Wednesday, October 24, 2007

Book Review: Value Acceleration


The central contention of Value Acceleration: The Secrets to Building an Unbeatable Competitive Advantage by Mitchell Goozé and Ralph Mroz comes down to three points: 1) virtually every functional discipline in the modern organization (accounting, engineering, production etc.) is now run using established processes; 2) marketing and sales organizations are broken because they lack such processes; 3) companies can create an "unbeatable" competitive advantage by incorporating an overarching sales and marketing process, borrowing principles from the manufacturing realm.

Goozé and Mroz argue that marketing (defined as the entire process of determining customer needs, guiding product development based on customer and competitive intelligence, promotion and sales) is the central function of every company—it aligns marketplace needs with the organization's core competencies. Therefore, "An integrated-process model and objective management methods to manage that process lay the foundation for realizing the potential of marketing/sales."

The authors make a compelling case—up to a point. Particularly on the product management side of marketing, many organizations struggle to implement effective practices, or have reasonably solid product management processes but lack integration with the promotional end of marketing. In the words of the authors, "The "front-end" marketing skills—such as positioning and opportunity identification—and the "integrative" marketing skills—such as integration with product development, sales and corporate strategy—are not well understood." Getting the "front end" of marketing right us crucial because, to cite one example used in the book, "80% of HP's and Canon's revenue comes from products less than two years old."

Among the book's highlights:

- "Competitive advantage, therefore, goes only to the risk takers—to those who pioneer useful new management techniques." That may well be true, but small businesses constitute the bulk of the American economy (and many others) precisely because as companies grow, they tend to become more risk-averse.

- "Among all corporate functions, marketing alone has the distinction of not having a well-defined process by which it is practiced." The authors propose a promising answer: an overarching product-management-promotion-sales process based on a "customer manufacturing system" and borrowing principles from manufacturing, such as constraint analysis, continuous improvement and lean thinking.

- "Why is there no well-accepted marketing process today? The first and most obvious answer is that there isn't even a common answer to the question `What is marketing?' Ask 100 managers and marketing practitioners to define marketing and you'll get 150 different answers." There is no overall process because there is no common definition.

- "There is no consistency [in marketing processes] over time or across products." This shouldn't come as a surprise, given that the average tenure for a CMO is less than two years (optimistically; I've seen figures closer to 18 months). While that's enough time to install a process, it's not enough to really establish it as part of the organizational fabric. This presents a chicken-and-egg question: are CMO tenures so short because they don't implement effective, overarching marketing processes, or are such processes rare because corporations chew through CMOs too quickly?

- "[A common problem is that] too much attention is paid to gaining new customers, to the detriment of existing customers...There [is] a strong likelihood that [companies lose] existing customers to the competition while...working hard to attract replacements."

- As familiar as that last point likely sounds, this one will probably resonate even more with most marketers: "If you ask sales people where the constraint or bottleneck is in your marketing/sales process, we find the answer is invariably in only one of three areas: 1) Your prices are too high; 2) They need more leads; 3) They need more new products or services. In our experience working with companies to identify the actual constraint, this is rarely where the constraint actually lies." Ouch!

- "A set of sales activities not organized into a process is nothing more than a chaotic, random group of events. The inevitable outcome—surprise!—is a chaotic, random group of results...The only way to 'manage' or 'improve' a sales function that is not process-driven is to swap out sales people and hope for better results. Sound familiar? That's the way many sales organizations are run."

Although the central message of the book is compelling, I do have several issues both small and large with the book. Among the small issues:

- The overall tone of the writing is dryly academic, and could have benefited from a lighter treatment in places (though in fairness, the authors do quote Yoda at one point). Here's a sample: "Using a causal modeling technique known as structural equation modeling (SEM) or pathway building combined with constraint theory, it is possible to obtain correct results from this approach using a widely applied set of questions." Whew, doesn't exactly roll off the tongue.

- PR is NOT a lead generation activity; it's about awareness and credibility building.

- The proofreading is sloppy in spots. Example: "Clearly spelled out in these of processes is a detailed list marketing responsibilities at each phase from a product development perspective." Huh?

