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Busting Loose
MarketBusters helps firms formulate breakout strategic moves.
Back in the early '90s, Italians bought car insurance grudgingly. Their government set premiums and policy terms, and they had no choice but to buy from agents. Claims were processed slowly by firms that operated more like bureaucracies than efficiency-oriented businesses.
The situation was ideal for a new company to swoop in and swipe customers from established players.
Enter Clive Mendes, who'd been assigned in 1994 by Royal British Insurance to review its Italian operations. Mendes knew that the European Union soon would require member nations to loosen their insurance rules, letting companies set their own rates and terms.
That, he sensed, created an opening for a new kind of insurer. So he launched Royal Insurance Italy. It distributed its policies via call centers and introduced new standards for pricing and customer service. The company, for example, made apology payments to customers when its service fell short of stated goals. The result: 250,000 policies — two and a half times the expected number — by the end of August 2002.
Mendes' moves constitute "marketbusters," according to Prof. Ian MacMillan, co-director of Wharton Entrepreneurial Programs and director of the Sol C. Snider Entrepreneurial Research Center.
What's a marketbuster? "An action taken by your firm that changes the game to deliver markedly superior performance," MacMillan says in his new book, MarketBusters: 40 Strategic Moves that Drive Exceptional Business Growth.
MarketBusters, written with Rita Gunther McGrath of Columbia University, lays out a framework for devising these sorts of moves. It gives readers five lenses for analyzing their businesses and tools for transforming them. Each chapter ends with action steps to help managers to kick-start their efforts.
The book's capstone is 40 marketbusting moves that are peppered throughout. (Learn about a few marketbusting tactics HERE)
The new book builds on a prior work by MacMillan and McGrath called The Entrepreneurial Mindset which aimed to help firms create environments where, MacMillan says, "everyone who works for you feels they have both the duty and the authority to help you think of ways to improve your business." In other words, it examined small steps that any employee could take to help a company innovate and compete.
MarketBusters, in
contrast, aims higher, exploring the sort of moves
that might give a company, say, 10 percent growth in sales over two
years.
An example of the book's tools is the consumption chain, which
MacMillan created. A consumption chain "represents the linked sets
of activities that customers engage in to meet their needs," MacMillan
and McGrath write.
Consumption chains strive to illuminate how consumers perceive their needs. They don't try to shoehorn what consumers want into the usual boundaries of corporate organization, with departments of sales, finance, manufacturing, fulfillment and customer service. When a customer's laptop breaks down while on a business trip, he doesn't care that he's called the sales center and not customer service, which closed at 5. He just wants help.
"There's nothing inherently wrong with this specialization; after all it's efficient," MacMillan and McGrath say. "The difficulty is that your customers evaluate their total experience with your company as a whole. If you mess up one significant part of the chain, the whole relationship can be in jeopardy."
Change links in the chain and improve your customers' experiences, and you may be poised for big gains.
Another tool provided by MarketBusters is the attribute map. It helps business people understand what customers like about their offerings, what they hate and what they couldn't care less about. Once business people have teased out these factors, they can begin to seek ways to enhance the positives and eliminate the negatives.
Take Proctor & Gamble, which several years ago introduced the SpinBrush battery-powered toothbrush, which dramatically improved the positive attributes of electric toothbrushes. Before the SpinBrush, electric toothbrushes cost close to $100, making them impractical for many people. But three entrepreneurs devised an inexpensive alternative, which P&G bought and rolled out at a price of less than $10 each. "As of this writing, [the SpinBrush] is sold in 35 countries, has contributed $200 million in global sales and has forced competitors into an uncomfortable reactive position involving discounts on their previously higher-priced products," MacMillan and McGrath point out. (Learn more about the SpinBrush and its creator, WEP Entrepreneur in Residence John Osher HERE)
Occasionally, a business can improve its offerings without touching its core product or service.
Consider the push by Victoria's Secret into selling classical music. On its face, it doesn't make a lot of sense; women's underwear and Wagner seem odd companions. But it works — five of Victoria's Secret's CDs have sold more than a million copies.
"Think about it: As consumers shop, the music plays, and then right there at the counter is the CD," MacMillan and McGrath write. "If one is shopping for a special occasion why not pick up music that would…uh…enhance the experience?"
Victoria's Secret's CDs have been so successful that other retailers are trying the tactic, too. Starbucks peddles tunes to its caffeinated clientele. Pottery Barn offers them to folks trying to create the perfect dinner party.
Products like these are called parallel differentiators. They have nothing to do with the functionality of the purveyors' core products; Starbucks coffee gives just as much jolt without Miles Davis blowing his horn in the background. But they create incentives for customers to buy or stay loyal. One of the most famous parallel differentiators is McDonald's Happy Meal.
A difference between
MarketBusters and many other business how-to books is that it
examines both
successes and
failures. It's not just another celebration
of a business hero or a silver-bullet strategy.
Instead, MacMillan and McGrath point out stumbles,
too. Take CargoLifter AG's
big bet on giant blimps. The Germany firm envisioned
blimps that could act as flying cranes, carrying
heavy loads at low cost and operating without
airstrips.
Trouble was, CargoLifter's blimps did need infrastructure, just not the typical sort. The blimps had to hover above the ground when loading and unloading and required special frames to lift cargo to their bays. Likewise, they needed water for ballast — 160 tons of it, or they'd float away when unloaded. It wasn't clear where they'd be able to get so much water or where they'd dump it when done.
"The CargoLifter story reflects how difficult it can be to try to create a new market through the introduction of innovative solutions alone," MacMillan and McGrath say. A better approach is to start small and test the market — admittedly, that might be tough with giant blimps.
In their conclusion, MacMillan and McGrath stress that no book — not theirs, not anyone's — can offer magic. MarketBusters provides a wealth of tools, but managers have to do the hard work of applying them to their businesses and, even more important, executing whatever strategy they devise.
"Effective execution of a marketbusting strategy (or any other kind of strategy, for that matter) is an exercise in holistic alignment," the authors say. "It is all about the concept of and. You need excellent leadership and clear direction and a sensible structure and the right people."
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Wharton Entrepreneurial Programs
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