Current Marketing Issues Seminar …its defining attributes, concepts & emergent ramifications …
2 nites Mission: ¢ What “it” is… ¢ Who-saw-what coming-when… ¢ “Its” defining dimensions…& their implications…. ¢ “Its” Ramifications: l New Rules for Organization Structure & Management l New Business Models l Need for New Marketing Skills & Strategies. .
January 3, 2000, page S 1 “There’s a new economy out there – and it look nothing like the old one”
“The new economy is not just a dot. com thing. It’s not just about high tech …computers or microchips. What it is about is new ways of doing things in every industry, every government. It’s about speed, quality, flexibility, knowledge and networks. It will affect everything. ”
New Forces in the New Economy…. Ø Over-capacity & hyper- competition. Ø Ascendant power of customers. Ø Ascendant power of distributors over manufacturers. Ø Growth of digitalization & the Internet as major sources of efficiency & profitability. Ø Proliferation of channels & media. Ø Globalization & global interdependence. Ø Mergers, alliances, large company bankruptcies
At Least Ten Key Differences Old Economy 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Tangible assets Rigid-Vertical Org. Protected markets Competition Distribution hierarchy Rigid barriers Standardization Domestic Prdt-Life Cycle=Years Seller power New Economy 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Intangible assets Fluid & Modular Open markets Hypercompetition Direct to customer Flexible entry Personalization Global PLC=months Buyer power
¢ Old ¢ New Economy – Manufacturing driven – Information driven 100% Ø Differentiation, New Ø Standardization & Duplication 75 U. S. Ø Economies of scale 50 GDP Ø Hierarchical bureaucractic 25 0 ’ 72 ’ 78 Source: Marvin Zonis & Associates ’ 84 Economy ’ 90 customization “E”conomy Ø Networks & speed-Economies of Scope Industrial Ø Diversified Economy Adhocracy ’ 08 ’ 96 ’ 02
… arising largely from new developments in the internet, telecommunications and computer sectors. -
Commercialization of the Internet Until 1993 -The GENERAL PRINCIPLE of Internet Use: l “NSFNET Program Backbone services are provided to support research and education in and among US research and education institutions and for private or personal communication incidental to such activities… Use for other purposes, including extensive use for private or personal business, is not acceptable.
25 COMPUTERS HOSTS IN INTERNET (MILLONS) 25. 000 20 1993 - National Information 15 Infrastructure Act is passed-- Internet commercialized 10 5. 000 5 4 130. 000 0 1969 JUL. 1992 JUL. 1989 SEP. 1991 MAR. JUL. SEP. JUL. 1994 1995 1996 1997 OCT. ENER. ABR FEB. NOV. 1993 1995 1996 1997
Seamless-Instant 24/7 global Connectivity s LEO Os & E G 00 10, 0 ~ , M EOs local ISP Enables an everincreasing Interdependent Interconnected Mobile Society living in the Info. Bubble regional ISP router company network server
Computers emptied factories & gave us paperwork in offices As Machines emptied countryside. . . & gave us factorywork in cities
And the office work grew. . . ¢ If there’s no document. . . nothing happens ¢ Where industry had its products, administration has its documents • "914", the First Automatic Xerographic Machine (1959) • The First Laser Printer for Computer Output (1978) • Desktop Laser Printing (1984) History of the Office: Office Machines http: //inventors. about. com/library/inventors/bloffice. htm
The New Economy % “Information -Workers” 50% 2% ¢ A Knowledge Economy l. By 1990 -1/2 American workers are knowledge workers l. Today -80%+ of new jobs are in information intensive
W/ New Tech comes New Realities ¢ Time becomes more important l ¢ Space/Distance- less important, even meaningless l ¢ Decision-making accelerated- as business processes automated Connectivity & virtuality renders distance obsolete Intangibles more valuable l new value is applied information (CRM, SCM)
2 nites Mission: ¢ What “it” is… ¢ Who-saw-what coming-when… ¢ “Its” defining dimensions…& their implications…. ¢ “Its” Ramifications: l New Rules for Organization Structure & Management l New Business Models l New Marketing Strategies
As early as 1969 Peter Drucker foresaw an “age of Discontinuity” w/ upcoming shifts: From manufacturing based economy to knowledge based economy From primary focus on engineering & manufacturing to primary focus on information gathering, analysis & marketing Drucker, Peter F. The Age of Discontinuity. Harper & Row Publishers, Inc: New York, 1969.