And among the large issues:

- "A useful process model...defines the information flows between the elements and sub-elements of the process; thus ensuring that marketing/sales is an integrated function, and that the information it operates on is complete and accurate." Because the authors use manufacturing practices as a model for marketing, they sometimes seem to lose sight of the fact that marketing deals with people, not parts. Yes, anyone can theoretically make the right decision given complete and accurate information, but getting such information is more challenging than the authors concede. Unlike production parts, people bring biases, assumptions, and other mental baggage to the process, so the trick is to be able to make good decisions based on information that is fundamentally BAD (my acronym from my competitive intelligence days for "best available data"), with recognition that the information at hand will always be less than "complete and accurate."

A further complication here is that human behavior is much more complex than the physics of manufactured parts. If I perform operation A on part B in the prescribed fashion, over and over, I should get pretty much the same results (within tolerances). But the same ad campaign can produce radically different results from week to week based on seasonality or just random factors.

- The authors' description of the dysfunction of most marketing departments (they devote an entire chapter to this!), while containing many valid criticisms, is a bit overdone. While their central contention—the marketing discipline in general lacks an all-encompassing process framework, and could benefit greatly from having one—is valid, few marketing departments in quite as bad shape as the authors describe. The lack of an overarching process certainly doesn't mean that there are no processes in place, or that management techniques from the manufacturing world, such as continuous process improvement, can't be or aren't already being applied (having started my career as an industrial engineer before moving over to marketing, I was applying this approach an ERP company a decade ago).

- In their discussion of misalignment between selling and buying processes, the authors write, "End-of-the-period purchase incentives are another common misalignment...you are training your customers to expect an incentive. As we write this, the U.S. automobile industry has been running "incentives" for so long, that most customers won't buy a car without one any more."

While the observation that car makers could optimize their profitability by ceasing to offer incentives may be true in theory, in practice they have created for themselves a "prisoner's dilemma"—they could all make money by dropping the incentives, but any single manufacturer that tried this would quickly lose business to those who continued the practice. The authors provide no answer to this quandary.

- The chapter on "Breakthrough Thinking in Sales" is the weakest in the book. The authors advise sales people to "Map your customer's buying process. There is no step 2. Now you can stop selling and start making customers." There are (at least) three problems with this approach:

1) Customers are most likely to have established buying processes in place for frequently purchased items, where the roll of sales is primarily to act as an order-taker, not true "hunting."

2) Different customers have different buying processes: small companies buy different than large ones, public companies may have different processes than private firms, and government agencies purchase differently from private sector organizations. Practices may also vary by industry. If there are a dozen (or more) different buying processes to model depending on any variety of factors, is there really a "process" to mirror at all?

3) For infrequently purchases products and services, or entirely new offerings, there is no established buying process in place to reflect. Sales people require the skills to guide the customer through the purchase.

- The authors emphasize continuously throughout the book the importance of solid product management in designing the right products for your market. Yet, despite the one example cited to the contrary (an odd one at that—IBM, the company that famously missed the PC revolution, which was launched by two guys in a garage), large and even midsized companies rarely introduce truly new products. They are very good at developing incremental improvements, but the aforementioned risk-aversenss of larger organizations make them ill-suited to designing entirely new products. These are most commonly created by visionary entrepreneurs in small companies willing to risk everything to bring an idea to life. As noted above, the personal computer wasn't invented in large company; neither was online music distribution (which the record companies were too short-sighted to capitalize on; that took the work of a 19-year-old), online video sharing (YouTube) or a host of other innovations.

- Finally, there is this: "This book has been about both the necessity of process management and about the need for a process model of the corporation's single most critical, non-out-sourceable function: marketing/sales." [Emphasis mine.] Whoa, while product management may be very difficult to outsource, the notion that marketing can't be outsourced would certainly be news to the 3,000+ marketing agencies in the U.S. (and many more around the world). And if sales can't be outsourced, how does one explain the existence of brick-and-mortal retailers, ecommerce companies, wholesalers, distributors, VARs and other external sales channels?

Still, despite its flaws, Value Acceleration: The Secrets to Building an Unbeatable Competitive Advantage presents a compelling case for, and a useful description of, a unified marketing/sales process model that could benefit many companies. It deserves to be read, if sometimes with a dash of skepticism, by every CMO, aspiring CMO, and marketing executive, as well as non-marketing executives who want to understand why marketing and sales sometimes seem like dysfunctional, disorganized parts of the organization—and what can be done to fix the problem.

Other blog reviews of this book:

Six Sigma Blog
Meaningful Marketing

*****

Contact Tom Pick: tomATwebmarketcentralDOTcom

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