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Sales,
Marketing, & Entrepreneurship in Business Markets |
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Underdogs Achieve When Strategy Aligns with Market Needs by Tim Smith, PhD, March 2006 It is natural to expect that those who won in prior battles will continue to win in future ones, but underdogs can upset the structure when they focus on the right strategy. In 2005, Boeing, Motorola, and AMD each reversed their downward decline or questionable market position to achieve strong performance. How they achieved their wins provides insights for all involved in creating and implementing corporate strategy. Boeing To achieve their turnaround, Boeing focused product development on meeting the needs of the financers of aircraft purchasers and revamped their sale force. The financers of aircraft place a higher priority on the total costs of ownership than on the initial purchase price. To address their needs, Boeing designed their aircraft to utilize less fuel, improve flexibility, and increase reliability.
To improve their sales force, they removed layers of bureaucracy and pushed decision making down in the organization. These changes were accompanied by a new approach to sales and a new sales methodology. The results include a shortened sales cycle and a sales force that is more able to meet customer needs. While Boeing focuses on the needs of the people who make the aircraft purchasing decisions, Airbus demonstrated misguided lethargy. Airbus points to the research that indicates that passengers feel safer in aircraft with 4 engines rather than 2, but passengers don’t purchase aircraft. Airbus routinely prices their product lower than Boeing, but discounts in the initial purchase price don’t imply that a customer captures greater value. And, to top it off, Henri Courpron, President of Airbus’s North American Subsidiary responded with complacency to the situation by stating “In a duopoly, you are going to loose to your competitor about half the time.” Motorola To achieve this turnaround, Motorola ditched distracting businesses and increased their focus on cellphones. Their semiconductor business was spun-out into Freescale and off other non-core businesses were sold. Prior concerns such as the hypercompetitive lifecycles associated with chipsets became secondary to new concerns such as product design and consumer marketing. Out went the engineering focus. In went the consumer focus, including channels, partnerships, and marketing. With their renewed focus, Motorola developed products and marketing aimed at attracting trendsetters. Their Razr became the epitome of coolness and the “Hello Moto” branding campaign entered into a buzz marketing virtuous cycle. Currently, Motorola is aiming to top their prior success with the next generation Pebl and Slivr. While Motorola demonstrated their design ability, their main competitor, Nokia, floundered in an inadequate attempt to enter into the mobile gaming market. The N-Gage paled in the face of fierce competitors in the mobile gaming market such as Nintendo’s Game Boy and Sony’s PlayStation portable. Nokia’s move left them struggling with market coordination challenges of both gaining software developers to create compelling games for their handset and gaining gamers to purchase their handset. AMD To overcome their competitor, AMD focused on enabling customers to try-out new computers at retail outlets. Intel however has continued to focus on their direct-to-the-consumer channel strength, most notably their partnership with Dell. Unfortunately for Intel, their past strategy may not be appropriate for the current market. Not only has Dell has made market statements that indicate their partnership with Intel is not set in stone, and they may include AMD products in future models, but Intel’s strategy may be poorly aligned with the current market demands. The maturing of the personal computer market, like other maturing markets, is showing signs of increased price sensitivity. In the more mature personal computer market, an increasing portion of consumers fail to perceive a significant performance variation between the different processor chips. As such, consumers are more willing to purchase the AMD product once product trial has demonstrated the efficacy of their chips. More problematic for Intel is their failure to combat this challenge, and, their effective choice to support AMD’s rise. Intel’s choice to decrease their broadcast advertising support of their “Intel Inside” branding campaign weakens their ability to thwart AMD’s encouragement of consumers to learn the points-of-parity of their products and encourage price sensitivity. Perhaps Kim will shake things up at Intel. Lessons Learned 1. Long-standing competitive hierarchies are not set in stone. Underdogs that utilize resources wisely can out-maneuver competitor to upset the status quo. 2. Each of these companies created and implemented strategies that are aligned to the current market need. None of them took a “copy-cat” or “me-too” approach but rather they took an approach that uniquely combined market information and corporate strengths to create a compelling value proposition. 3. None of these competitors were in a horrid position to start with. Boeing, Motorola, and AMD were each at a Number 2 position within their market prior to implementing their winning strategy. As such, they had the resources to compete. These lessons are transferable. And, it appears that companies are taking these lessons to heart. One of the points of Mr. Fields “Way Forward”, the executive drafted by Chairman and CEO William Clay Ford to lead the company’s overhaul, is to “quit trying to sell fords to people who won’t buy them; focus instead on likely prospective customers”. Even Ford is ready to focus on the battles it can win by aligning their market strategy with the segment of customers whose demands they can fulfill. _______
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© 2004 - 2007 Wiglaf LLC