In 1988 Drucker wrote “The Coming of the New Organization” “by 2008 successful organizations “will be ¢ knowledge-based … composed largely of specialists who direct … their own performance through organized feedback… from colleagues, customers & headquarters. ” ¢
In early ’ 70’s Daniel Bell foresaw coming post-industrial society-that would: 1. Shift from a goods-producing to service economy 2. Be dominated by professional & technical class "Coming of Post-Industrial 3. Be knowledge driven Society: A Venture in Social Forecasting; 1973 4. & Future oriented Pre-Ind. Key Resource Industrial Post-Ind. Land Machine Knowledge Corporation Lab Socio-locus Farm
1980 - Toffler’s ¢ First rd 3 Wave ~8000 BC Hunter Gatherer To Agricultural Age ¢ Second Wave ~1750’s Agricultural Age To Industrial Age ¢ Third Wave ~1950’s Industrial Age To Information Age Wave
1982 Naisbitt’s Mega. Trends: Ten New Directions Transforming Our Lives 1. 2. 3. 4. 5. 6. 7. 8. 9. Industrial to Information Society National to World Economy Short to Long Term Centralization to Decentralization Institutional to Self Help Representative to Participatory Democracy Hierarchies to Networking North to South Either/or to Multiple Options
May 30, 1983 Vol. 121 No. 22 May 30, 1983 COVER STORY Technology has set off a scramble for jobs, profits and global markets Near the corner of Main and Walnut streets in the small town of Maynard, Mass. , stands a massive complex of aged red-brick buildings. Within those walls, workers toiled amid clanging, churning machinery to produce carpets in the 1850 s and Army blankets during two World Wars. But today the sturdy, old facade houses an entirely different enterprise. The noisy machines and grease-stained factory floor have given way to offices where engineers huddle over glowing oscilloscopes and secretaries peck quietly at word processors. .
2 nites Mission: ¢ What “it” is… ¢ Who-saw-what coming-when… ¢ “Its” defining dimensions…& their implications…. ¢ “Its” Ramifications: l New Rules for Organization Structure & Management l New Business Models l New Marketing Strategies
Tapscott’s Defining Dimensions of the New Economy Knowledge ¢ Digitization ¢ Virtualization ¢ Molecularization ¢ Integration ¢ Disintermediation ¢ Convergence ¢ Innovation ¢ Prosumption ¢ Immediacy ¢ Globalization ¢ Discordance ¢ Strategy in the new economy Don Tapscott. Strategy & Leadership. Chicago: Nov/Dec 1997
Knowledge “The new economy is: ¢a knowledge economy ¢ based on human capital & networks”
¢ Old Economy – Manufacturing driven Ø Buildings, tools & equipment are assets Ø people are expenses ¢ New Economy – Information driven Ø Buildings, tools & equipment are expenses Ø people are assets Ø & knowledgeable people greatest asset of all…
¢ ¢ ¢ How many mfgg plants & office buildings does Microsoft own? What is the value of all the equipment in its offices? How much inventory does it have? Microsoft’s real assets walk out the door every night…
Another Dimension to Consider: Digitalization! 11010010010010010 0110001011010010010011000101101001011 0100100100110001011 0100101101001001001 100010110100100100110001011010010110 1001001001100010110
The “Media Fusion” Bomb Akin to energy generated by nuclear fusion, communication power generated by media fusion is formidable… W/ digitalization all media become translatable into each other –and gives one ability to digitally mix all media on a common palette…
The New Economy: Digitalization A Digital Economy l Old information flow: atoms - paper • Cash, checks, invoices, maps, photographs… l New information flow: bits • All things - done digitally
“Being Digital” (’ 95) is understanding the significance of. . . The movement of compressed weightless bits of data/ information Transmitted at speed of light l Combined seamlessly l Retrieved instantly, anywhere l 24/7 around globe l
