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In 2008 Abbott introduced a revolutionary new device, FreeStyle Navigator, designed to improve the lives of the world's more than 500 million diabetes patients by offering continuous glucose monitoring with technology that could translate an electrochemical signal from the body into precise, real-time data. Doctors and patients who tried the device appreciated it—but it was bulky, hard to manufacture, and expensive. And without widespread adoption, it wouldn't have the hoped-for impact. Abbott's leaders soon realized that they needed to go back to the drawing board. Four years later they launched FreeStyle Libre, a reimagined continuous glucose monitoring (CGM) system in which an even smaller sensor applied to a patient's arm sends data directly to a smartphone app every minute. It is now used by millions globally, and by the end of 2024 it will have generated more than $5 billion in revenue, making it one of the most successful medical devices—as measured by usage and sales—in history. The pivot from the Navigator to the Libre was a deeply consequential decision for Abbott, and others can learn from the principles the company's leaders followed to arrive at and then execute on that choice. [ABSTRACT FROM AUTHOR]

The article discusses the pros and cons of launching new consumer products during a recession. The authors explore how products introduced during a recession perform, examine how the severity of the recession can impact performance of the product, and scrutinize if the timing within the recession matters. INSET: "A Recession-Era Product Launch Is Like a Running Start".

The article discusses how to best brand a new product. A popular strategy known as brand extension, where the new product is tied into an existing product can have a negative consequence on both the new product and the existing product. In this article research is cited looking into the various branding strategies—new brand and two types of brand extension-direct extension and sub-brand—with success criteria. The success criteria are identified as fit with the company’s current offerings, innovation of the new product, span of existing portfolio, risk of brand dilution, and amount of advertising funds. INSET: "Look for Opportunities to Stimulate People's Imaginations".

Though social and digital media are rapidly transforming marketing and new tools emerge daily, in most firms the organization of the function hasn’t changed in 40 years. How should marketers revamp their strategies, structures, and capabilities to meet the new realities? To find out, the consultancy Effective- Brands and its partners conducted a study involving 10,000 marketers from 92 countries, which examined what separated high-performing marketers from the pack. High performers, the study showed, excelled in three areas: integrating data about what customers are doing with an understanding of why they are doing it; communicating a brand purpose (the functional, emotional, and societal benefits of the offering); and delivering a “total experience” to customers. To provide this kind of experience, high performers break down silos and enlist the help of the entire organization. That means they must link marketing strategy tightly to business strategy and to other functions; inspire employees across the company with the brand’s purpose; focus and align around a few key priorities; set up nimble, cross-functional teams; and build internal capabilities through extensive training at all levels. Surprisingly, few companies have been able to put all these pieces together. Only half of even high-performing organizations excel on some of these capabilities. But that shouldn’t be discouraging; rather, it just illuminates where there’s work to do. [ABSTRACT FROM AUTHOR]

In the traditional strategic-planning model, managers attempt to forecast how markets will evolve and competitors will respond, and then define a multiyear plan to position their company to win in this future state. That worked well when markets were more stable and the primary factors influencing future growth and profitability were easier to forecast. But the world is now changing so quickly that no business can plan for every eventuality. And fewer than a quarter of large organizations employ the most notable tools and frameworks for strategy development under uncertainty: scenario planning, Monte Carlo simulation, and real options analysis. Executives say that those tools require data that is impractical to gather and analysis that is too expensive to execute routinely and that their output can be counterintuitive and complicated to explain to senior leadership and the board. In this article the authors offer a new approach and mindset for making strategic decisions, along with a new model for managing strategy development and performance monitoring. They describe what it takes to produce great results in uncertain times and propose a practical model for strategy development that they have seen succeed at several leading companies. INSET: The Drivers of Unpredictability. [ABSTRACT FROM AUTHOR]

Some branded product companies are sidestepping digital aggregators like Amazon and Google Shopping and instead building their own brand flagship platforms. These platforms are more than just a direct sales channel. They provide a mix of specialized products, services, and content by involving participants—consumers and third-party businesses—in the value creation process, as both receivers and providers of value. In this article, the authors introduce four types of brand flagship platforms: platform as instrument, as guide, as canvas, and as companion. They describe the relationship style, risks, and opportunities associated with each one. [ABSTRACT FROM AUTHOR]

Companies often believe they should make their customers’ experiences as effortless and predictable as possible. But the authors’ research shows that this approach is overly simplistic—and can even backfire. While in some instances (say, watching movies on Netflix) customers want their journeys to be easy and familiar, in others (working out on a Peloton bike or playing World of Warcraft) they want to be challenged or surprised. This article outlines four kinds of journeys: Routines are effortless and predictable and are suited to utilitarian products. Joyrides are effortless and unpredictable and work with products that deliver an on-demand thrill. Treks are effortful and predictable and are associated with products that help people achieve challenging long-term goals. Odysseys are effortful and unpredictable and are perfect for products that facilitate customers’ passion projects. Each type of journey has its own design principles. Routines should offer consistent touchpoints in familiar sequences; joyrides, endlessly varied moments of delight. Treks require goal-posting (breaking big objectives down into small ones), and odysseys, substantive variation and journey tracking. [ABSTRACT FROM AUTHOR]

The article presents the author's views on the need for thorough marketing in new products and services. The author offers examples of both successes and failures for organizations to consider, and recommendations to implement in their marketing strategy. Recommendations include identifying customer needs, product perception, engaging with customers in use cases, developing customer experience, and utilizing a marketing strategy appropriate to the offering and its target customers. Examples include Google Glass, L-Cups,and the Sony Reader.

The article presents information on the use of sensory stimulation as a marketing strategy. Recent research suggests that sense-based marketing can intensify consumer perceptions of a brand and increase sales percentages. Topics include the current focus companies place on visual attributes of a product, the current use of sensory marketing in the automotive industry, and the potential impact of sensory stimulation on memory. Insights from Aradhna Krishna, director of the Sensory Marketing Laboratory at the University of Michigan, and author of the 2013 book, "Customer Sense: How the 5 senses Influence Buying Behavior," are presented. INSETS: Warmth Induces People to Conform;"Taking Sensory Communication to a Whole New Level".

