Is Business Really All About Trade-Offs?

In an interesting article back in 2009 by Kevin Keller and Frederick Webster, they wrote that “one of the realities of modern brand marketing is that many of the decisions that marketers make with respect to their brands are seemingly characterized by conflicting goals, objectives and possible outcomes. Unfortunately, in our experience, too many marketers define their problems in ‘either/or’ terms, creating situations where one idea, one individual or one option wins out, (p.13).”

 

In this scenario opportunities are potentially missed as the ‘organisation’ doesn’t look at optimizing the branding options through synergies between the ideas or looking at completely new ideas.

Keller and Webster also highlighted that “conflict and trade-offs are inherent in marketing decision making, and are the most fundamental challenges of marketing and brand management;” and highlight four broad categories for these trade-offs, “strategic, tactical, financial and/or organizational, (p.13).” But trade-offs are a key part of business, not just marketing management. 

Anyone who has been through a strategy development process will know that trade-offs are being considered all the time and what the best organisations do, is to look at the optimization of their future growth and see ‘trade-offs’ as opportunities to optimize ‘all the potential, positive, outcomes’ for their business; i.e. they turn the perceived ‘trade-off’ into a ‘new’ winning formula for success.

Where organisations miss potential growth opportunities, is when their operational philosophy encourages their employees to choose between potential trade-offs like, for example, setting performance targets that look at quantity, but don’t consider quality.

Keller and Webster highlight how “to understand the nature and extent of marketing trade-offs, some key questions must be answered: How severe are they? Are they unavoidable, inherent in the nature of the decision problem and situation? How have they been dealt with before? And of particular importance is to recognize whether the trade-offs result from internal organizational considerations or external structural issues inherent in the marketing environment where management has less control, (p.15).”

The key to dealing with trade-offs, not just in the marketing function but throughout the organization, is how you approach them and whether you see the process as ‘creating’ a win-lose or compromise result; or if your organisation seeks to create the ‘best’ outcome for the organisation.

At least Keller and Webster mention that “one compelling way to resolve potential marketing strategy trade-offs is through product or service innovations. For example, Miller Lite became the first successful nationally marketed light beer through an innovative brewing formulation that was able to retain more of the taste profile of a full-strength beer, while still having a lower calorie count, (p.15).”

As another example, when BMW first made a strong competitive push into the US market in the early 1980’s, it positioned the brand as being the only automobile that offered both luxury and performance. At that time, American luxury cars were seen by many as lacking performance, and American performance cars were seen as lacking luxury. By relying on the incomparable design of their car, and to some extent their German heritage, BMW was able to simultaneously achieve (1) a point of difference on performance and a point of parity on luxury with respect to luxury cars and (2) a point of difference on luxury and a point of parity on performance with respect to performance cars. The clever slogan, ‘The Ultimate Driving Machine’ effectively captured the newly created umbrella category - luxury performance cars.

Dealing with trade-offs is as much about ‘effective decision making’ as it is about the ‘culture’ of the business. If employees are debating the pros and cons of a trade-off because they want to ‘win’ then the business is very likely going to miss out on some real synergistic multi-dimensional solutions. 

Keller and Webster conclude that “achieving marketing balance requires penetrating insights, shrewd judgments and a knack for arriving at solutions that go beyond the obvious. Creativity, the combination of previously unrelated ideas into new forms, is often the inspiration to achieve marketing balance,” (p.17).

What is clear is that effective marketing is a key function of business success and organisations will always be presented with ‘trade-offs’ if that is how they wish to view their marketing opportunities. The ‘smart’ business will not see trade-offs but will see a set of ‘factors’, where some are opportunities and some are ‘limitations’ and they will work with these factors – not to choose one over and other – but to create the most effective marketing-mix of solutions at the micro level, for their range of products and/or services in their respective target markets, both for ‘today’ and the foreseeable future.

References:

Keller, K.L. and Webster, F.E. (2009). The Branding Sweet Spot. Marketing Management, Vol. 18, Issue 4, p.12-17.

A Review of 2013.