Virtualization “As information shifts from analog to digital, physical things can become virtual… Changing the metabolism of the economy, the types of institutions & relationships possible, & nature of economic activity itself ” Entering the infosphere Journal of International Affairs ; New York; Spring 1998; Michael Vlahos The Virtual: l Partner/ Community l Office/ Corporation l Store/ Mall
Molecularization “The old corporation is being disaggregated replaced by dynamic molecules & clusters of individuals which form the basis of economic activity” The knowledge worker (atom) forms working clusters/ molecules
Integration & Internetworking “The new economy is a networked economy, integrating molecules into clusters which network w/ others for the creation of wealth” Enables small companies to • Overcome advantages of large companies economies of scale & access to resources • Avoid burdens Bureaucracy, hierarchy & inflexibility
Disintermediation Middleman functions …being eliminated thru digital networks Musicians don't need recording companies l Airlines, Hotels don't need travel agents l Food Companies don’t need wholesalers 100% 90% 80% 70% 60% 50% 40% 30% 20% Mfgrs Wholesalers l Retailers 0% Japan Britain United States Number of companies involved in each level of the food industry, % of total, 1993
Convergence 1 “ the 2 dominant economic sector is being created by three converging industries which, in turn, provide the infrastructure for wealth creation by all sectors” - Tapscott. 3
Over 100 years ago a technology convergence fueled a new economy Steam Power Mechanical Engineering Material Sciences The resulting Industrial Economy defined the business landscape for the 20 th century
Today, another technology convergence is fueling a new economy Computing Communication Technologies NS ATIO NIC MPU CO Content Technologies The resulting Techno/Info-sphere is redefining the business landscape for the 21 st century
Innovation “The new economy is an innovationbased economy. …Obsolete your own products l The collapse of product life cycles • ‘ 96 Sony introduced 5000 new products • “No matter how good you are, you are only 18 months away from failure”
ATTACK of the Cyber-Blob! ¢ ¢ ¢ Every 18 months- double CPU power- for ½ the price (Moore’s Law) Every 12 months double fiber network capacity for ½ the price Every 9 months double wireless capacity for ½ the price
Prosumption Dominant Economic Sector Production ¢ 1 st Wave= Sector A Crafted/ for Self Use 2 nd Wave= Sector B Mass/ for Exchange 3 rd Wave Mixed Prosumption 2 nd Wave created situation where vast majority of food, goods n’ services destined for exchange (Sector B) ¢ ¢ Virtually wiped out goods produced for selfconsumption (Sector A) Created civilization where almost no one– not even farmer was self-sufficient
rd 3 Wave Rise of PROSUMPTION: 1970 ¢ ¢ ¢ 1970’s few self service retail outlets nor tools, building materials, medical instruments sold to consumers 1980’s DIY explosion in full force 3 rd wave characterized by massive growth of sector A 1980 8% 70% Tools <30% >70% PG ID 0 ~20 million Self-Serve Gas
Prosumption 3 RD Wave finds gap between consumers & producers blurring CUSTOMERS INVOLVED IN PRODUCTION PROCESS • Levi’s – Original Spin
Customerization ¢ ¢ CRAYONhttp: //www. crayon. net/ Chrysler - special order vehicles in 16 days United Airlines – involved in design of Boeing 777 Delfield - involved in strategizing/ design of KFC Express outlets
Tapscott, Immediacy ¢ Economy The new economy is a real-time economy operating w/ speed of light rather than speed of the post office ¢ Organization The new enterprise is real-time enterprise, continuously & immediately adjusting to changing business conditions ¢ Technology is applied to capture information online & to update information in real time.