The article lists four ways that one can boost their businesses' social media marketing effectiveness including defining one's goals, exploring which platforms should be used and whether or not you're ready to talk with your audience in real time.

If you’re unhappy at work—and changing roles or companies may be unrealistic given the tough economy—what can you do? A growing body of research suggests that a process called job crafting can be a powerful tool for reenergizing and reimagining your life at work. It involves redefining your current job description to better incorporate your motives, strengths, and passions. The exercise prompts you to visualize your job graphically, map its elements, and reorganize them to shape the job to better suit you. In this way, you can put your own personal touches on the way you see and do your job; and you’ll gain a greater sense of control at work—all of which is especially critical at a time when you’re probably working longer and harder than ever, and will be retiring later. Perhaps job crafting’s best feature is that it’s driven by you, not your supervisor. Research with a range of organizations indicates that employees who engage in job crafting often end up more engaged and satisfied with their work lives, achieve higher levels of performance in their organizations, and report greater personal resilience. Organizations have a lot to gain by enabling job crafting: The exercise lets managers turn the reins over to employees, empowering them to become “job entrepreneurs.” And when raises are constrained or promotions impossible, job crafting may give companies a different way to motivate and retain their most talented employees. [ABSTRACT FROM AUTHOR]

For decades, Western executives of multinational brands seeking to expand globally have operated under a simple premise: Marketing content and channel selection should be customized to local markets, but Western marketing principles are universal. Firms are particularly quick to export media and ad strategies to developing markets, where advertising and media are more recent developments. Meanwhile, Chinese marketers have developed a unique approach tailored to China’s mobile-first consumer. It relies on the creation of shareable, viral content and the presence of dominant, channel-straddling media giants. It is faster and cheaper and often more effective than the Western marketing paradigm. It also is more embracing of risk. For companies that hope to enter China or grow existing operations there, understanding the Chinese marketing mindset will be essential to achieving success. This article examines the adjustments Western companies must make to succeed in China—and around the world. [ABSTRACT FROM AUTHOR]

A reprint of the article "Content Is Crap, and Other Rules for Marketers" by Greg Satell, which was published on HBR.org on October 30, 2015, is presented. It is suggested that marketers think more like publishers. Topics of discussion include building ongoing customer relationships, metrics versus meaning and mission, and publishing as a product.

The article discusses research concerning a pricing and marketing strategy in which managers utilize prices slightly below round numbers in order to create a perception among consumers that items are less costly. According to the article, however, such a strategy discourages consumers to decide to upgrade purchases.

The gap between marketers’ aspirations and what their organizations can accomplish creates intense pressure to reshape how marketing is done. In recent years some leading companies have developed an innovative approach that focuses on the seams between marketing and the other functions it interacts with--the C-suite, IT, sales, finance, and so on. It is at these seams that communication most often breaks down and processes stall. Typically, three categories of marketing-related decisions cross organizational seams: strategy and planning; execution; and operations and infrastructure. When marketing works closely with other units to execute key decisions, it can get things done far more quickly and effectively than in the past. But divergent assumptions or a lack of alignment and shared commitment between functions can get in the way. When the authors asked people in marketing and other relevant units what roles they played in a decision, the answers were all over the map. In a classic example, both marketers and product developers in one automaker’s European division believed that they had the final say on which features to include in a new model. The authors provide a tool for revamping the decision process at the boundaries between functions and describe how Target, Nordstrom, and other large companies have identified important decisions at the seams and increased the impact of their marketing organizations. [ABSTRACT FROM AUTHOR]

Though social and digital media are rapidly transforming marketing and new tools emerge daily, in most firms the organization of the function hasn’t changed in 40 years. How should marketers revamp their strategies, structures, and capabilities to meet the new realities? To find out, the consultancy Effective- Brands and its partners conducted a study involving 10,000 marketers from 92 countries, which examined what separated high-performing marketers from the pack. High performers, the study showed, excelled in three areas: integrating data about what customers are doing with an understanding of why they are doing it; communicating a brand purpose (the functional, emotional, and societal benefits of the offering); and delivering a “total experience” to customers. To provide this kind of experience, high performers break down silos and enlist the help of the entire organization. That means they must link marketing strategy tightly to business strategy and to other functions; inspire employees across the company with the brand’s purpose; focus and align around a few key priorities; set up nimble, cross-functional teams; and build internal capabilities through extensive training at all levels. Surprisingly, few companies have been able to put all these pieces together. Only half of even high-performing organizations excel on some of these capabilities. But that shouldn’t be discouraging; rather, it just illuminates where there’s work to do. [ABSTRACT FROM AUTHOR]

Small and midsize companies that want to expand abroad often face a daunting task: finding the sweet spot between multinationals, with their extensive resources and economies of scale, and the smaller players in the foreign markets, which have an intimate understanding of local conditions. The more than 75 Israeli companies that have transformed themselves into global players in the past four decades prove that it can be done. Their approach: Focus on countries and regions that offer an opportunity that multinationals don't find attractive and local companies can't adequately address, and then penetrate this middle ground in ways that won't immediately trigger a response. Given the size of their home market and their limited opportunities in the Middle East, Israeli companies have not had many other options for pursuing growth. The stories of three Israeli companies--Netafim, Teva Pharmaceutical, and Amdocs--illustrate tactics for seizing the middle ground: Evade the giants, disguise yourself as a local, and focus on weak spots [ABSTRACT FROM AUTHOR]

The value of many products and services rises or falls with the number of customers using them; the fewer fax machines in use, the less important it is to have one. These network effects influence consumer decisions and affect companies' ability to compete. Strategists have developed some well-known rules for navigating business environments with network effects. "Move first" is one, and "get big fast" is another. In a study of dozens of companies, however, the authors found that quite often the conventional wisdom was dead wrong. And when the rules failed, the reason was always the same: Companies trip up when they try to attract large volumes of customers without understanding (1) the strength of mutual attraction among various customer groups and (2) the extent of asymmetric attraction among them. Looking at examples such as TripAdvisor, Wikipedia, and the New York Times, the authors offer strategies for competing in markets with network effects. New entrants should focus on customer groups that they are uniquely positioned to serve or appeal to the most attractive customers in a market. Incumbents pursuing growth strategies in adjacent markets or new geographies should consider how similar the needs of new customers are to those of existing customers. Offering complements also allows incumbents to reach additional customer groups. [ABSTRACT FROM AUTHOR]