2013 has been a hard year for many individuals around the world, with most countries seeing an increase in those living below the poverty line. This has been exasperated by prices for basic foods and services, increasing at a greater rate than salaries.

 

Business has been up and down, with a multitude of scandals around the world being reported during the year.

 

Some of the key moments in 2013 include;

 

6 Jan: NASA let asteroid-watchers know about the expected flyby of 99942 Apophis, the mighty rock named after an ancient Egyptian god of evil and darkness. While it wasn't a proximity warning for any time soon, the space agency does think there's a ‘tiny chance’ of Apophis crashing into the Earth in April 2036.

 

18 Jan: In the highly anticipated interview on the Oprah Winfrey Network, disgraced US cyclist Lance Armstrong admitted that he used performance-enhancing drugs to win all seven of his Tour de France titles.

 

1 Feb: The New York Times says Chinese hackers have carried out sustained attacks on its computer systems, breaking in and stealing the passwords of high-profile reporters and other staff members.

 

14 Feb: American Airlines and US Airways agree $11bn merger. The combined company becomes America's largest airline with 1,500 aircraft, $39bn in revenues and 100,000 staff.

 

8 Mar: Pope Francis, the first non-European pontiff of the modern era, revealed himself to the world from a balcony at the Vatican. Jorge Bergoglio, who served as archbishop of Buenos Aires, took the name Francis shortly after being elected by cardinals in what was apparently the fifth round of voting on the second day of the conclave.

 

15 Mar: Microsoft shuts off its Windows Live Messenger chat service, transitioning its more than 100 million users to Skype

 

15 Apr: The joy and celebration of the Boston Marathon turned into pain and fear after two explosions ripped through the streets killing at least three and injuring over 100. The blasts happened as spectators cheered on runners finishing the race in a carnival atmosphere. They came just over four hours after the start of the race when many amateur runners would have been finishing.

 

17 Apr: The Queen of England joined hundreds of dignitaries and the family of Baroness Thatcher for the funeral of the former prime minister at St Paul's Cathedral. Baroness Thatcher, who was Prime Minister from 1979 to 1990, died on April 8, aged 87 after suffering a stroke.

 

29 Apr: Kodak sells two of its businesses to UK pensioners in $2.8bn deal. The company, based in Rochester, New York, announced Monday that it will hand over control of its camera-film and document-imaging businesses to UK retirees in a deal to settle $2.8bn in obligations. Kodak invented the digital camera, which ultimately destroyed its business. After years of falling sales and missed opportunities the company declared Chapter 11 bankruptcy last January.

 

1 May: Amanda Berry, Georgina "Gina" DeJesus and Michele Knight were freed after a decade of captivity inside a Cleveland home, after Berry attracted the attention of a neighbour who helped her escape.

 

7 May: Hewlett-Packard faces $1bn lawsuit from shareholders over Autonomy deal. HP's chief executive Meg Whitman, her predecessor Léo Apotheker, the company's former chairman Ray Lane and Autonomy founder Mike Lynch are among eight defendants named in the class action suit, filed at California's San Francisco district court, which accuses those who oversaw the botched deal of conducting "cursory due diligence on a polluted and vastly overvalued asset".

 

15 May: Google Glass, a cross between a mobile computer and eyeglasses that can both record video and surf the Internet, is now available to a select few but is already among the year's most buzz-worthy new gadgets.

 

8 Jun: NSA source revealed that a 29-year-old computer technician for a U.S. defense contractor, Eric Snowden, leaked details of a top-secret American program that sifts through reams of data from telecommunications companies.

 

22 Jun: Microsoft announced that it will be adding 3-D printing support to Windows 8.1. The company believes 3-D printing one day, will be as normal and active as regular printing.

 

7 Jul: Andy Murray became the first British male to win the Wimbledon singles title in 77 years after a thrilling straight-sets victory over Novak Djokovic.

 

22 Jul: After much anticipation and media coverage - Prince William and Duchess Kate's first baby, a future monarch, was born today at 4:24 pm local time in London's private wing of St. Mary's Hospital. The announcement said the baby weighed 8 pounds, 6 ounces, and William was present for the birth.

