STARTING WITH AN EXAMPLE

Four Steps towards becoming market oriented

1. Information Acquisition 2. Cross-Functional Analysis of Information 3. Shared Diagnosis & Coordinated Action 4. Delivery of Superior Customer Value

1. Information Acquisition Gathering & analyzing relevant information about customers, competition, & the market; Data-mining of company records & information system; Using company resources (in Sales, Marketing, & other functions) to obtain information on competition, market norms, regulations etc.); Learning from experience: open-minded enquiry, broad-based information sharing

2. Cross-functional Analysis of Information:

Sharing of information across functions for deeper understanding of customer needs & more rapid product development. At Zara, the Spanish apparel retailer, 40,000
apparel styles are created every year, each taking no more that 4 weeks from designing to arrival in store. This "fast fashion" system depends on a constant exchange of information throughout every part of Zara's supply chain

3. Shared diagnosis and action: Input from cross functional teams goes towards agreement on essentials and trade-offs in meeting customer needs; Teamwork a positive driving force for companies; Generates commitment towards action plans as they are mutually agreed.

4. Delivering superior customer

value:

Superior customer value a key

competitive advantage; Superior customer value = Trade off between benefits and cost; Benefits include the product quality, support services, purchase experience & more.

1. Make

customer the focal point;

2. Commit systems to creating continuous

superior customer value; 3. Use superior skills understand & satisfy customers; 4. Involving entire workforce in the process cross-functional coordination! 5. Constantly monitor changing customer needs & wants;

6. Measure impact of changes on

customer satisfaction; 7. Pursue product innovation; 8. Gather competitor intelligence make it a priority; 9. Design & implement strategies for competitive advantage.

In Zara stores, customers can always find new products but in limited supply. There is a sense of tantalizing exclusivity a few items on display even though stores are spacious . A customer thinks, "This green shirt fits me. If I don't buy it now, I'll lose my chance."

Zaras retail concept depends on the regular creation and rapid replenishment of small batches of new goods. Zara's designers create approximately 40,000 new designs annually, from which 10,000 are selected for production. Some of them resemble the latest couture creations.

But Zara often beats the high-fashion houses to the market and offers almost the same products, made with less expensive fabric, at much lower prices.

This "fast fashion" system depends on a constant exchange of information throughout every part of Zara's supply chain - from customers to store managers, from store managers to market specialists and designers, from designers to production staff, from buyers to subcontractors, from warehouse managers to distributors, and so on.

Most companies insert layers of bureaucracy that bogs down communication between departments. But Zara's organization, operational procedures, performance measures, and even its office layouts are all designed to make information transfer easy.

Zara

is market driven!

 Starbucks: By creating a new customer

experience, along with drinking of fine coffee, Starbucks dominated a new dimension of customer value, while charging a high price.

 WalMarts TEN-FOOT-RULE of greeting

customers (by greeters), & collective singing of the stores anthem, upset customers at the stores established in Germany & forced them to stop the practice.

 What

makes a company Market Driven?

Understanding markets/ customers - the starting point for any business strategy. of markets -

Understanding

companywide!
Integrating

all company activities to deliver Customer Value is the challenge... that can ONLY be met through

Market-driven strategies.

Development of market-driven strategy is not a short-term exercise. Requires investment in: 1. Market-driven organizational culture & processes; 2. Measurement systems, beyond the short-term financial performance.

Becoming MarketDriven Leveraging Distinctive Capabilities

Achieving Superior Performance

Matching Customer Value & Capabilities

Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.

Organization's capabilities are not a particular business function, asset, or individual, but comprise major processes as well. E.g. Dell Computers direct-to-customer, built-to-order process.

Distinctive Capabilities: Process Flow

Skills (cross functional teams) Accumulated knowledge (new product experience)

Organizational processes (New Product experience)

Superior customer value

Coordination of activities (communication)

Assets (brand image)

Organizational Processes 1. Point-to-point route system (not hub-andspoke!). 2. Service to 57 cities in 29 states - average trip about 500 miles. 3. Value proposition: low fares & limited service (no meals). 4. Major emphasis on building loyal customer base. 5. Operating costs low - Boeing 737 aircraft.