For decades, businesses have sought competitive advantage in "upstream" activities related to making new products--building bigger factories, finding cheaper raw materials, improving efficiency, and so on. But those easily copied sources of advantage are being irreversibly eroded, and advantage increasingly lies "downstream"--in the marketplace. Today the strategic question that drives business is not "What else can we make?" but "What else can we do for our customers?" This new center of gravity demands a rethink of long-standing strategy principles: First, the sources and locus of competitive advantage now lie outside the firm, and advantage is accumulative-rather than eroding over time as competitors catch up, it grows with experience and knowledge. Second, it's no longer about having the better product but about how you position yourself in the market and which companies you choose to compete against. Third, the pace of change in markets is now driven by shifts in customers' purchase criteria rather than by improvements in products or technology. INSET: How Cialis Beat Viagra. [ABSTRACT FROM AUTHOR]

Abstracts are presented to articles published in this issue including "How Google Sold Its Engineers on Management," "When Marketing Is Strategy" and "Why Conglomerates Thrive (Outside the U.S.)"

Companies in developing countries are often so focused on chasing growth that they fail to invest in improving their innovation, operations, and brand management. So despite enormous reach and revenues in the billions, they're unprepared when demand growth slows and competition from increasingly savvy developed-world multinationals intensifies. The once high-flying Chinese automakers BYD and Chery have landed hard. In contrast, another automaker, Great Wall, and the appliance maker Haier have won early competitive advantage. In their efforts to compete, emerging-market companies should consider four stages: (1) Seize the moment and invest in the basics, such as payroll, finance, factory operations, and employee management. (2) Build strength by learning (through licensing or contract manufacturing, for example) from established companies. (3) Scale and consolidate, keeping product lines and markets relatively narrow. (4) Move up and out, with a strong portfolio of brands, innovation capabilities, advanced technology, marketing, and sales. INSETS: How One Chinese Car Company Came Up Short;Great Wall: First Stronger, Then Bigger. [ABSTRACT FROM AUTHOR]

In 2009, TED, an organizer of highly respected conferences on "ideas worth spreading," threw its doors open, allowing anyone, anywhere, to manage and stage local, independent events under its banner. In the next few years, an army of volunteers produced some 5,000 such TEDx events in more than 130 countries. The brand extension and new content TED gained through these gatherings would have cost millions to produce by traditional means. But they came with a risk: TED no longer completely controlled its brand, and an extended community of people who didn't work for TED were now capable of damaging it. And when TEDx licensees began putting dubious pseudoscientific presentations on their programs, that risk became a real threat. The blogosphere trashed TED for producing dumb content and questioned its overall credibility. In this article, Nilofer Merchant describes the uproar and the lessons it offers: (1) that "open" does not mean "easy" or "free" and (2) that you need to get the crowd working with you, not against you. TED did that, turning things around by adopting three practices: "listening loudly," realigning the community through shared purpose, and being strategic about the parts of the business it opened to the crowd and the parts it kept under tight control. [ABSTRACT FROM AUTHOR]

We live in a media-saturated world, where consumers are drowning in irrelevant messages delivered from the web, TV, radio, print, outdoor displays, and a proliferating array of mobile devices. Advertising strategies built on persuading through interruption, repetition, and brute ubiquity are increasingly ineffective. To win consumers' attention and trust, marketers must think less about what advertising says to its targets and more about what it does for them. Rayport outlines four domains of human experience: In the public sphere people move from one place or activity to another, both online and off. In the social sphere they interact with and relate to one another. In the tribal sphere they affiliate with groups to define or express their identity. In the psychological sphere they connect language with specific thoughts and feelings. Savvy marketers think about crafting messages that consumers will welcome in these domains. Zappos did that when it placed ads in airport security bins (the public sphere)-reaching people whose minds may be on their shoes. Nintendo identified young mothers who were willing to host Wii parties and provided them with everything they needed for these social-sphere events. Yelp's Elite Squad of reviewers have a heightened sense of tribal affiliation that makes them powerful brand ambassadors. Life is good Inc. is rooted in the psychological sphere: It advertises only through the optimism-promoting logo and slogan on its products. INSET: Online Ads in the Four Spheres. [ABSTRACT FROM AUTHOR]

Most marketers think they know how their advertising affects consumer behavior and drives revenue. They correlate sales data with a few dozen discrete variables, and they rely on consumer surveys, focus groups, media-mix models, and online last-click attribution. But to treat advertising touch points as if each works in isolation is to misrepresent the way today's complex combination of marketing efforts influences purchasing outcomes. MarketShare CEO Wes Nichols explains how many big companies are now deploying analytics 2.0, a set of capabilities that can chew through terabytes of data and hundreds of variables in real time to accurately reveal how advertising touch points interact dynamically. The results: 10% to 30% improvements in marketing performance. Firms of various sizes can make the shift to analytics 2.0 by engaging in three broad activities: • Attribution: quantifying the contribution of each element of advertising • Optimization: using predictive-analytics tools to run scenarios for business planning • Allocation: redistributing resources across marketing activities in real time Nichols argues that implementing analytics 2.0 means building the required infrastructure and entwining it in organizational culture, strategy development, and operations. Any company can begin that journey; businesses that don't will be overtaken by those that do. INSETS: Get Out of Your Swim Lanes;How One Company Attributed, Optimized, and Allocated;How Ads Interact to Boost Sales;How Ads Interact to Boost Sales [ABSTRACT FROM AUTHOR]

The article presents a case study that considers which type of customer a marketing-software company should focus on. Medium-sized businesses tended to stay with the company's product longer and were willing to pay a higher price for it. However, small businesses had lower acquisition costs, they were much more numerous than mid-sized firms, and the ease of dealing with them often led to quicker sales. Commentary is presented from Roger Martin of the Rotman School of Management at the University of Toronto, and Mike Volpe of software company HubSpot.

