Marketing
Strategy Unplugged
by David Black
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Thinking inside the Box
by Nicholas Schreiber
Nicholas Schreiber is president of Tetra Pak Americas of Pully, Switzerland. He has taught international business at Goizueta and has served on the Goizueta Advisory Board. His company processes and packages liquid foods.
Let's think inside the box. The vertical axis in the box represents customer satisfaction, and the horizontal axis represents internal commitments such as efficiency drives.
The axes outline four quadrants-Ensuring the Future, Boomerang, Time Bomb, and Mine Field-plus a center section, No Man's Land.
Most companies prefer to operate in the quadrant Ensuring the Future. Actions that belong in the Ensuring the Future zone include:
- Successful innovation, both in products and services.
- Customer-focused re-engineering programs.
- Broad-based strategic management systems.
Unfortunately, companies often have competing initiatives that place them outside this winning quadrant.
The Boomerang quadrant represents shortsighted initiatives that deliver short-term bottom-line impact but jeopardize a company's long-term competitive positions. Examples include:
- Indiscriminate cost-cutting.
- Price umbrellas, where a company with a unique product or service sets prices so high that it allows competitors to sneak under the umbrella and gain a strong foothold with substitute or copycat products.
- Premature promotions or job rotations.
The Time Bomb quadrant encompasses actions that are unsustainable either because they are too costly or because they consume inordinate amounts of resources. Time Bomb actions, sooner or later, will blow up in the company's face unless resolved. Examples include:
- Dis-economies of scale. For example, to gain a competitive advantage in a certain region, a company may invest in a production facility that does not have the critical mass of business needed to ensure its own profitability. If it eventually closes down due to poor profitability, customer expectations will be dashed and the remedy will have been worse than the cure.
- Reckless customer financing, where a vendor that is substantially larger than its client takes financial risks that a bank would not take, such as extending financial assistance. The vendor gets the business, but if it has to take extreme and punitive measures to collect the loan, all customer goodwill is lost.
- Over-aggressive pricing, where a supplier decides on predatory pricing to get a business deal, only to hike the price once it is the vendor of choice. This is the reverse of price umbrellas and is certain to lead to enormous customer dissatisfaction.
The Mine Field is the worst quadrant. It's an area where both supplier and customers suffer as a consequence of misguided initiatives such as:
- Technology non-performance.
- Failed commercial strategies.
- Acquisitions gone sour.
The middle box, No Man's Land, is where we find a company's key initiatives in development but not yet fully implemented. This represents an opportunity as a risk. Examples include:
- Not-yet-proven technological
developments.
- Not-yet-proven commercial initiatives.
- Not-yet-proven information technology investments.
Thinking inside this box is a management framework. By increasing the awareness of the pitfalls that can arise from managing only one axis of the box, we can avoid certain initiatives that may benefit the company but inadvertently hurt customers and vice versa. By being aware of these pitfalls, we can release the power that comes from choosing actions and strategies that create win-wins in the marketplace.
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