremental units two come from would-be Apple buyers. Microsoft is a very competitive company, this would not be an insignificant win.
  • Imagine the impact of the news “Apple sells only 12 million iPads in Q4, Microsoft sells 5 million in its first quarter”. The brand, PR, employee morale and talent acquisition value of this statement is woth much more then a 3.5% decrease in profits. Imagine the Businesweek cover story “Microsoft is Back”.

When Microsoft priced the Surface at $499 I was very suprised, knowing Steve Ballmer is hyper competitive and a long-term thinker that has demonstrated a discipline to invest in markets for the long term.  Microsoft has a lot of smart people, I am sure they spent considerable energy in their pricing startegy.

I believe the Surface will be successful anyway. The 128Gb Pro model sold out in hours. A million units in their first quarter is not bad, even compared to the iPad’s 3.3 million in its first quarter. But I can’t avoid thinking of what could have happened with a more agressive pricing strategy. We probably would be in an alternative future. your thoughts?

For the record, I admire Steve Jobs and Apple and have blogged about it a couple times.

Disclosure: I worked for Microsoft from 2004 to 2008, I am no longer affiliated with the company but still own some stock.  As with all post in this blog, this post reflects my personal opinion. I own a Dell PC, a Surface, a Lumia 920 and a Zune. We have an iPhone, multiple iPods and an iPad at home. I have used Macs since the 1980s and sold a few of them when I was in the digital imaging business.

When Microsoft announced the Surface there was a lot of expectation of the market. Since I got mine, almost every time I...

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Establishing a Premium Position in the Market

Premium Products

Today (February 2012) I had the opportunity to present at the American Marketing Association Austin luncheon lunch on the topic of how to establish a premium position in the marketplace.

The key points form the presentation:

  1. Building a premium product is about differentiating by focusing on a segment of customers who are willing to pay more for a product that serves them better. Premium products are created by value.
  2. People buy emotionally – then justify their decisions rationally
  3. People buy experiences
  4. Price communicates value
  5. Packaging communicates value
  6. Happy, empowered employees create value

Here are my slides:

Today (February 2012) I had the opportunity to present at the American Marketing Association Austin luncheon lunch on th...

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A Pricing Lesson from the Concorde

Pricing lesson from the Concorde

Are you pricing your products right or are you leaving money on the table?

The Concorde was one of the most innovative machines ever built. The first and only supersonic commercial aircraft capable of flying at twice the speed of sound is also one of the most beautiful machines ever built. The Concorde story provides an interesting lesson on pricing.

During the first 6 years of operation, the fantastic Concorde lost money for British Airways. Losses were so bad, in 1982 BA’s boss Sir John King gave the responsibilities of the newly created Concorde division to  Captain Brian Walpole and gave him two years to turn Concorde losses into profits. If he failed, BA would terminate operations, shutting down Concorde for good.

The COncorde team decided to do some market research. They asked businessmen how much they thought a Concorde ticket cost. The answer, “Most of them didn’t know. It was their secretaries or travel companies doing the bookings. When they were asked to guess, because they were senior, very important people, they all guessed that the fare was higher. ” – explained Captain Jock Lowe, Concorde resource & Planning Manager.

This insight led to a new pricing strategy. Captain Lowe described “So very simply, we said, we’ll charge them what they think they are paying. And so we put the fares up”.  There was a discrepancy between what the company was charging and the value customers saw in the product. Have you asked your customers how valuable is your product or service to them?

Concorde ticket prices were doubled to over $7,000,  one way, in today’s prices. As a result, Concorde was repositioned to provide a super-elite class for bankers, the rich, and the famous. Concorde became the place to be seen.

Despite the high price, sales were very strong.  For one particular day, half the tickets for its first fare-paying London-New York flight were sold out in the first two hours of booking, (source).

Concorde started making money. Lots of it. “We made about $500 million pounds in net, clear profit.”. Estimates point to $50 million pounds in profit per year. That’s significant, even for a company the size of BA.

Many companies build their pricing strategies based on cost + margin. Often, there is a predetermined margin based on an overall pricing strategy or on a corporate profitability target. The story of Concorde sows us the power of market-based pricing and the importance of understanding the true value of the products and services your company offers. Do you know what is the price elasticity of your products?

Source: “Concorde, Flying Supersonic” – Smithsonian TV, 2010

Concorde photo courtesy Flickr user Howard N2GOT – Creative Commons

Are you pricing your products right or are you leaving money on the table? The Concorde was one of the most innovative m...

