john deere: critical skills for strategic marketing deere: critical skills for strategic marketing...

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© 2014 Dr. William Putsis

John Deere: Critical Skills for Strategic Marketing

“Innovation without a business case is just art” … S. Jobs

William Putsis, Professor of Marketing, Economics and Business Strategy,

Kenan-Flagler Business School, UNC Chapel Hill

Storytellers.

Haley’s Comet, Phil Rizzuto and

Michelangelo:

The importance of Prioritizing Strategically

Chestnut Hil l A SSOCI A TES


“So, what’s so different about today?”

This is the most exciting time in the history of the planet …

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Michelangelo. Da Vinci.

Vanderbilt. Rockefeller.


Jobs. Zuckerberg. Musk. Bezos. Brin. Schmidt. Gates.

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What’s so different about today?

A. Speed

B. Ubiquity

C. Mobility

D. Information access (e.g., MLS, GPS)

E. Convergence

“New Math” of today”

A + B + C + D + E = ex (Transformational Growth)



A. Speed

Just 4 years ago, RIM (now Blackberry) had a

higher market share of the smart phone market

than Apple and Samsung combined. Today, its

market share is about 2%. Such rapid change is

unprecedented.

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Speed

See March 2013 Harvard Business Review, “Big Bang Disruption”



B. Ubiquity

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C. Mobility



D. Information Access

Real estate commissions in the United States stood at 6% for over a century, surviving U.S. Supreme Court rulings and Department of Justice lawsuits. Until the Multiple Listing Service (MLS) opened up to the Internet. Now, companies like Redfin have dramatically changed the structure of the brokerage industry and are rebating a portion of what has now become a 5% commission back to buyers.

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E. Convergence



E. Convergence

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E. Convergence


The impact is pervasive …

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Google Project Glass


https://www.youtube.com/watch?v=9c6W4CCU9M4

Google Project Glass

https://www.youtube.com/watch?v=9c6W4CCU9M4

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Google Project Loon


Supporting a culture of innovation through smart, prudent risk taking …

What should we learn from these examples?

We can’t afford to stand still

Standing still today IS failure

The biggest risk is not innovating

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Sea Change in Behavioral Health Care as Well

1) Market consolidation

2) Service delivery consolidation

3) Integration inside and across the Value Chain

4) Doing less with more

5) Continued increase in focus on clinical outcomes due to the

Affordable Care Act

6) Care integration between primary care and behavioral health

care specialists


The Aero-Cab Station

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© 2014 Dr. William Putsis.

The Stirrup Cup


Aviation Police

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A House Rolling Through Countryside


Heating with Radium

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A 1. Rizzutoisms.

at the core … make it difficult to innovate away from the core …


A 2. No matter how big your ship …

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A 3. Haley’s Comet Phenomenon


Where Do We Need To Be

5-10 Years From Now?

Strategic Setting and

Future Market Pull

Where Can We Be Next Year?

Incrementalism

and Negotiation

TIME

GO

AL

What should we do?Where we

are now

TIME

GO

AL

And the next?…Where we

are now

Slide courtesy of The Futures Strategy Group ®

Staying One Step Ahead

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First key construct: “Core”?


CoreBusiness

Core Business: Set of products, capabilities,

customers, channels and geographies that defines

the essence of the company & fulfills its vision

statement and mission

What is “Core?”

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Degrees of Adjacency: How Hard Is It?

0

10

20

30

40%

Steps away from core

Odds of successSources: Bain & Co “Growth Strategy” prepared for Boeing, Feb 2004

Minimum

Maximum

Sucess Rate

1 1.5 2 2.5 to 3 3.5 to 4 4.5 to 5

33% 21% 16% 17% 10% 6%

PercentageBreakdown of Steps

Measuring distance from core, for every one not

present it is one step

• Level of shared customers

• Level of shared costs

• Level of shared channels

• Level of shared competitors

• Level of shared capabilities & technology

Primary


“Has the apple fallen

far enough from

the tree … ???”

Teke Home Exercise:

Adjacency Scorecard

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Innovating around your core requires a different,

disciplined approach in today’s business environment


So … let’s talk about developing and using a processfor innovating through strategic prioritization.