In an economy based on bits Immediacy becomes a key driver Product life cycles compressed: ¢ From concept to production. l ¢ In 1990, autos took 7 years; In 1997 < 2 From Introduction to Mass Diffusion l New products taken up much more quickly
From Adoption to Obsolescence- a matter of months ¢ “In the old economy, an invention like Polaroid camera ensured revenue stream for decades. ¢ Today(’ 97*), consumer electronic products have a typical lifespan of 2 months” *Strategy in the new economy Don Tapscott. Strategy & Leadership. Chicago: Nov/Dec 1997
Acceleration Quiz Q: Disney and Sony (respectively) produce and launch one new product every _____? Three minutes for Disney. Twenty minutes for Sony. Elizabeth Debold, What is Enlightenment? , March-May 2005
TIME to Reach 50% Diffusion
Market Adoption Sequence: Traditional and Internet Life Cycles Source: Patel, Mc. Carthy; 2000; Digital Transformation; Mc Graw Hill
Call me- anytime – anywhere… Twice as many cell vs. net users -¢ ¢ 1, 173, 109, 925 - net users ¢ 2, 168, 433, 600 - cell users most developed countries have today between 50% ¢
. . . Work has become Communication! l From work dominated by machines & production-- to work dominated by people & conversation. l Going to work is to going meet. . l Work, education & entertainment are mixed. Work goes on anywhere, anytime. . . we become nomads as technology becomes mobile Bo Dahlbom: President of the Swedish Research Institute for Information Technology http: //www. informatics. gu. se/
Globalization ¢ “Borders are Becoming Meaningless” Work performed globally…. continuously…. l “The entire globe is now tied together in a single electronic market moving at the speed of light. "There is no place to hide” l • Walter Wriston, Citicorp Chairman
Discord As we stand on frontier of new economy, we see beginnings of a new political economy Raises questions about: ¢ power, privacy, access, ¢ equity, quality of work life, quality of life in general, ¢ and the future of the democratic process itself.
2 nites Mission: ¢ What “it” is… ¢ Who-saw-what coming-when… ¢ “Its” defining dimensions…& their implications…. ¢ “Its” Ramifications: l New Rules for Organization Structure & Management l New Business Models l New Marketing Strategies
The Old Company ¢ A society of its own, a well organized center for production & distribution. . . ¢ A well defined, autonomous organization, with its own goals, values, and quality control
“Organizations will still be critically important in the world, but as ‘organizers, ’ not ‘employers’!” — Charles Handy
“The organizations we created have become tyrants. They have taken control… creating barriers that hinder rather than help our businesses. The lines that we drew on our neat organizational diagrams have turned into walls that no one can scale or penetrate or even peer over. ” —Frank Lekanne Deprez & René Tissen, Zero Space: Moving Beyond Organizational Limits.
“Ninety percent of what we call ‘management’ consists of making it difficult for people to get things done. ” – Peter Drucker
A Time of Transformation Not simply… Networked technology But. . . Networked humans using technology
“Ebusiness is about rebuilding the organization from the ground up. Most companies today are not built to exploit the Internet. Their business processes, their approvals, their hierarchies, the number of people they employ … all of that is wrong for running an ebusiness. ” Ray Lane, Kleiner Perkins
The New Company Organizational Transformation ¢ From product to customer orientation ¢ From hierarchies, processes and channels to ad-hoc networking ¢ From info- control to cooperative communication ¢ From in-house to out-source
Must Make fundamental paradigm shift Need- structural & philosophical organizational transformation Tech- Diffusion More than Adm. Process Improvement • Not just automate production • Deploy expert systems TIME
…to fully integrate into new “Economy”… need ¢ The ability to Network- ¢ Find strategic business partners- global, flexible, competitive, alliances ¢ ID & cultivate employee capabilities, information & knowledge mgt skills
“The key ingredients of success… organizational learning ¢ knowledge sharing ¢ the continuous improvement of processes ¢ working in teams ¢ & high levels of customer service… ¢ The glue that holds it together is empathy, trust, learning and loyalty” Source: Competing in the Third Wave by Jeremy and Tony Hope
“Firms will not ‘manage the careers’ of their employees. They will provide opportunities to enable the employee to develop identity & adaptability & thus be in charge of his or her own career. ”
