Management Theory

Why hard-nosed executives should care about management theory

Generic prescription: Professors and consultants routinely prescribe generic advice, and managers routinely accept such therapy. Case: Lucent Technology (centralized vs. decentralized organization)

Three steps to make a theory: 1. Observation and description of the phenomenon; 2. Categorization
3. A statement of what causes and why.

Correlation and causality: Don't confuse correlation and causality. People usually confuse the correlation between attributes and outcomes with the underlying causal mechanism.

The breakthroughs that lead from categorization to an understanding of fundamental causality generally come not from crunching ever more data but from highly detailed field research, when researchers crawl inside companies to observe carefully the causal processes at work.

Circumstance contigent: They define not just what causes what and why, but also how the causal mechanism will produce different outcomes in different situations.

The importance of failures: the obsession with studying successful companies and their best practices is a major reason why platitudes and fads in management come and go with such alarming regularity and why much early-stage.

Why doesn't it work?: The question is a magical key that enables statements of causality to be expressed in circumstance-contingent ways.

Trustable theory or advice: We can trust a theory only when its statement describing the actions that must lead to success explains how they will vary as a company's circumstances change.

The moral of theory is that in business, as in medicine, not single prescription cures all ills.

Becoming a discerning consumer of theory:
- Beware of work urging that revolutionary change of everything is needed.
- We need to know not only where, when, and why things must change but also what should stay the same.
- Remember that a researcher's findings can almost never be considered the final word.

Marketing: Impressions to Expressions

기업의 마케팅도 결국은 사람 사귀는 것과 마찬가지인 것 같다. 좋아하는 감정을 강요할 수 없는 것처럼, 기업이나 제품을 좋아하는 감정도 강요할 수 없다.

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Coca-Cola Marketing Shifts from Impressions to Expressions

A lot of us remember when the role of the CMO was much simpler. Information flowed in one direction: from companies to consumers. When we drew up our plans and budgets, the key metric was consumer impressions: how many people would see, hear or read our ad?

Today the only place that approach still works is on Mad Men. Now information flows in many directions, consumer touch points have multiplied, and the old, one-size-fits-all approach has given way to precision marketing and one-to-one communications. Perhaps the most consequential change is how consumers have become empowered to create their own content about our brands and share it throughout their networks and beyond. It has changed my role as the chief marketing and commercial officer at Coca-Cola, and the company's approach to consumer engagement as we work to double our business by 2020.

In the near term, "consumer impressions" will remain the backbone of our measurement because it is the metric universally used to compare audiences across nearly all types of media. But impressions only tell advertisers the raw size of the audience. By definition, impressions are passive. They give us no real sense of engagement, and consumer engagement with our brands is ultimately what we're striving to achieve. Awareness is fine, but advocacy will take your business to the next level. (I used to think that loyalty was the highest rung on the consumer pyramid until I became the CMO of Allstate Insurance. There, I saw clearly that so much business was driven through personal referrals and advocacy by individuals for their agent.)

So, in addition to "consumer impressions," we are increasingly tracking "consumer expressions." To us, an expression is any level of engagement with our brand content by a consumer or constituent. It could be a comment, a "like," uploading a photo or video or passing content onto their networks. We're measuring those expressions and applying what we learn to global brand activations and those created at the local level by our 2,700 marketers around the world. For example, in our 24-Hour Live Session with Maroon 5, we captured impressions (the number of online views) but gained tremendous insights from expressions by our consumers — their comments, input on the song that was being created and what they shared with their networks.

So what are the keys to winning in this new era of empowered, engaged and networked consumers? Here are some of the top "expression" lessons we've learned so far:

Accept that consumers can generate more messages than you ever could. Don't fight this wave of expression. Feed it with content that touches consumers' passion points like sports, music and popular culture. We estimate on YouTube there are about 146 million views of content related to Coca-Cola. However, only 26 million views were of content that we created. The other 120 million views were of content created by others. We can't match the volume of our consumers' creative output, but we can spark it with the right type of content.

Develop content that is "Liquid and Linked." Liquid content is creative work that is so compelling, authentic and culturally relevant that it can flow through any medium. Liquid content includes emotionally compelling stories that quickly become pervasive. Similarly, "linked" content is content that is linked to our brand strategies and our business objectives. No matter where consumers encounter it, linked content supports our overall strategy. When content is both "Liquid and Linked," it generates consumer expressions and has the potential to scale quickly. An example of "Liquid and Linked" was our FIFA 2010 World Cup program, which was the largest-ever Coca-Cola activation in history. More than 160 countries used a common World Cup Visual Identity System, a pool of television commercials, and a common a digital platform. All were linked by the common thread of celebration.

