Market-Led Strategic Change This page intentionally left blank Market-Led Strategic Change Transforming the Process of Going to Market Fourth edition Nigel F. Piercy Professor of Marketing and Strategic Management Warwick Business School The University of Warwick AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD PARIS • SAN DIEGO • SAN FRANCISCO • SYDNEY • TOKYO Butterworth-Heinemann is an imprint of Elsevier Butterworth-Heinemann is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA First edition published by HarperCollins Publishers Ltd 1991 First published as a paperback edition by Elsevier Ltd 1992 Second edition 1997 Reissued with new cover 2000 Third edition 2002 Fourth edition 2009 Copyright © 2009, Nigel Piercy. Published by Elsevier Ltd. All rights reserved The right of Nigel Piercy to be identifi ed as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone ( ϩ 44) (0) 1865 843830; fax ( ϩ 44) (0) 1865 853333; email: [email protected]. Alternatively visit the Science and Technology Books website at www.elsevierdirect.com/rights Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress ISBN: 978-1-85617-504-3 For information on all Butterworth-Heinemann publications visit our website at www.elsevierdirect.com Typeset by Charon Tec Ltd., A Macmillan Company. (www.macmillansolutions.com) Printed and bound in Italy 09 10 11 12 13 10 9 8 7 6 5 4 3 2 1 To the memory of my mother, Helena G. Piercy (1911–2001) This page intentionally left blank Contents Preface to the fourth edition ix Acknowledgements xiii About the author xv What readers said about market-led strategic change xvii PART I THE IMPACT OF CUSTOMER VALUE IMPERATIVES 1 Chapter 1 New marketing: marketing is dead, long live marketing! 3 Chapter 2 The customer is always right-handed: customer satisfaction, customer sophistication and market granularity 31 Chapter 3 New marketing meets old marketing: new marketing wins! 81 Chapter 4 Value-based marketing strategy 109 End-of-part cases 147 Case 1 Tata, But Defi nitely Not Goodbye 147 Case 2 Strangling the Fat Lady at EMI? 155 Case 3 The Clouds Raining on the Computer Business 162 PART II DEVELOPING A VALUE-BASED MARKETING STRATEGY 169 Chapter 5 Strategic thinking and thinking strategically 171 Chapter 6 Market sensing and learning strategy: competitive strength through knowing more 219 Chapter 7 Strategic market choices and targets: where to compete and where not to 267 Chapter 8 Customer value strategy and positioning: what have you got to offer, how does it make you different to the rest? 309 Chapter 9 Strategic relationships and networks: building the infrastructure to deliver the strategy 343 End-of-part cases 377 Case 4 Big Blue Gets Transparent 377 Case 5 Oh, the Tangled Web They Weave at BAA 388 Case 6 The Wild, Wild Rover 402 Contents PART III PROCESSES FOR MANAGING STRATEGIC TRANSFORMATION 413 Chapter 10 Strategic gaps: the difference between what we want and what we have got 415 Chapter 11 Organization and processes for change: building the infrastructure to make it happen 431 Chapter 12 Implementation process and internal marketing: making it happen 467 End-of-part cases 517 Case 7 Tesco – Fresh & Queasy in the USA 517 Case 8 When the Peddle Hits the Mittal 526 Case 9 One-Laptop-Per-Child Stirs Up the Grown-Ups 532 Index 539 •• viii Preface to the fourth edition Yes – I fear the terrible moment has arrived when Market-Led Strategic Change 4 is allowed to escape and wreak havoc on staid and conven- tional academic views of the world of customers and competitors, and to wallow in the glorious turbulence and disruptive change that char- acterize modern markets! My target readers remain people of practice – whether managers, students and teachers of marketing and management, or analysts and planners – rather than people of theory. I really have nothing particu- larly against academic theoreticians (thank goodness, my lie-mode chip appears to be effective), just their irritatingly superior attitudes, unde- served arrogance, stupidly smug expressions, wilfully closed minds and their inherent belief that ‘the trouble with good practice is that you have to ask if it works in theory’ . Why do people with no inter- est in business get involved in teaching in business schools, when they usually aren’t any good at it? Such persons can best be described as ‘ murally challenged ’ (can’t read the writing on the wall). I really think some of these people need to take a bite from the reality sandwich. The world wants more from us than untested and pointless theorizing. Thoughts on the future of business schools ‘ If stupidity got us into this mess, why can’t it get us out? ’ (Will Rogers) Let’s be honest, Market-Led Strategic Change remains a book with atti- tude, and I remain insincerely apologetic to those who do not like that attitude – sorry, it’s the only one I’ve got. Changes in the Fourth Edition Constant from the earlier editions of the book is our focus on the ‘ proc- ess of going to market ’ rather than ‘ marketing ’ , in the conventional sense of what people in marketing departments are assumed to do. This focus underlines the point that customers do not much care how we organize Preface to the fourth edition ourselves inside the company, until and unless it affects the value they receive. How we perform in the market is a concern for everyone in the organization, not just an issue for the marketing department (if there still is one, which is actually increasingly unlikely). Going to market is a proc- ess, usually a cross-functional process, and often an inter-organizational process. The underlying goal of this book is to provide managers and management students with ideas, concepts, and tools for achieving superior performance in their markets. This means that my target reader is not just the marketing special- ist, but all those who have to work with marketing processes, what- ever their management specialisms. This audience embraces those who may never in their careers ever work in marketing or sales – but who do need to understand what the really important questions are that they should demand to have answered by their marketing colleagues and consultants. For those who are marketing specialists – you need to read it too, to know what the searching questions are you will be asked and how you should go about answering them! In fact, everyone in the world should read it (as long as they buy their own individual copies). The ‘ good news’ for some about the leaner organizations we are now developing is that you may have to spend less on specialist market- ing functions. The ‘ bad news ’ is that even if you are in operations, sup- ply chain, fi nance, or human resource management, you now share in responsibility for the way we go to market, so you had better under- stand how it works! While the focus and goal of the book remain constant from the last edition, there have been substantial changes to the structure of the book. These changes refl ect the feedback from users of the last edition, and the changing realities which managers are now confronting. The rationale for the structure is explained in the fi rst chapter ( ‘ A route- map for market-led strategic change’ ). To streamline the material and to maintain clarity of purpose, the book has been divided into three parts with 12 chapters. Part I examines the imperatives for a focus on customer value. This part explains the approach we are taking and the requirements for value-based strategy. The major addition here is a chapter that contrasts the somewhat static conventional, ‘4Ps ’ , pro- grammed approach to marketing with the requirements of new mar- keting for new types of market. The logic for this change is that readers have suggested (somewhat unkindly, I thought) that to establish a basis for ‘new marketing’ , it is helpful to fi rst clarify what is meant by ‘ old marketing ’ , and I guess they have a point. Part II provides a detailed template for developing a value-based marketing strategy. The core material is concerned with market learn- ing, market segmentation and positioning, value propositions and strategic relationships. A new chapter has been added to focus on the challenges of strategic thinking and ‘ thinking strategically ’ about cus- tomers, competitors and markets. Part III addresses questions of imple- mentation and change from a process perspective and looks at strategic gaps between intent and reality, organizational change and implemen- tation process and internal marketing. •• x Preface to the fourth edition Opportunities to consider and examine the implications for practice are provided in the cases at the end of each part. These have all been newly produced for this new edition. Supporting materials I hope that many of the users of this book will be managers who sim- ply pick it up from the bookstall or web pages as a potentially useful read from which they may gain some new insights and ideas.