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Fundamentals, fundamentals, fundamentals


5. Tactics

4. Incentive Alignment

3. Segmentation – Pivot to Tactics

2. Value Chain and Strategic Control Points

1. External Business Environment, Market Assessment, Growth Opportunities

Think of the process from the bottom up:

Strategy

Tactics

The rationale is to prioritize at

every step … “Ruthlessly

Prioritize”

http://www.competesmarternotharder.com/

http://competesmarternotharder.wordpress.com/

http://www.competesmarternotharder.com/

http://competesmarternotharder.wordpress.com/

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External business environment

Overall Market Assessment

Portfolio analysis

Core and adjacent markets

Value chain / Strategic control points

Vertical Incentive Alignment

Segmentation

Value Proposition

Strategic Considerations and Financial Assessment and Due Diligence

Points in Positioning: Value Proposition

Points in Time: Offering Timing

Points in Value: Pricing principles and Conjoint Analysis

Points of Access: Aligning to Customer Needs

Points of Touch: Integrated communications

Choosing which part

of market opportunity

space to compete

“Pivot” – which

customers with

which offerings

Go to Market

(GTM)

Tactics

Logical Flow of Strategic Tools

(“Innovating in the core”)


Inside the box, we need a process …

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Reinventing Business by Owning the Value Chain


“If you have no material

product or service

differentiation, no strategic

advantage in the

value chain, no

opportunistic control point

advantages, you’re toast.”

W Putsis, IEMA, Barcelona

Value Chain and Strategic Control Points

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What happens if we don’t – market forces are at work

Time Warner TDS Division

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Time Inc. Publishing

Magazine Group:

30 + magazines

In the US, accounts for 21% of total consumer magazine ad revenue

Ranks first in ad pages and ad revenues


Time Inc. Publishing’s “Threat #1”:

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Time Inc. Publishing’s “Threat #2”:


Time Inc. # 1 Publisher Publisher

Distributor

Wholesaler

Retailer

Time Distribution Services (‘TDS’) services Time Inc., Meredith and Condé Nast Warner Publisher Services (‘WPS’) services third-party clients, e.g. Petersen, Ziff-Davis

Five geographically concentrated players have 30% of a fragmented market:•Anderson•News Group Unimag•Charles Levy•Hudson

Wal-Mart, Safeway, Kroger and other major chains have 52% market share

4%

56%

20%

20%

Industry in 1995

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Time Inc. # 1 Publisher Publisher

Distributor

Wholesaler

Retailer

TDS services Time Inc., Meredithand Martha Stewart WPS services third-party clients,e.g. Reader’s Digest

Four major players represent90% of the market:AndersonNews GroupLevy, Hudson

Wal-mart, Safeway, Kroger,and other major retailers are taking increasing market share(over 60%) and squeezing margin

53% 56%

2002 1995

4% 4%

14% 20%

29% 20%

Industry in 2002


Control Points

A Strategic Control Point provides the potential for sustainable competitive advantage and pricing power via areas of the value chain that has limited supply or capabilities

“Big Item #1 – The “Stick”

Strategic Use of the Value chain

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A Value Chain reveals potential elements of differentiation between companies and their product offerings

“If you have no material product

or service differentiation, no

strategic advantage in the

value chain, no opportunistic

control point advantages,

you’re toast.”

W Putsis, IEMA, Barcelona

Strategic Use of the Value chain – The “Stick”

The Story of Minnetonka and SoftSoap®


Potential Sources of Strategic Control

Product-Based

Sources

Internal R&D investments

(creates IP)

Lowest production cost

(manufacturing)

Best value systems cost

Lowest lifecycle cost

(designed in)

Family-based systems with

common elements

True performance based

logistics (PBL)

Customer-Based

Sources

Imbedded personnel

with customer

Early research

partnerships

Knowledge-Based

Sources

Integrated modelling, test

and simulation

Operations analysis

PMBPs (process patents,

risk management, budget

management, supplier

management)

LEAN manufacturing

Integration skills

(requirements

management, technology

development/ selection/

insertion, product lifecycle

management, configuration

management)

Resource-Based

Sources

Patents / procedures

Contract to produce/

installed base of platforms

(drives sole source

support contracts)

Ability to serve the

customer anywhere

including theatre of war

Large factory, machinery

Skilled Workforce


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A Case Study - The Story of Captain Jepp


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Adding Competency Gap Analysis


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Nightmare versus Dream Scenarios

• Dream Scenario: You have “green” capabilities in all the areas where there are points of strategic control in the market and your competitors are all “red” in these areas.