Accept that you don't own your brands; your consumers do. Coca-Cola first learned this lesson in 1985 with the introduction of New Coke, but it's become even more important with the growth of social media. As I write this, Coca-Cola's Facebook page has more than 25 million likes (fans). Our fanpage wasn't started by an employee at our headquarters in Atlanta. Instead, it was launched by two consumers in Los Angeles as an authentic expression of how they felt about Coca-Cola. A decade ago, a company like ours would have sent a "cease and desist" letter from our lawyer. Instead, we've partnered with them to create new content, and our Facebook page is growing by about 100,000 fans every week.

Build a process that shares successes and failures quickly throughout your company.Increasing consumer expressions requires many experiments, and some will fail. Build a pipeline so you can quickly replicate your successes in other markets and share the lessons from any failures. For example, our "Happiness Machine" video was a hit on YouTube so we turned it into a TV commercial, and we've replicated that low-cost, viral concept in other markets.
Be a facilitator who manages communities, not a director who tries to control them. In 2009, we launched Expedition 206. Consumers voted for the three people they wanted to see travel the world as Coca-Cola Ambassadors, visiting most of the 206 countries where Coca Cola is sold and driving an online conversation about what makes people happy around the world. On every step of their 273,000 mile journey, the ambassadors blogged and created all the content. Our role was to facilitate their journey, which was no small task. We had to give up control of the content, so our ambassadors could share their own experiences. In an era of consumer expressions, seek to facilitate and participate with communities, not control them.

Speak up to set the record straight, but give your fans a chance to do so first. Of course, not every consumer expression will be positive. You have to be part of the conversation so you can set the record straight when you need to. Even better, we've found that our fans make online communities self-policing. When our Facebook site was targeted by an activist group whose members posted negative messages, our fans responded with messages of support for our company, and our fans challenged the use of the community for activist purposes.

Marketing has changed dramatically since Doc Pemberton poured the world's first glass of Coca-Cola in 1886. On May 8th, 2011, Coca-Cola and our fans around the world will celebrate our 125th anniversary. While I'll be curious how many impressions our activities generate, I will look most closely to the expressions of our consumers as a better measure of our success in keeping the world's most valuable brand relevant for the next 125 years.

Joe Tripodi leads global marketing, customer management and commercial leadership as Executive Vice President and Chief Marketing and Commercial Officer of the Coca-Cola Company.

Kill a brand, keep a customer

Reality:
Most brands don't make money for companies.
Companies can boost profits by deleting loss-making brands.
Most attempts at brand deletion fail.
When companies drop brands clumsily, they antagonize customers, particularly loyal ones.
Brand rationalization programs have often become so bogged down by politics and turf battles.

Perils of proliferation (Multi-brand):
Non-differentiation - Cases: GM
Inefficiency
Lower bargaining power against retailers
Complexity

Four step process to optimize brand portfolios:
1. Make the case: Audit existing brand portfolio. Assess each brand for its Global M/S, Market position, Brand positioning, and Cash status.
2. Prune the portfolio
   A. Portfolio approach: Choose to keep only those brands that conform to certain broad parameters, e.g. Brand power, Brand growth potential, Brand scale - Cases: GE, Unilever
   B. Segment approach: Identify the brands they need in order to cater to all the consumer segments in each market - Cases: Electrolux
3. Liquidating brands: Merge, Sell, Milk, or Kill (in order from the most complex to the simplest to execute)
4. Growing the core brands: Companies can reap the benefits of brand deletion only if they reinvest the funds and management time they have freed either into the surviving brands or into discerningly launching new ones.

Source: Kill a brand, keep a customer, HBR, Dec 2003

Should you launch a fighter brand?

Five tough questions for launching a fighter brand

# Cannibalization: Think about how thoroughly a fighter brand might cannibalize premium brand sales
- Case: Kodak vs. Fuji, Luvs(P&G) vs. Private lables

# Bury the competition: Check that you will be able to launch a fighter brand that is competitive enough to damage your enemy.

- Cases: Zocor MSD(Merck) vs. Generic drugs, Intel Celeron vs. AMD

# Financial losses: Check if the fighter brand is profitable enough to continue to so over the long haul.
- Cases: GM Saturn vs. Japanese cars, 3M Highland

# Missing the mark with customers: Make sure that the value equation b/w your two brands is suitably distinct in the mind of the customer
- United Ted vs. Southwest, Tesco vs. Aldi, Qantas vs. Virgin Blue

# Lost attention: Consider carefully the strategic implications of dividing your organization's resources during a period when focus and investment are critical.
- Cases: United, Delta, GM, P&G


Quotation
"The god of war hates those who hesitate." - Euripides, the Greek playwright

Source: Should you launch a fighter brand? HBR, Oct, 2009