Many executives rely on a process for devising strategy suited to stable, predictable environments even when they know conditions are highly volatile and mutable. Why? Because, the authors contend, they lack a systematic way to match their strategy-making style to the particular circumstances of their industry, business function, or geographic market. These three BCG consultants offer a framework to do just that. It identifies four "strategic styles": classical, adaptive, shaping, and visionary. Which of these is best suited to your situation depends on how far and accurately you can confidently forecast demand, corporate performance, competitive dynamics, and market expectations (predictability) and to what extent you or your competitors can influence those factors (malleability). A classical style, familiar to most managers and business school graduates, is well suited to an industry whose environment is predictable but hard for your company to change. Oil is a good example of this. An adaptive style suits an unpredictable industry, such as fashion, that players can't alter. A shaping style is best when the industry is unpredictable but your company or another has the power to transform it. And a visionary style fits a predictable industry that is nevertheless amenable to change. Too often strategists focus only on how predictable their environment is and not on the opportunities they-or others-may have to change it. INSETS: When the Cold Winds Blow;The Ultimate in Strategic Flexibility. [ABSTRACT FROM AUTHOR]

The article presents a fictional case study of an avant-garde dance troupe which debated the role of marketing in its organization. The marketing expert proposed conducting a customer survey, but the artistic director expressed concerns that it would impact the group's creative direction. Expert advice is provided to address customer research on topics including the importance of maintaining brand reputation, encouraging artistic innovation, and balancing the needs of employees and customers.

Many managers feel doomed to trade off the futile rigor of ordinary strategic planning for the hit-or-miss creativity of the alternatives. In fact, the two can be reconciled to produce novel but realistic strategies. The key is to recognize that conventional strategic planning, for all its analysis, is not actually scientific it lacks the careful generation and testing of hypotheses that are at the heart of the scientific method. The authors outline a strategy-making process that combines rigor and creativity. A team begins by formulating options, or possibilities, and asks what must be true for each to succeed. Once it has listed all the conditions, it assesses their likelihood and thereby identifies the barriers to each choice. The team then tests the key barrier conditions to see which hold true. From here, choosing a strategy is simple: The group need only review the test results and choose the possibility with the fewest serious barriers. This is the path P&G took in the late 1990s, when it was looking to become a major global player in skin care. After testing the barrier conditions for several possibilities, it opted for a bold strategy that might never have surfaced in the traditional process: reinventing Olay as a prestige-like product also sold to mass consumers. The new Olay succeeded beyond expectations- showing what can happen when teams shift from asking "What is the right answer" and focus instead on figuring out "What are the right questions?" INSET: Assessing the Validity Of a Strategic Option. [ABSTRACT FROM AUTHOR]

In a predictable world, getting a new initiative off the ground typically involves analyzing the market, creating a forecast, and writing a business plan. But what about in an unpredictable environment? INSET: Why Desire Matters. [ABSTRACT FROM AUTHOR]

It's wrong to think we're entering a world in which traditional marketing activities will become irrelevant. Yet the scale and speed of social media make it urgent to get the branding basics right: Think of the internet-fueled backlash against Dell's flammable laptops and Kryptonite's expensive but easily picked lock. The obvious danger is failing to keep pace with social media developments. An equal if less obvious danger is getting distracted by them and losing sight of the fundamentals. Brands should exploit new media's possibilities to deliver on four basics: off ering and communicating a clear customer promise, building trust by delivering on that promise, continuously improving on it, and innovating beyond the familiar. Virgin Atlantic does this by, for example, including travel tips from crew members on its Facebook page; communicating with customers on Twitter in rapidly changing situations; offering a taxi-sharing system to enhance its brand; and maintaining Vtravelled.com, a site where customers exchange information, stories, and advice. As customers experiment with social media, companies should gain customer insights rather than simply try to increase sales, capitalize on the media's speed and reach while protecting the brand's reputation, and carefully follow the unwritten rules of customer engagement online. INSET: Idea In Brief. [ABSTRACT FROM AUTHOR]

With consumers tightening their belts, many premium brands are losing market share to low-price rivals. Their managers face a classic conundrum: Should they tackle the threat head-on by cutting prices and risk damaging their profits and brand equity? Or should they hold the line and lose customers who might never come back? Faced with those two unpalatable alternatives, companies often turn to a third option: launching a fighter brand. A fighter brand is designed to protect a premium offering by combating, and ideally eliminating, its cheaper competitors. The textbook example is Busch beer, which Anheuser-Busch introduced in 1955 at half the wholesale price of Budweiser. Busch fended off the inexpensive regional beers that were eating into Bud's sales and, even better, opened up a brand-new market segment for the company. Unfortunately, such victories are rare. Too many fighter brands inflict little damage on their targets and instead cause significant collateral losses for the companies that initiate them. What trips them up? Cannibalization of the premium product's sales, failure to create an offering that can compete, unprofitability, inattention to consumer needs, and drains on management's time and resources. With detailed accounts of campaigns lost -- and occasionally won -- Melbourne Business School's Ritson explains how to avoid those major hazards and launch an offering that wins on all fronts. [ABSTRACT FROM AUTHOR]

