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| A New Way to Market
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As the marketplace evolves ever more rapidly, marketers struggle to keep pace. Their traditional stratagems—redesigning market segmentations, building strong brands, and hiring cadres of marketing managers—continue to be necessary. But unless those solutions can be mobilized rapidly, many marketers could find themselves overtaken by their competitors, for a fundamentally different way of organizing companies to exploit opportunity seems to be emerging among many growth leaders. You might call them venture-marketing organizations (VMOs), since like venture capitalists they are quick to spot new possibilities, to allocate resources to the best ones, and to cut their losses as they go.
Such groups realize that to outpace the market consistently, they must not only create fluid organizational structures but also provide for unyielding rigor in measurement and decision making. As a result, they enjoy revenue growth rates that on average are one and a half times those of the competition (exhibit). Incumbent or attacker alike, they are capturing more than their share of market opportunities.
Stay Fluid
When traditional marketers think of organization, they mean structure: distinct product, channel, and customer groups focusing on specific functional tasks, such as brand management, customer segment management, and market research. Functional managers play the pivotal roles in these functionally focused groups, which are responsible for generating ideas and taking them to market.
But the traditional approach hinders the fluidity required to keep pace with the market’s evolution. For when market priorities change, traditionalists take a "wreck and rebuild" approach that consumes the precious time of top executives, disrupts action on the front lines, and, worst of all, often fails to yield the intended results. Sixty-seven percent of respondents in a Watson Wyatt survey1 said that in most cases the complex and confusing changes companies passed through during such reorganizations did little to improve their performance.
New-style marketing groups understand that formal structures can’t drive value in fast-moving environments. To make organizations keep pace with the market, these groups rely not on periodic restructurings but on a continual process of evolution. VMOs do have designated managers for core products, segments, and channels, but the number of these managers, the scope of their responsibilities, and the people to whom they report evolve constantly to reflect changing opportunities.
At Dell Computer, for instance, the incentive system rewards marketing managers who successfully identify and capture so many market opportunities that some of their business must be passed on to other managers. Divisions divide into smaller and smaller units, and profit-and-loss responsibility spreads out among more and more managers—an approach that encourages all of them to turn the needs of their customers into products and services as quickly as possible.
First USA’s credit card unit is another organization whose strong growth over the past few years has been propelled by the new approach. It has few solid-line reporting relationships. New positions are created above, beside, or below their predecessors, and new people are constantly being placed in shared resource pools, which are constantly reconfigured dynamically.
Although First USA has had performance problems since being acquired by Bank One, the phenomenal earlier growth rate of the credit card issuer was propelled largely by its VMO approach. First USA routinely makes organizational changes in the ordinary flow of business, without slowing down day-to-day progress on initiatives. After identifying new opportunities worth pursuing, the company quickly determines what specialized skills are required and pulls together a suitable "dream team." To provide qualified leaders quickly, First USA maintains a pool of available managers whose specialized skills can be used to develop and launch a variety of new card products. If building the dream team means pulling people out of their current jobs, finding them in the ranks of partners, or hiring from the outside, those people are pulled, found, or hired.
Contrast First USA’s venture-marketing philosophy with the standard approach of financial-services marketing organizations.
One leading traditional credit card issuer places all of its marketing resources in a single organization split into distinct groups focusing on functional tasks. Instead of evolving these groups continually, the company reorganizes them every two years to create the structure for the next business cycle. Responsibility for capturing new opportunities is assigned to existing functional groups. This traditional marketer has a strong brand name, uses a number of channels with great skill, segments its markets effectively, and runs a high-impact direct-marketing operation. Yet starting from a smaller base, First USA issued five times as many new credit cards during a recent three-year period.
Another VMO-style company, Starbucks, tackles new opportunities by assembling teams whose full-time leaders often come from the functional marketing areas most critical to success. If the originator of an idea has the right qualifications, that person may take the lead role. When teams require specialized skills that are not available internally, Starbucks looks outside. To lead its Store of the Future project, for example, it hired a top executive with retail experience away from Universal Studios, and to develop its lunch service concept it chose a manager from Host Marriott Services.
After teams at First USA and Starbucks have successfully launched new products and services, some members continue to manage or sustain them;
others go back into a pool and are quickly redeployed on new-opportunity teams; still others return to line management jobs. In all cases, success on a team is vital for promotion or for a bigger leadership role in the next project.
This approach to teamwork also prevails when venture marketers collaborate with outside partners. Starbucks, for instance, wanted to launch a new ice cream product, but executives quickly realized that the company lacked the in-house packaging and channel management skills to move quickly enough. It therefore teamed up with Dreyer’s Grand Ice Cream. Starbucks understood the specific marketing skills it needed and acquired them with the dream team philosophy in mind. As a result, the company launched the new product in half of the usual time, and within four months it became the top-selling brand of coffee ice cream. |
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2001 MarketingPower.com Inc. Contents used by permission of The McKinsey Quarterly. |
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