2 nites Mission: ¢ What “it” is… ¢ Who-saw-what coming-when… ¢ “Its” defining dimensions…& their implications…. ¢ “Its” Ramifications: l New Rules for Organization Structure & Management l New Business Models l New Marketing Strategies
Old Economy Quantity & Quality of Product Dictated by limitations: ü Shelf –space ü Spectrum –space ü Inventory carrying costs ü Mass-Media
Logic of Limitations: dictated that should appeal to Lowest Common Denominator to maximize economies of scale
Logic of Limitations: Lowest Common Denominator = Mass Appeal = Top Selling “Hit”
Changes in Promo Channels & Costs
<Changes in Supply Chain> Traditional Supply Chain • Autho r Well-defined lock-step supply chain Publishe r Printer Wholesal er Retailer Consume r Today’s Supply Chain • New direct relationships are being established 2 Autho r Publisher Printer 1 Wholesal er Retailer Consume r 3
Changes Exposed the Myths of Mediocrity Myths: • Store inventories reflect what people want to buy • Only established brands, media hits … sell
“We sold more books today that we didn't sell at all yesterday, than we sold today of all the books that did sell yesterday. ” Amazon employee quoted in Wikipedia
Amazon= Prototype of the New Business Model
Emerging Business Models Demand Customers Are Demanding. . . New Business Models are Emerging More Convenience New Channels Hybrid Products Lower Cost The Networking Is Accelerating. . . Physical Communication Enterpris Collaboration e Commerce The Virtual Enterprise Supply Business Is Driving. . . Deregulation Globalization Core Competence Centricity Innovation From Most Common Denominator to Most Specialized Aggregator
New Business Models Basics & proprietary collaboration vs. ownership & exclusivity ¢ Open l Open-source ¢ Peer code; Licensing & Leveraging Production l “Harnessing collective intelligence of users” ¢ Proffering Long Tail Inventories l Offer everything to everyone rather than just the best-selling to the
Every single i. Tunes song has been bought at least once. . w/ a million+ song catalog. The i. Tunes Music Store features music from all five major record labels + over 600 leading independent labels from around the world. w/ more than 100 million songs downloaded and 70% market share of legal downloads
Thinking Small to Get Big Any Industry where there is demand for/ availability of specialized products…. can & will be influenced by … The Long Tail
Sex Mp 3 Britney Spears 3% Excite Query Distribution 97% Top 10 1000’s 10, 000
Excite didn’t figure out how to make a business out of 97% of our traffic volume
Google Did… $150 bn anyone? …Created an efficient marketplace for advertisers to reach SMALL audiences.
2 nites Mission: ¢ What “it” is… ¢ Who-saw-what coming-when… ¢ “Its” defining dimensions…& their implications…. ¢ “Its” Ramifications: l New Rules for Organization Structure & Management l New Business Models l New Marketing Strategies
“Marketing Secrets for the New Economy: Everything you thought you knew about marketing is wrong!” The January 2000 cover of PC Computing magazine
Career Competencies Needed by New E-Marketers… Traditional Skills ¢ Sales mgt ¢ Advertising mgt ¢ Sales promotion mgt ¢ Marketing research ¢ Pricing PLUS: ¢ ¢ Customer relationship management (CRM) Partner relationship management (PRM) Marketing Resource Mgt. : Database Mgt & Data-mining l Lifetime Profitability analysis by segment, customer, channel Integrated marketing communications; Public relations -(including event & cause sponsorship, buzz marketing)
Marketing in the New Economy Traditional Make Price Distribute Promote New ¢ Engage ¢ Sense ¢ Process ¢ Respond
Marketing in the New Economy ¢ ¢ Exploit e-commerce & e-business- gain market by building superior information & communication systems. Treat customers differently and appropriately. Build & use customer database to manage customer portfolio. l Focus on customer lifetime value, customer value mgt, customer share & customer profitability. Build brands in new ways-- Shift promotion funds away from broad advertising toward more direct promotion. Partner with your employees, customers, suppliers, and distributors for co-prosperity…
focus is on relationships with customers & business partners Business Customer Strategy People Business Customer Technology Process Customer
Old Economy New Economy Not easy , costly – Knowing-Understanding customer time consuming Easier, Less costly Cross selling, upselling strategies. CRM, 1 to 1 Easier Profitable customers are ID’d followed very closely. Objective Increasing Profitability Difficult to identify the profitable customer. Both the tools and the information for measuring profitability not developed Customer churn expected Customer acquisition & and accepted maintenance Keeping the profitable customer Attractingcompetitors’ buyers Not easy Customers more loyal Focal point of marketing efforts; churn minimized & maintenance imperative Easier; Less costly Customers are less loyal