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How can CMOs Build an Effective Social Media Strategy

This post was first published in the American Marketing Association blog.

Bazaarvoice and the CMO club recently published a report about how CMOs think about social media and how they are finding ROI (or not).  You will find a number of stats and details in the report itself. I want to share my own perspective on what I think are the implications made evident by the research.Crossroads

Social is Important. Every marketer knows it. Customers have shifted the way they buy. Social is here to stay, there is no question about it. Every CMO knows they need to have a social marketing plan. This should not be a surprise to anyone, the report simply confirms it.

Measuring results is harder than expected. The report shows social media is harder to measure than what CMOs expected. By looking at last year’s report, it is clear most of them thought by now their social marketing efforts would have matured enough to have a good measurement framework. Today, most marketers are measuring engagement, not actual business impact. Many are still chasing shiny objects. Consider how many companies are trying to grow their Facebook fan pages without a clear reason why they are doing it or a strategy to convert fans into business value.

Social Marketing is too tactical. Without an indication of results, CMOs can’t make investment decisions on social media. As a result, most companies are still in experimentation mode. Only two years ago, social marketing meant blogs and wikis. Last year it has been about Facebook and Twitter. Now GroupOn (which is not even social, IMHO) and Foursquare join the category of shiny objects. Small and large businesses are jumping on the GroupOn mania, getting 25 cents on the dollar, often without thinking through a strategy.

Sadly, without a framework for results, CMOs have a hard time deciding how much to invest in social. According to research by Altimeter, the average large company is investing only $830K per year in social marketing. This budget can cover salaries for a team of three people, maybe a community platform to run support forums and a listening platform.  The amount of resources, budget and results in social marketing is insignificant relative to overall marketing efforts. The danger is that a CMO hires a social strategist, two people to “man their Facebook and Twitter pages”, start a blog and ‘check’ – they have a social strategy, they can move on to more important stuff. 

CMOs know they need to shift their investments from traditional advertising to social and digital efforts, but they can’t do it blindly. Even if a CMO wanted to shift $20 million dollars to social, they would have a very hard time finding where to spend it.

Reading the results from the research can be heartbreaking. The obvious question is: How to build an effective social strategy? There is no easy answer, however, I want to offer four ideas to help you build social into your marketing strategy:

  1. Social is not a Strategy. Eventually, the word social will go away. Humans are inherently social, most human activity is social. We don’t talk about digital computers or electronic calculators, it is assumed. Companies are in business to make money. According to management guru Peter Drucker, the only valid business purpose is to create a customer. That is a paying customer. Social is not a goal, it is a means to an end. Should you experiment with social? Sure. What I am suggesting is to always think about how each social marketing activity will support your business goals.
  2. Social as a marketing tool. Social tools can help marketing, innovation, customer support and other functions. But this is a blog for marketers. Yesterday I was having lunch with a friend who asked me if he should hire a social media strategist. To his surprise, I said ‘No’. I suggested he should hire a marketer that understands how social media can support the organization’s marketing goals. A marketer that understands how social marketing efforts can work together with ‘traditional’ marketing efforts to create more customers. To make money.
  3. Smart social metrics. In any business functions leading indicators are important. For years, online marketers have measured page views as a leading indicator for customer engagement that then can be converted into paying customers. In the same way that email newsletter subscribers are an engagement metric that companies can leverage to do permission marketing to drive sales, the number of Facebook fans are also an interesting metric that enables permission marketing to drive sales. But you have to think through the experience: from leading indicator to business impact. Build a model that uses social media tools, to drive engagement and activity that then impacts business goals. Take a look at the model in this slideshare from two years ago, and at a more evolved model in Jeremiah Owyang’s Social Media ROI Pyramid
  4. Social drives Advocacy. Social Marketing can be used by marketers in many ways: to build confidence in customers, to learn from customers and monitor your brand to make your organization more customer centric, etc. If you are looking for a quick win, I suggest consider using social media to drive advocacy: tap into Facebook , customer reviews and other forms of social media to empower your customers to sell for you. Word of Mouth is nothing new, it has been around forever. Social Media online makes it easy for happy to customers to drive advocacy and makes it scalable – and often measurable – for marketers.

Good luck with your social marketing efforts. Have fun. Be authentic. Experiment. And learn.

This post was first published in the American Marketing Association blog. Bazaarvoice and the CMO club recently publishe...

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