 

8 Aug: With sales stalling and its customer base shrinking, BlackBerry formally put itself up for sale, a signal the company that pioneered the smartphone market now sees its prospects as a stand-alone public company diminishing fast. (They later took the company ‘off  the market’).

 

2 Sep: British mobile phone group Vodafone pulled off one of the biggest deals in corporate history on Monday, selling its stake in America's biggest mobile phone business for $130bn (£84bn). More than £54bn of the proceeds will be returned to Vodafone's shareholders − with £22bn going to UK investors. Vodafone will also pour cash into its existing business to accelerate the rollout of superfast 4G broadband services across Europe.

 

8 Sep: The United States and Russia agree on an outline for the identification and seizure of Syrian chemical weapons and said Syria must turn over an accounting of its arsenal within a week. The agreement will be backed by a U.N. Security Council resolution that could allow for sanctions or other consequences if Syria fails to comply.

 

1 Oct: The U.S. government shut down at 12:01 a.m. ET after lawmakers in the House and the Senate could not agree on a spending bill to fund the government.

 

18 Oct: Payday lender Wonga has continued its global expansion with the purchase of German payment firm BillPay. The controversial online lender, which charges an annual interest rate on UK loans of more than 5,000%, said the deal "significantly accelerates our development into a broad-based, digital finance group". The German firm lets people pay for items bought online with a range of different payment methods, including instalment credit. Founded in 2009, it has around 2 million users and more than 3,500 online partners in Germany, Austria, Switzerland and the Netherlands.

 

8 Nov: Typhoon Haiyan ripped through the Philippines, killing thousands and leaving hundreds of thousands displaced. It was the strongest recorded cyclone ever to make landfall.

 

15 Nov: J.P. Morgan & Chase will pay a record $13 billion to resolve U.S. Justice Department probes into the bank’s sale of mortgage bonds that officials said helped feed the financial chaos of 2008.

 

18 Nov: Ontario Teachers' Pension Plan buys Burton's Biscuits, which employs more than 2,000 people in the UK, for about £350m. Burton’s had sales of more than £333m in 2012, down from £341m a year earlier. The Burton's management team is to keep a substantial minority stake in the business. The deal is Teachers' second British acquisition in less than three weeks, after it agreed to buy the Busy Bees nursery chain in late October. As with Busy Bees, Teachers' thinks it can help Burton's to expand outside Britain.

 

1 Dec: Nelson Mandela, who rose from militant antiapartheid activist to become the unifying president of a democratic South Africa and a global symbol of racial reconciliation, died at his Johannesburg home following a lengthy stay at a Pretoria hospital. He was 95.

 

 

Although many countries are predicting a turnaround in their fortune for 2014, there is concern that poverty will continue to increase around the globe and especially in, so called, first world countries.

 

Leadership will be one of the key drivers for ‘growth’ in 2014 and beyond – where stakeholders, that have a long term view, need to ensure they have ‘effective’ leadership in place to ensure sustainable growth, which should include embracing and clear, positive action in the areas of corporate governance and corporate social responsibility.

 

Have a great 2014.

 

How Do You Develop a Working Culture within Society?

Britain, for example, differs from countries like France, Spain and Japan in not having a ‘job for life’ culture – where sacking middle-aged workers is easier than almost anywhere else in the world.

 

The good news, at least, may be that Britain’s economy is finally crawling out of recession since the International Monetary Fund upgraded the UK’s growth forecast for 2013 – but the recovery is far from evenly spread. In London and the south-east, house prices and employment are soaring, but in areas in the north-east around Teesside there is precious little sign of improvement – where the local unemployment rate is almost twice the national average, at 13%.

 

The problem seems to be at least two-fold – firstly cities and towns in the UK, for example, need to learn how to reinvent themselves; and that can mean thinking completely out of the box. Bruce Katz of the Brookings Institution, a Washington based think-tank, believes the US has learnt the hard way, saying ‘in America, cities that decline must redefine themselves. Like a man who has lost weight, they have to get new clothes that fit – shrinking their boundaries and ambitions; where unfortunately Britain’s failing towns struggle on indefinitely in their old industrial shape and size.’ But others may highlight areas in the US around New Orleans, Detroit and Michigan, where parts of the community can resemble a ghost town, thus challenging Katz’s optimistic view.