• Nightmare Scenario: You have “red” capabilities in all the areas where there are points of strategic control in the market and your competitors are all “green” in these areas.

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At Home Exercise:Value Chain of Your Business Unit

Individually

• Using the Value Chain discussed earlier, create a “Capabilities and Gap Analysis” (however cursory it may be at this point) for your part of the business.

• Do you have capabilities in the areas of high strategic control? Are they better or worse than competitors?

• On the scale below, where 10 means you own the strategic control point and where 0 means either there is no point of control or someone else owns it, place an X below on your place (use your judgment):

0 5 10


Why all of this matters …

• Cornelius Vanderbilt and the Hudson River Bridge

• Rockefeller’s pipeline

• Rockefeller’s attempt to stop Tesla, Edison and electricity

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✔ External business environment

✔ Overall Market Assessment

✔ Portfolio analysis

✔ Core and adjacent markets

✔ Value chain / Strategic control points


Segmentation

Value Proposition








Choosing which part


space to compete


customers with

which offerings

Go to Market

(GTM)

Tactics


“The art of being wise is the art of knowing what to overlook.”

William James, Philosopher 1842-1910

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BasicsFinally, on the importance of being customer centric


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Understanding your customer –

Latent needs and salient differentiators


Empathy: the ability to understand and share the

feelings (and thoughts) of others.

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Innovation and Empathy


Innovation and Empathy

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Transformation


“If I’d asked my customers what

they wanted, they’d have said

a faster horse.”-Henry Ford

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“Big Item #2” – The “Carrot”Incentive Alignment


P&G and Incentive Alignment – The “Carrot”(what’s new about today …)

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P&G and Incentive Alignment(what’s new about today …)

Asset Specificity – a joint investment, often

well short of a full-blown merger or

acquisition, unique to the parties at hand,

that aligns the incentives of the parties to

the investment.


In Industry:

P&G / Walmart

Amazon

Anheuser Busch distribution

“Siemens One”

John Deere:

•Parts management

•Dealer conflict

Aligning Incentives and “Asset Specificity”

(It’s all about the incentives)

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Exercise:Value Chain / Vertical Incentive Alignment Table

On the scale below, where 10 means all external incentives are aligned

with yours and where 0 means there is no external incentive alignment,

place an X below on your organization’s place (use your judgment):

0 5 10


Research on publically traded firms in over 25

industries has suggested a “Carrot” and a “Stick”

approach:

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The Stick: “Strategic Control Points”

The Carrot: “Vertically Aligned Incentives”


• 34% (R2) of net income is explained by Strategic Control (SC) and Vertical Alignment

(VA), with SC most important

• 41% of share price change 2009 – 2013 is explained by SC, VA and net income

• SC from 3 to 8, for example, would have increased share price growth by 35%.

• BL: Earnings dominated by SC, not VA; both matter for net income; 41% of share price

change is explained by these three items.

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The “Bottom Line” – Life in 2014 and Beyond



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Do everything right, care with all of

your heart for your patients, friends

and colleagues, work 24/7/365 with

every fiber of your being and …

if someone else controls key parts

of the value chain in a market that is

evolving and consolidating and you

don’t focus on what was discussed

here, it all may be for naught, you’re

likely not to have an organization

left to run …

The importance of

“Innovating In the Core”



External business environment

Overall Market Assessment

Portfolio analysis

Core and adjacent markets

Value chain / Strategic control points


Segmentation

Value Proposition







Choosing which part


space to compete


customers with

which offerings

Go to Market

(GTM)

Tactics


(“Innovating in the core”)

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Conclusions

“Thoughtful questions are the sign of a bright, inquisitive mind …”

…. Shep Hill, President Boeing International

Any questions????

Discussion question:

What does all that we’ve discussed

mean for you?


John Deere: Critical Skills for Strategic Marketing

“Innovation without a business case is just art” … S. Jobs

William Putsis, Professor of Marketing, Economics and Business Strategy,

Kenan-Flagler Business School, UNC Chapel Hill

Storytellers.

Haley’s Comet, Phil Rizzuto and

Michelangelo:

The importance of Prioritizing Strategically

Chestnut Hil l A SSOCI A TES

john deere: critical skills for strategic marketing deere: critical skills for strategic marketing...

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