In tough times, many retailers focus on their most loyal customers. That seems sensible enough. But, paradoxically, your most loyal customers are not your best source of revenue growth in a recession. You're already collecting most of the money they're spending. If they suddenly spend 25% less, most of that will come out of what they spend in your stores. It's not likely that you'll pry away customers who are fiercely loyal to other retailers either. Your best opportunity lies with "switchers"--the people who spend money both in your shops and elsewhere. If you collect, say, only 20% of what they're spending today but can increase that to 30%, you'll still realize a net gain even if their total spending drops by 25%. Drawing on a study of more than 50 major U.S.-based retailers and over 20 years of global consulting experience, consultants Favaro, Romberger, and Meer set out five operating rules to help retail executives determine where to direct recession-squeezed resources for the biggest return. These rules basically boil down to: (1) Identify the people who are shopping both in your stores and in others' (2) Figure out what they're buying elsewhere (or want and can't find at all) and adjust your offer so you can give it to them (3) Analyze which of your costs contribute to producing the benefits the switchers want, then spend more on those activities and less on the ones that don't matter to them (4) Organize your efforts efficiently by grouping your stores into clusters based on different populations of switchers and, finally, (5) focus your customer research, merchandise-planning, performance management, and strategic planning process on the switchers. By following those rules, struggling retailers will discover that they have a larger universe of growth opportunities than they might think. [ABSTRACT FROM AUTHOR]

Multisided platforms can lower your transaction costs and increase customer reach. But powerful MSPs like Microsoft, Google, and Apple have also tended to extract most of the value from their platforms, mainly because companies that played with them didn't adequately understand their motives and operating strategies. As a result, firms can easily find themselves ceding control over customers to MSPs or being unwittingly turned into commodities. Hagiu and Yoffie, both professors at Harvard Business School, explore how MSPs can use their power to "hold up" companies that join them. The authors offer guidelines to help managers create an effective strategy for dealing with MSPs, identifying three basic issues that managers must address: (1) Whether to play with existing MSPs, build their own platform, or do both; (2) once they've concluded that at least one third-party MSP can benefit their business, deciding how many to join; and (3) figuring out how to play -- that is, which features or services they should adopt and which they should reject in order to maintain their company's competitive advantage. Some companies that lack the power to influence an MSP's actions may have few options. But many firms -- either on their own or in alliances -- can make choices that will differentiate them from competitors and curb MSPs' power over their businesses [ABSTRACT FROM AUTHOR]

Because no two recessions are exactly alike, marketers find themselves in poorly charted waters every time one occurs. But guidance is available, say Quelch and Jocz, who have studied marketing successes (by Smucker, Procter & Gamble, Anheuser-Busch, and others) as well as failures throughout past recessions and identified patterns in consumer and company behavior that strongly affect performance. Understanding consumers' changing psychology and habits, the authors argue, will enable firms to hone their strategies so they can both survive the current downturn and prosper afterward. Consumers in a recession can be divided into four groups: The slam-on-the-brakes segment, which feels the hardest hit, reduces all types of spending. Pained-but-patient consumers, who constitute the largest segment, also economize in each area, though less aggressively. Comfortably well-off individuals consume at near-prerecession levels but become a little more selective (and less conspicuous) about their purchases. Live-for-today consumers pretty much carry on as usual, responding to the recession mainly by extending their timetables for making major purchases. People may switch segments if their economic situations change for the worse. All groups prioritize consumption by sorting products and services into the following categories: essentials (central to survival or well-being), treats (justifiable), postponables (can be put off), and expendables (unnecessary or unjustifiable). As firms manage their marketing investments, they must simultaneously assess their brands' opportunities, allocate resources for the long term, and balance their budgets. Many make the mistake of cutting costs indiscriminately, which can jeopardize long-term performance. Instead, firms should streamline their product portfolios, improve the affordability of their offerings, and bolster customers' trust. [ABSTRACT FROM AUTHOR]

In tough economic times, some companies have outmaneuvered rivals to become market leaders through value-for-money strategies. That is, they have enabled recession-hit consumers to economize (do less and spend less), become more efficient (do the same for less), or become more effective (do more but spend no more). To implement such a strategy, argue this British professor and Chinese academic, companies must go beyond refining cost-cutting capabilities to develop expertise in cost innovation. That may not be good news for many U.S., European, and Japanese corporations, because multinationals from emerging markets, which have long experience with value-conscious customers, have already built cost-innovation capabilities that are unlocking mass markets in both developing -- and developed -- countries. Some, like battery maker BYD, have learned to sell high-tech products profitably at mass-market prices through a combination of lower labor costs and manufacturing innovations. Others, like drinks purveyor United Spirits, have dominated industries by blanketing sizable niches in their home markets with a full range of products or customized options. And still others, like appliance manufacturer Haier, have used low-price offerings to turn small, unguarded niches into mass markets in developed countries. In response, the authors argue, Western companies should turn to developing countries for vital lessons in lowering the cost of building brands and developing and manufacturing products. They should enter into alliances with emerging giants to gain cost-innovation capabilities. And they should use their superior financial strength to beat emerging giants at their own game of growing mass markets in developing countries. Multinationals that fail to learn from emerging rivals are unlikely to weather the recession well -- or stay competitive for very long. [ABSTRACT FROM AUTHOR]

Free customers who are subsidized by paying customers are essential to a vast array of businesses, such as media companies, employment services, and even IT providers. But because they generate revenue only indirectly, figuring out the true value of those customers -- and how much attention to devote to them -- has always been a challenge. Traditional customer-valuation models don't help; they focus exclusively on paying customers and largely ignore network effects, or how customers help draw other customers to a business. Now a new model, devised by professors Gupta, of Harvard Business School, and Mela, of Fuqua School of Business, takes into account not only direct network effects (where buyers attract more buyers or sellers more sellers) but also indirect network effects (where buyers attract more sellers or vice versa). The model calculates the precise long-term impact of each additional free customer on a company's profits, factoring in the degree to which he or she brings in other customers -- whether free or paying -- and the ripple effect of those customers. The model helped an online auction house make several critical decisions. The business made its money on fees charged to sellers but recognized that its free customers -- its buyers -- were valuable, too. As competition heated up, the company worried that it wasn't wooing enough buyers. Using the model, the business discovered that the network effects of buyers were indeed large and that those customers were worth over $1,000 each -- much more than had been assumed. Armed with that information, the firm increased its research on buyers, invested more in targeting them with ads, and improved their experience. The model also helped the company identify the effects of various pricing strategies on sellers, showing that they became less price-sensitive over time. As a result, the company raised the fees it charged them as well. INSET: Inadequate Remedies. [ABSTRACT FROM AUTHOR]