 

Even taking the problems of location out of the equation, the Economist highlights how “young Britons not only lack abstract literacy and numeracy skills they also join the labour market with little work experience and practical training – at least that’s what businesses seem to find and/or think,” (p.33).

 

One study by the British Chamber of Commerce concluded that many leave education with ‘fairly useless’ degrees in non-serious subjects; and another by the Confederation of British Industry found bosses disappointed by the disorganization of school-leavers and their general attitude to work.

 

Yet on a positive note, one school based in Birmingham has experimented with a ‘business-friendly’ curriculum since 2000, when Digby Jones, a former head of the CBI, accused the education system of failing employers. This led to Richard Riley, a teacher at Small Heath School, writing to Mr Jones asking him what should be done; leading to him and his colleagues injecting workplace practices into school life.

 

Today you’ll find that science, maths and technology modules are accompanied by presentations about related careers. Unusually for a school, Small Heath has CBI membership, which gives it useful networks with businesses and where, for example, Aston Villa football club has commissioned the statistics class to redesign a network for young supporters and where Birmingham Airport hosts food technology exercises and back at the school, pupils are taught how to prepare in-flight meals.

 

The good news is that their approach seems to be working as the school has not only made good academic progress, which is one thing – but last year 223 of its 224 leavers went into employment or further education.

 

This is even more impressive considering the school is in one of the most deprived areas of the city where currently 43% of 16 to 18-year-olds aren’t in school or working.

 

The bad news, which is so often the case with these great stories, is why do these ‘great schemes’ always seem to be the exception rather than the rule. You don’t have to be a genius to realise the more you prepare youngsters for work, the greater the chance they have to find work – not only because they have some skills and experience, but because they are additionally inspired through the experience and exposure to want to work in certain sectors.

 

Gisela Stuart, the MP for Birmingham Edgbaston, argues that schools should be judged not just on their examination results but on also whether they nurture an aptitude for the workplace – where more schools should invite businesses into their classroom. It’s just a shame that she feels she has to argue a point that to many in business would think is an approach that makes logical common sense.

 

Society sometimes blames the ‘younger generation’ for not having what ‘they’ determine to be a ‘working culture’ – but surely it’s society; the media; educationalists; politicians and business leaders that must guide students by ‘showing them a positive future’ that reinforces the benefits of embracing a ‘positive working culture’ – and that responsibility can start today.

 

References:

 

Capitalists in the classroom. The Economist. 12-18 October, 2013. p. 33.

 

The urban ghosts: These days the worst urban decay is found not in big cities but in small ones. The Economist. 12-18 October, 2013. p.31-32.

Have You Worked for a Corporate Psychopath?

Commentators on business ethics have noted that corporate scandals have assumed epidemic proportions and that once great companies have been brought down by the misdeeds of their leaders. These commentators raise the intriguing question of how resourceful organizations end up with impostors as leaders in the first place (Singh, 2008). One writer on leadership goes as far as to say that modern society is suffering from a plague of poor leadership in both the private and public sectors of the economy (Allio, 2007). An understanding of Corporate Psychopaths helps to answer the question of how resourceful organizations end up with impostors as leaders, (p.121)

 

If Corporate Psychopaths end up in corporate leadership positions, this would be expected to cause very poor levels of ethical decision making within corporations. Recently, psychologists have come to understand that a type of psychopath exists who is not prone to violent, criminal behaviour and who therefore operates relatively undetected and successfully in society (Levenson, 1993; Paul Babiak, 1995; Cooke et al., 2004b; Board and Fritzon, 2005). They have been called successful psychopaths because they successfully evade contact with legal authorities. (p.122)

 

Writers on business ethics have long been interested in the influence of ruthless leaders such as Machiavellian managers (Singhapakdi, 1993; Schepers, 2003; Buttery and Richter, 2005). It is evident that Corporate Psychopaths and Machiavellian managers share many common characteristics and some important differences such as psychopaths having no conscience (McHoskey et al., 1998; Paulhus and Williams, 2002; Jakobwitz and Egan, 2005). However, psychopathy is a much more developed and currently researched construct than Machiavellianism and indeed is one of the most commonly studied constructs in psychology. For these reasons, management researchers need to become more aware of it. (p.122).

