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1

Summarizing state of affairs

 General economic situation is worsening  Impact are dramatic on the forest sector  Production centres have shifted- and continue to shift away- from
Canada

 Until the recent surge, forest sector job loss was approximately
150,000 (mostly in rural communities)

2

What to do?

 Domestic policy reforms  Economic protection  Industry renewal – the focus of this class

3

Where we left last time…

Developing new ways to think…
CRITICALLY!

Going outside our comfort zones!

4

Industry renewal

Two major pathways to industry renewal

 Do it more efficiently than the competition
(Management-centric)

 View it differently than the competition

(Leadership -centric)

5

The road to renewal

 Human resources- developing a culture of transformation

 Marketing- developing more sophisticated ways to identify, attract and

retain customers/clients
 Sales and distribution- delivering goods/services efficiently to customers

 Global dexterity- know this world better  Entrepreneurship- develop a small scale business base HERE!

 Sustainability- preserve communities and our planet, Planet A!

 Strategic management- Re-imagining your business

6

Re-imagining your business

MARKETING MYOPIA BY THEODORE LEVITT, 1960

7

Author & Article Background

 With more than 850,000 copies sold, Marketing Myopia is, by

far, the best selling HBR reprint of all time. More than 1,000

companies ordered 35,000 reprints in the weeks after publication

 Marketing Myopia revolutionized the thought processes of business managers who were too narrowly focused on the products they sold rather than on meeting the needs of customers

8

Marketing Myopia

 Myopia (my·o·pi·a): Short-sighted.

Lacking foresight or intellectual insight

 Marketing Myopia: a short-sighted and inward looking approach to marketing that focuses on the needs of the

company instead of defining the

company and its products in terms of the customers' needs and wants. It results in the failure to see and adjust to the rapid

changes in their markets

9

Why industries decline?

 Companies and industries go into decline because executives do not

define their industries properly.

 Railroads declined because they were railroad oriented rather than transportation oriented; they allowed other industries (i.e. cars,

trucks, airplanes, and even telephones) to fill their customers’

transportation and freight needs

 Hollywood was nearly replaced by television because it defined itself as a movie business rather than as an entertainment business. Hollywood rejected television when it should have considered TV an opportunity to expand the entertainment business.

10

Shadow of Obsolescence

 As industries experience growth, they appear to assume superiority

of their products – effective substitutes simply don’t exist. Yet,

their products are often substitutes for the products they replaced.

 Dry cleaning: as synthetic fibers and chemical additives began to

appear, customers’ need for dry cleaning decreased

 Electric utilities: chemical fuel cells and solar energy are threats to electric utilities

 Grocery stores: corner stores failed to understand customer needs and were largely replaced by supermarkets.

11

Self-Deceiving Cycle

“there is no such thing as a

growth industry… There are

only companies organized and operated to create and capitalize on growth opportunities. When

companies assume

automatic growth, they descend into stagnation through a self-deceiving

cycle of expansion and

decay.

Growth is assured

No
Preoccupation

with a product competitive substitute

Too much faith in mass production

12

Population Myth

 The population myth is the false belief that profits are

essentially guaranteed due to an increasing population

of customers purchasing your product or service.

 Growing population = growing industry ??

 An expanding population and/or market allows

companies from having to think creatively. More

specifically, if a company’s market is expanding, the

company will likely not put much thought into how to

expand their market. And that’s the recipe for future

disaster.

Levitt’s predictions and the Petroleum

13

industry

 The industry’s chief product (petroleum) has always been defined

narrowly (i.e. as gasoline rather than as energy, fuel, or transportation)

 Major improvements originate outside the oil industry  Major innovations originate in small, new oil companies

 The industry remained convinced that there are no effective substitutes  As the industry has been blinded by its narrow focus on a specific product and the value of its reserves and has paid little or no attention to its customers’ needs or preferences, Levitt warned the petroleum industry would have a very uncertain future.

Product orientation vs. customer orientation

14

 Gaining efficiency through mass production-- produce as much as possible.

Consequently, efforts are focused on production while true needs of markets are neglected

•Focus: Product attributes

•Objective: convert product to cash •Push strategy /selling

Product

•Focus: Real needs of customers

•Objective: satisfy customer needs

•Pull strategy / marketing

Customer

15

Product Provincialism

Profit potential from low unit production costs often undermine concern for real needs of consumers. This approach often leads to industry

decline; products fail to adapt to customers’ changing needs and

preferences.

16

Re-defining what business forest

products companies are in!

(Going beyond the material mentality)

-Structural lumber segment

-Cabinets and furniture segment

-Paper segment

17

What did we learn so far?

 Declining industry  Multiple ways to sustain (policy support, organizational transformation)

 Industry renewal is what we are focusing on  It requires changes in management approaches and leadership/vision

 How a change in the vision would look like

18

The Beginning and End

 The belief that an industry is a customer satisfying process, rather

than a goods producing process, is vital for all managers to

understand. An industry must begin with the customer and the customer’s needs – not with a patent, raw material, or selling skill.

 Once the customers’ needs have been considered, the industry

must develop backwards: physical delivery of customer satisfaction, creating products or services by which these satisfactions are met, and, only then, finding raw materials to meet these needs.

19

Key take-away points

 Companies who experience growth also experience obsolescence, only effective strategies can save them.

 To ensure continued growth, companies must concentrate on

meeting customers’ needs rather than on selling products.

 Industries must define themselves as customer oriented than

product oriented.

 Companies focus far too much on production and research and development when they ought to focus on understanding true needs of their customers.

 Without a strong leader and a collective view, a company will merely be a disconnected parts, with no sense of purpose or direction.

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