Multinational corporations from developed and developing economies alike are aggressively expanding their global presence, particularly in emerging markets. Industry traits largely determine the winners -- but that needn't always be the case, say Ghemawat, of IESE Business School, and Hout, of the University of Hong Kong. Companies can break the pattern by anticipating or creating new customer segments, managing cost convergences, or reworking the value chain. Some established MNCs are succeeding in production- and logistics-oriented businesses, where local rivals usually have an advantage. One way is by using technology and capital to accelerate segments' growth. Samsung, Sharp, and others surprised Chinese producers with vicious price competition in flat-screen TVs, which quickly collapsed the demand for conventional TVs, bottoming out Chinese profits. Another way established MNCs are beating emerging players is on costs, as home appliance companies in the United States did when Haier tried to enter the U.S. market for midsize refrigerators. Conversely, some emerging-market challengers are outperforming established MNCs in knowledge- and brand-intensive industries. Bharti Airtel has built the largest mobile-services operation in India by specializing in a limited part of the value chain (customer care and the regulatory interface) and outsourcing the rest, which freed up capital, made Bharti's cost structure more variable, and allowed the company to radically undercut advanced-market prices. Firms such as India's Suzlon Energy are also spotting opportunities to bundle ancillary services and products in which they have an advantage. The authors point to these examples and others to suggest that conditions are right for aggressive global players to move outside their industry comfort zones. [ABSTRACT FROM AUTHOR]

Redefining the terms of competition for a market sector, an industry, or an entire global ecosystem is a tall order. It means attracting thousands of participants, galvanizing their efforts, and retaining their commitment for the long haul. Hagel, Brown, and Davison, of the Deloitte Center for Edge Innovation, provide a blueprint for this daunting task of shaping strategy as technology-driven infrastructures constantly change. The authors discuss three elements that, no matter the industry, are vital in shaping strategy. A shaping view, or rallying cry to potential participants, clarifies the market opportunity, makes sense of fundamental forces, identifies rewards, and highlights the shared nature of risk. Bill Gates, of course, succeeded with his view of desktop computing, and more recently Salesforce.com's Marc Benioff has held out a new model for delivering enterprise software. A shaping platform, like that of Google's AdSense, clearly defines standards and practices that help organize and support the activities of many participants, enabling them to do more with less. Specific shaping acts and assets convince participants that the shaper has the muscle to pull off its initiatives, as Facebook has done by showcasing its relationship with Microsoft. The three elements together allow a shaper to quickly mobilize a critical mass of participants and, thereby, unleash powerful network effects that can yield big rewards during periods of rapid change. Almost any company will benefit from an attempt to shape strategy, say the authors, but they recognize that not every business is ultimately a shaper. By participating in other firms' shaping strategies, they show, a company can still find plenty of opportunities to create value. INSET: Rethinking the Process of Strategy Development. [ABSTRACT FROM AUTHOR]

Each of Lilypad's boutique hotels has its own sense of place and definition of customer experience. Though loyal to their favorites, guests don't visit other luxury properties in the collection or even realize they're affiliated. To boost the lifetime value of existing customers and reach new ones, CEO Andre Cleary is thinking about positioning the hotels more directly under the corporate umbrella. The company could gain scale efficiencies and possibly increase visits -- but does one brand really fit all? Four experts comment on this fictional case study. Horst Schulze, the CEO and president of the West Paces Hotel Group, says that Lilypad must build up its corporate brand to create long-term value. This would also help the company become more efficient at cross-promoting properties, offering services, and buying supplies in bulk. Jill Granoff, the executive vice president of direct brands at Liz Claiborne, says that the financial risks of putting the Lilypad name front and center may outweigh the potential rewards. The company should instead market its hotels more aggressively to travel agents and selectively acquire new properties to propel further growth. Kevin Lane Keller of Dartmouth argues that Lilypad must clarify what its brand represents before giving it any more emphasis. Rather than making significant changes in the rooms themselves, which could weaken the individual brands, management should coordinate behind the scenes to improve cross-sell numbers. Jez Frampton, the global CEO of the consultancy Interbrand, thinks Andre should systematically examine the brand in terms of Lilypad's customers and culture. That means conducting market research and moving away from the current "warlord" approach of managing each property as a separate fiefdom. [ABSTRACT FROM AUTHOR]

In 1979, a young associate professor at Harvard Business School published his first article for HBR, "How Competitive Forces Shape Strategy." In the years that followed, Michael Porter's explication of the five forces that determine the long-run profitability of any industry has shaped a generation of academic research and business practice. In this article, Porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. The five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. That value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. In exploring the implications of the five forces framework, Porter explains why a fast-growing industry is not always a profitable one, how eliminating today's competitors through mergers and acquisitions can reduce an industry's profit potential, how government policies play a role by changing the relative strength of the forces, and how to use the forces to understand complements. He then shows how a company can influence the key forces in its industry to create a more favorable structure for itself or to expand the pie altogether. The five forces reveal why industry profitability is what it is. Only by understanding them can a company incorporate industry conditions into strategy. [ABSTRACT FROM AUTHOR]

The article contains summaries for nine featured papers in this issue of "Harvard Business Review." The HBR fictional case study, "Mad About Plaid," is by Julia Kirby and has commentary from Niall Ferguson, Dana Thomas, Dov Seidman, and Gill Corkindale. The cover story is "A Leader's Framework for Decision Making," by David J. Snowden and Mary E. Boone. "Cognitive Fitness" is by Roderick Gilkey and Clint Kilts. "If Private Equity Sized Up Your Business" is by Robert C. Pozen. "Eight Ways to Build Collaborative Teams" is by Lynda Gratton and Tamara J. Erickson.