 

In terms of leadership research, bad leaders are said to be callously disregarding of the needs and wishes of other employees, and are prepared to lie, bully and cheat and to disregard or cause harm to the welfare of others (Perkel, 2005). All these traits are commonly associated with psychopathy. This is one reason why research into Corporate Psychopaths is important; it is a part of understanding bad corporate leadership and where it comes from. (p.123).

 

In terms of successful psychopaths, including Corporate Psychopaths, researchers suggest that non-criminal psychopaths may have the same neuropsychological dysfunctions as criminal psychopaths do, resulting in a similar lack of empathy, for example. However, it has also been suggested that a superior executive function in these non-criminal psychopaths may serve as a protective factor, decreasing their risk of being involved in illicit behaviour (Mahmut et al., 2007). This superior executive functioning would be promoted by a good socio-economic family background, good education and high intelligence and so this idea is supported by research showing that high psychopathy traits are strongly associated with the opposite of these factors, i.e. factors such as low socioeconomic status and poor early parental supervision (Farrington, 2005). (p.123).

 

Corporations are reported to want to recruit employees who are energetic, charming and fast-moving. Psychopaths can appear to be like this and can present themselves in a good light because of their ability to tell interesting stories about themselves. Corporate Psychopaths are thus recruited into organizations because they make a distinctly positive impression when first met (Cleckley, 1988). They appear to be alert, friendly and easy to get along with and talk to. They look like they are of good ability, emotionally well-adjusted and reasonable, and these traits make them attractive to those in charge of hiring staff within organizations. Other researchers confirm that psychopaths can present themselves as likeable and personally attractive (Mahaffey and Marcus, 2006). Corporate Psychopaths make those who interact with them think that the feelings of friendship and loyalty they evoke in others are reciprocated. It does not occur to people that this may not be the case and this makes it easy for Corporate Psychopaths to be accepted.

 

The personal charm of Corporate Psychopaths means that they come across well at job promotion interviews and can inspire senior managers to have confidence in them. They can thus both enter and do well in organizations and corporations (Ray and Ray, 1982). Being accomplished liars (Kirkman, 2005) helps them in obtaining the jobs they want. Once inside an organization, Corporate Psychopaths can reportedly survive for a long time (Loizos, 2005) before being discovered during which time they can establish defences for themselves to protect their positions. (p.124).

 

Corporate Psychopaths then manipulate their way up the corporate ladder, using pawns and shedding patrons as these people become superseded and no longer needed. According to Hare, the formation of two factions then typically develops in the organization. One fraction being of the network of supporters, pawns and patrons of the Corporate Psychopath and the other fraction being made up of their detractors and those pawns who realize they have been used and abused or those who otherwise realize that the organization is in danger (Babiak and Hare, 2006b). A confrontation between the rival fractions results from this, during which the detractors are typically outmanoeuvred and ultimately removed. After this happens, the Corporate Psychopath ascends to power unopposed (Babiak and Hare, 2006, p.125).

 

It has been argued that Corporate Psychopaths are more motivated and better equipped to rise to high corporate positions than other managers are. They are motivated because they are more single minded in their craving for power, money and prestige that senior managerial positions bring. They are better equipped because they are ruthless, unemotional and without empathy (Chapman et al, 2003; Maibom, 2005), and are fully prepared to lie. They also have fewer other time commitments and constraints because of a lower number of emotional attachments to other people than normal people have (Maibom, 2005). These attributes may facilitate their entrenchments within an organization, after which their ability to gain more power through informal mechanisms and through increased popularity enables a consolidation of power and further rises up the hierarchy, (p.126).

 

So it's worth keep your eyes open for these types of leaders. 

 

References:

 

Boddy, Clive R. P.; Ladyshewsky, Richard; Galvin, Peter. (2010) Leaders without ethics in global business: Corporate psychopaths. Journal of Public Affairs. Vol. 10 Issue 3, p121-138.