Skills and Accumulated Knowledge Skilled at operating business model at very low cost levels. Accumulated knowledge guides management decision making. Coordination of Activities Coordination across business functions facilitated by point-to-point model, high aircraft utilization, simple functions, limited services. Assets Low operating costs, loyal customer base, high employee motivation.

Understanding a firms distinctive capabilities and relating them to customer value requirements is important; Capabilities enable organizations to compete in new markets, provide value to customers, and create market entry barriers; Singapore airlines performs many commercial air transportation functions, but is well recognized as the industry leader in customer service delivery;

Deciding on which capability to pursue a is crucial for a companys long-term success; Hondas engine and drive-train technology has various product applications, and is widely respected. Three desirable capabilities: 1. Superior to competition; 2. Applicable to multiple competitive situations, 3. Difficult to duplicate.

Three types of distinctive capabilities have been identified, based on how processes operate: 1. Outside-in processes: connect organization to the external environment, providing market feedback and forging external relations; 2. Inside-out processes: designed to satisfy customer requirements; 3. Spanning processes: respond to customer needs and requirements identified by outside in processes.

EXTERNAL EMPHASIS

INTERNAL EMPHASIS

Outside-In Processes Market sensing Customer linking Channel bonding Technology monitoring

Spanning Processes Customer order fulfillment Pricing Purchasing Customer service delivery New product/ service development Strategy development

Inside-Out Processes Financial management Cost control Technology development Integrated logistics Manufacturing/ transformation processes Human resources management Environment health and safety

Becoming MarketDriven Leveraging Distinctive Capabilities

Achieving Superior Performance

Matching Customer Value & Capabilities

What is Customer Value? The outcome of a processthat begins with a business strategy and is anchored in a deep understanding of customer needs.value expectations & Customers form decide to purchase goods and services based on the perception of product benefits versus cost; Customer satisfaction indicates how the product experience compares to buyers value expectations.

Hewlett-Packard was about to introduce an inkjet printer in the market. The question was whether to pitch it against high cost, high profit laser printers, the kind H-P were known for. H-P management decided against targeting laser printers, and instead, positioned ink-jet as better Value compared to low-cost dot-matrix printers. H-Ps timely decision opened up a large market segment for the company, as dot-matrix users were getting increasingly dissatisfied with the quality and capabilities of dot-matrix printer.

Becoming MarketDriven Leveraging Distinctive Capabilities

Achieving Superior Performance

Matching Customer Value & Capabilities

Matching customers desired value and the firms distinctive capabilities

THE SWEET SPOT

Value Desired

Distinctive Capabilities

Research suggests that many marketoriented companies are not market driven. Market-driven companies are ones that: Identify which capabilities to develop; Decide on investment commitments to be made, & Put the plan into action. Q: What capabilities are required to become market-driven?

Market-driven strategies begin with understanding of market & customers; Developing market orientation, leveraging distinctive capabilities, matching customer value with organizational capabilities, & delivering superior customer value at key; Creation of superior customer value is a continuing competitive challenge.

1. Market Sensing Capabilities

a) Having effective processes in place, to keep learning about market; b) Sensing market changes by collecting and sharing information across functions to collectively arrive at action plan.

2. Customer Linking Capabilities:

the ability to create & maintain close customer relationships. Customer linking reduces churn - the possibility of their moving to other vendors/suppliers.

Royal Doulton, manufacturer of fine china, to recognize the consumer trend towards informal eating, that reduced the market size for formal dinnerware.

Becoming market driven often requires change in organizational design, either: To improve existing processes OR For process redesign.

Objectives: Improve product quality, Reduce cost, Improve service delivery. Primary targets for reengineering: Sales & Marketing, Customer Relations, Order Processing/ Fulfillment, and Distribution

Market-driven strategies begin with understanding of market & customers; Developing market orientation, leveraging distinctive capabilities, matching customer value with organizational capabilities, & delivering superior customer value make a company market driven. Creation of superior customer value is a continuing competitive challenge.