Summarizing state of affairs 1 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) What to do? 2 Domestic policy reforms Economic protection Industry renewal – the focus of this class Where we left last time… 3 Developing new ways to think… CRITICALLY! Going outside our comfort zones! Industry renewal 4 Two major pathways to industry renewal Do it more efficiently than the competition (Management-centric) View it differently than the competition (Leadership -centric) The road to renewal 5 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 Author & Article Background 7 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 Marketing Myopia 8 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 Why industries decline? 9 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. Shadow of Obsolescence 10 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. Self-Deceiving Cycle 11 “there is no such thing as a Growth is growth industry… There are assured only companies organized and operated to create and capitalize on growth opportunities. When No Preoccupation competitive companies assume with a product substitute automatic growth, they descend into stagnation through a self-deceiving Too much cycle of expansion and faith in mass decay. production Population Myth 12 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 14 orientation 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 Product • Push strategy /selling • Focus: Real needs of customers • Objective: satisfy customer needs Customer • Pull strategy / marketing Product Provincialism 15 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. Re-defining what business forest 16 products companies are in! (Going beyond the material mentality) -Structural lumber segment -Cabinets and furniture segment -Paper segment What did we learn so far? 17 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 The Beginning and End 18 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. Key take-away points 19 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. .