The customers who buy the most from you are probably not your best marketers. What's more, your best marketers may be worth far more to your company than your most enthusiastic consumers. Those are the conclusions of professors Kumar and Petersen at the University of Connecticut and professor Leone at Ohio State University, who analyzed thousands of customers in research focused on a telecommunications company and a financial services firm. In this article, the authors present a straightforward tool that can be used to calculate both customer lifetime value (CLV), the worth of your customers' purchases, and customer referral value (CRV), the value of their referrals. Knowing both enables you to segment your customers into four constituent parts: those that buy a lot but are poor marketers (which they term Affluents); those that don't buy much but are very strong salespeople for your firm (Advocates); those that do both well (Champions); and those that do neither well (Misers). In a series of one-year experiments, the authors demonstrated the effectiveness of this segmentation approach. Offering purchasing incentives to Advocates, referral incentives to Affluents, and both to Misers, they were able to move significant proportions of all three into the Champions category. Both companies reaped returns on their marketing investments greater than 12-fold -- more than double the normal marketing ROI for their industries. The power of this tool is its ability to help marketers decide where to focus their efforts. Rather than waste funds encouraging big spenders to spend slightly more while overlooking the power of customer evangelists who don't buy enough to seem important, you can reap much higher rewards by nudging big spenders to make referrals and urging enthusiastic proponents of your wares to buy a bit more. [ABSTRACT FROM AUTHOR]

Brands are on the wane. Many consumer-goods companies blame the big-box discount retailers, but the Wharton School's Leonard Lodish and the Fuqua School's Carl Mela have a different explanation. Their research suggests that companies have damaged their brands by investing too much in short-term price promotions and too little in long-term brand building. To rescue their brands and increase profitability, corporate managers must arm themselves with long-term measures of brand performance and use them to make smarter marketing decisions. Several factors explain the short-sightedness of brand management: the increased availability of weekly, or even hourly, scanner data, which show a clear link between discounts and immediate boosts in sales; the relative difficulty of measuring the effects of advertising, new-product development, and distribution--all of which can contribute to a brand's long-term health; the short tenure of most brand managers; and the near-term orientation of Wall Street analysts. Although discounts do increase sales in the short term, they ultimately lower profit margins. If a product is often discounted, consumers learn to buy it only when it's on sale. Moreover, when one firm increases its discounts, others usually follow suit, lowering everyone's margins. Executives can monitor a brand's long-term performance by watching a dashboard of measures. Only after examining such measures, for example, did managers at Clorox discover that the company's heavy discounting and decreased advertising had caused a steady decline in overall bleach sales and profit margins. In response, Clorox reduced discounting and increased television advertising, moves that ultimately strengthened the brand and reversed the firm's downward trends. [ABSTRACT FROM PUBLISHER]

How do some firms produce a pipeline of consistently excellent managers? Instead of concentrating merely on strengthening the skills of individuals, these companies focus on building a broad organizational leadership capability. It's what Ulrich and Smallwood--cofounders of the RBL Group, a leadership development consultancy--call a leadership brand. Organizations with leadership brands take an "outside-in" approach to executive development. They begin with a clear statement of what they want to be known for by customers and then link it with a required set of management skills. The Lexus division of Toyota, for instance, translates its tagline--"The pursuit of perfection"--into an expectation that its leaders excel at managing quality processes. The slogan of Bon Secours Health System is "Good help to those in need." It demands that its managers balance business skills with compassion and caring. The outside-in approach helps firms build a reputation for high-quality leaders whom customers trust to deliver on the company's promises. In examining 150 companies with strong leadership capabilities, the authors found that the organizations follow five strategies. First, make sure managers master the basics of leadership--for example, setting strategy and grooming talent. Second, ensure that leaders internalize customers' high expectations. Third, incorporate customer feedback into evaluations of executives. Fourth, invest in programs that help managers hone the right skills, by tapping customers to participate in such programs. Finally, track the success of efforts to build leadership bench strength over the long term. The result is outstanding management that persists even when individual executives leave. In fact, companies with the strongest leadership brands often become "leader feeders"--firms that regularly graduate leaders who go on to head other companies. [ABSTRACT FROM PUBLISHER]

Last December the Toyota Motor Corporation officially forecast that it would sell 9.34 million cars in 2007--which could make it the world's largest automaker. However, rapid growth and globalization have created many pressures for the company, and the strain of success is already beginning to show. Two HBR editors interviewed Toyota's president, Katsuaki Watanabe, and several top executives to learn about the strategies they're developing to cope in the future. For well over a decade, J.D. Power and other research firms have consistently rated Toyotas among the top automobiles for quality, reliability, and durability. But in 2006 a series of problems with its cars threatened to sully the company's reputation. What's more, speedy expansion to meet demand and the struggle to keep pace with technological change have combined to challenge Toyota's grand ambitions and its famed "Toyota Way." For Watanabe, being number one means "being the best in the world in terms of quality." If Toyota's quality continues to improve, he says, volume and revenues will follow. If problems arise from overstretching, he wants them made visible, because then his people will "rack their brains" to solve them--and if that means postponing growth, so be it. Toyota's long-term strategy involves developing both global and regional car models in order to compete worldwide with a full line of products. Watanabe aims to achieve his goals through a combination of kaizen ("continuous improvement") and kakushin ("radical innovation"). One of his visions for the future is a "dream car": a vehicle that cleans the air, prevents accidents, promotes health, evokes excitement, and can drive around the world on a single tank of gas. [ABSTRACT FROM PUBLISHER]

When François Jacques became head of marketing at Lafarge's cement division in late 2001, old-timers told him that there were only two types of customers: those who liked golf and those who liked fishing. Welcome to the front lines of your typical cement company, a hardscrabble world peopled by grizzled salesmen whose pitches are about making friends rather than demonstrating that their products are better than the competition's. It isn't easy to establish a marketing function in a company that doesn't think it needs one. From the start, Jacques tackled the challenge on a number of fronts. First, he formed a three-person steering committee with both his strongest ally and his most vociferous foe in the executive ranks. Then he set right to work applying marketing's most basic and powerful tools--segmentation and pricing strategy to four carefully chosen pilot projects. To make the value of those efforts quickly apparent, he measured their effectiveness with readily understood metrics. He shared the ongoing results as widely as possible by establishing regional networks of marketing and sales executives. He wove marketing into Lafarge's mainstream management processes by becoming a fixture at the company's strategic-planning, performance, and budgeting discussions. Step by step, over the next four years, Jacques and his team of first temporary, and then permanent, marketers fundamentally transformed Lafarge's commodity mind-set. Segmenting customers allowed people to see that they were selling to different groups that required different products, which in many cases could be sold for higher-than-commodity prices. Customer satisfaction surveys led them to improve supply chain execution and, ultimately, to change what they sold, so that their offerings were suited to a range of customer requirements, increasing value both for them and for the division. Many firms have a marketing function in name only. These lessons can serve as a model for such companies looking to escape the commodity trap. [ABSTRACT FROM AUTHOR]