Value creation in New Economy begins w/ aligning key elements of the enterprise… Customer-enlightened strategic intent Informationempowered Ad-hocracy Strategy Technology People Process MIS, MDSS & “e” processes Internet-enabled technology
The New Economy Needs New Workers w/ New Mind Sets A guide to surviving thriving, and finding meaning in a world rocked by outsourcing & computerization
The New Economy Needs People w/ New Business Degrees - Tom Peters (02. 2005) 15 “Leading ” Biz Schools Design/Core: 0 Design/Elective: 1 Creativity/Core: 0 Creativity/Elective: 4 Innovation/Core: 0 Innovation/Elective: 6
“The past few decades have belonged to a certain kind of person with a certain kind of mind —computer programmers who could crank code, lawyers who could craft contracts, MBAs who could crunch numbers. But the keys to the kingdom are changing hands. The future belongs to a very different kind of person with a very different kind of mind —creators, empathizers, pattern recognizers and meaning makers. These people —artists, inventors, designers, storytellers, . . big picture thinkers—will reap society’s richest rewards and share its greatest joys. ” —Dan Pink, A Whole New Mind
Agriculture Age (farmers) Industrial Age (factory workers) Information Age (knowledge workers) Conceptual Age (creators & empathizers)
Sept. 5, 2005 Business Week
NEW CULTURE
Thinking. Creatively…
OLD Circus Traditional animal acts, painted clowns, and high-wire stunts make for a very tired form of entertainment. NEW Cirque du Soleil is a dramatic rethinking of what a circus can be, with amazing costumes, moving music, and beautiful gymnastics
OLD Cotton Mop P&G studied the art of cleaning in search of something better than a wet mop, which spreads as much dirt as it picks up NEW Swiffer - a whole new way to clean--using electrostatic attraction. A revolutionary dry mop is born
NEW Sirius-Subscriber model brings a rich variety of content via satellite to your car and your handheld. OLD Radio Same old, same old adchoked, preprogrammed music and talk, from big national chains.
OLD The '60 s icon of the ergonomic and ecofriendly lifestyle, Birkenstock needed a modern update. NEW With Birkis, designers kept the core values and added new models, including colorfulslip-ons
“At Sony we assume that all products of our competitors have basically the same technology, price, performance & features. Design is the only thing that differentiates one product from another in the marketplace. ” Norio Ohga
OLD Best Buy has crowded shelves, overwhelming choice, and standard sales pitches. NEW The Apple Store is spare, elegant, and appealingly interactive—a hip place to be on a Sat. night.
OLD Grocery stores are big, messy places where you go to buy plasticwrapped and hothouse grown fruits and vegetables. NEW Whole Foods is where you shop for organic items and other healthy stuff w/ Old market look & feel
OLD Granola: More nutritious than the sugary cereals of childhood, but you still needed a bowl, spoon, and milk NEW Power bars: Can be eaten anywhere, any time, and they're tailored to meet a variety of health concerns: low-fat, low-carb, for women.
OLD Golden Nugget Casino: Las Vegas' early emphasis on gambling overshadowed amenities, entertainment, and atmosphere. NEW Luxor Hotel and Casino: Exotically themed hotels with elaborate décor and highend restaurants have given Vegas added allure.
“The sun is setting on the Information Society …. As information and intelligence become the domain of computers, society will place more value on… what cannot be automated: emotion. Imagination, myth, ritual - the language of emotion - will affect everything from our purchasing decisions to how we work with others. Rolf Jensen, Copenhagen Institute for Future Studies -= The Dream Society: How the Coming Shift from Information to Imagination Will Transform Your Business
“If things seem under control, you’re just not going fast enough. ” Mario Andretti
“If it works, it’s obsolete. ” —Marshall Mc. Luhan
Industry Sectors ¢ ¢ ¢ ¢ ¢ Sports/Event Marketing -4 Real Estate -5 Retail -2 ? ? Oil & Gas -6 Accounting -4 Hospitality -4 Communications -4 Mgt/HR -4 Education/ Health Care -4 Logistics -4
Trend Monitoring Other Useful Sites ¢ www. iconoculture. com/ ¢ www. psfk. com/ ¢ www. trendhunter. com/ ¢ www. ubercool. com/ • www. google. com/trends • HOW TO USE: Google~Trends
Best Resources -Socio-cultural Factors www. trendwatching. com/
#1. Best resource for monitoring business applications of technological developments … www. springwise. com/
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