More and more, expanding companies are hiring high-functioning groups of people who have been working together effectively within one company and can rapidly come up to speed in a new environment. These lifted-out teams don't need to get acquainted with one another or to establish shared values, mutual accountability, or group norms; their long-standing relationships and trust help them make an impact very quickly. Of course, the process is not without risks: A failed lift out can lead to loss of money, opportunity, credibility, and even native talent. Boris Groysberg and Robin Abrahams studied more than 40 high-profile moves and interviewed team leaders in multiple industries and countries to examine the risks and opportunities that lift outs present. They concluded that, regardless of industry, nationality, or size of the team, a successful lift out unfolds over four consecutive, interdependent stages that must be meticulously managed. In the courtship stage, the hiring company and the leader of the targeted team determine whether the proposed move is, in fact, a good idea, and then define their business goals and discuss strategies. At the same time, the team leader discusses the potential move with the other members of his or her group to assess their level of interest and prepare them for the change. The second stage involves the integration of the team leader with the new company's top leadership. This part of the process ensures the team's access to senior executives--the most important factor in a lift out's success. Operational integration is the focus of the third stage. Ideally, teams will start out working with the same or similar clients, vendors, and industry standards. The fourth stage entails full cultural integration. To succeed, the lifted-out team members must be willing to re-earn credibility by proving their value and winning their new colleagues' trust. [ABSTRACT FROM AUTHOR]

In this follow-on piece to his article "Hardball: Five Killer Strategies for Trouncing the Competition" (HBR April 2004), George Stalk of the Boston Consulting Group offers another approach for prevailing over rivals. Strategic hardball is about playing rough and tough with competitors; strategic curveball is about outfoxing them. It involves getting rivals to do something dumb that they otherwise wouldn't (that is, swing at a pitch that appears to be in the strike zone but isn't) or not do something smart that they otherwise would (that is, fail to swing at a pitch that's in the strike zone but appears not to be). Stalk describes four types of curveball: · Draw your rival out of the profit zone. Lure competitors into disadvantageous areas--for example, by competing for, but intentionally failing to win, the business of less profitable customers. · Borrow techniques from unexpected places. Using the hardball tactic of plagiarizing good ideas, put rivals off balance by importing techniques from other industries--for example, employing the retailer's hard sell in the stodgy world of retail financial services. · Disguise how you attain your success. Veil your methods by achieving an advantage through unlikely means--for example, generating product sales through your service operations. · Let rivals misinterpret the reasons for your success. Allow them to act on conventional but incomplete explanations for your success--for example, squeezing costs rather than aggressively utilizing assets. The author provides extended examples of these curveball strategies in action, at companies such as the industrial-cleaning chemical supplier Ecolab and the Australian airline Jetstar. INSET: Curveball Strategy. [ABSTRACT FROM AUTHOR]

Intel and Microsoft neither buy from nor sell to each other directly, but they are undeniably in business together. They are probably the world's most widely known pair of complementors--companies that independently provide complementary products or services to mutual customers. Complementors increase the value of each other's offerings and the size of the total market. So it's not surprising that so many just assume that their interests are aligned. Nothing could be further from the truth. Discord can develop in many areas, such as pricing, technology, standards, and control of the market--both in terms of which company has the most influence over customers and which one gets the biggest slice of the pie. The issue of pricing perfectly captures this tension. Ideally, you'd like to price your goods high while your complementors price theirs low. Airlines, for instance, would be happy to see vacation lodgings go for a song, while destination resorts could raise rates and still fill their rooms if customers could fly there for free. The first step in managing relationships with complementors is to develop a deep understanding of their economics, their strategies and goals, their existing capabilities, their incentives for cooperation, and any potential areas of conflict. Then, to gain the upper hand, companies can use a variety of tools that fall into two main categories: hard power (inducements or coercion to get what you want) and soft power (persuasion through indirect means to get others to want what you want). The authors explain how to build both hard power and soft, illustrate the strengths and limits of each, and offer guidelines for choosing one over the other. Conflict among complementors is inevitable, but together, hard and soft power can help companies manage the dark side of complementor relationships and take full advantage of the opportunities that cooperation should create. [ABSTRACT FROM AUTHOR]

When is a buyer not really a buyer? How can the best product at the lowest price turn off buyers? Are there anonymous leaders who make the actual buying decisions? As these questions suggest, the reality of buying and selling is often not what it seems. What's more, salespeople often overlook the psychological and emotional factors that figure strongly in buying and selling. By failing to observe these less tangible aspects of selling, a vendor can lose sales without understanding why. In this article, first published in 1982, Bonoma sets up a procedure for analyzing buying decisions and tells sellers how to apply the resulting framework to specific situations. Steps in the procedure include the following: Identifying the actual decision makers. Though it may come as a surprise, power does not correlate perfectly with organizational rank. The author outlines five bases of power and offers six behavioral clues for identifying the real decision makers. Determining how buyers view their self-interest. All buyers act selfishly, but they sometimes miscalculate. As a result, diagnosing motivation is one of the most difficult management tasks to do accurately. The author suggests several techniques to determine how buyers choose their own self-interest. Gathering and applying psychological intelligence. There is no formula for placing sound psychological analyses magically in the sales staff's hands. However, the author offers three guidelines--make sure that sales calls are highly productive and informative, listen to the sales force, and reward rigorous fact gathering, analysis, and execution--to help managers increase sales effectiveness. [ABSTRACT FROM AUTHOR]