| Issue 45 |

Business or marketing strategy?

There are many different types of strategy, and it’s important to differentiate between them. This time we will focus on the differences between business strategy and marketing strategy:

• Business strategy answers the question “Which markets should we target?”
• In other words, how much money do we want to earn (what are our business objectives) – and subsequently, where we want to do business: what are our areas of business, who is our target audience, and what goods and services do we offer
• For example – At first, Teva pharmaceuticals chose to target the generic drug market in Israel (manufacturing and marketing drugs whose patents have expired), and then branch out in the same industry but to overseas markets. In recent years, Teva has also started working with prescription drugs (developing and marketing original drugs such as Copaxone).
• Marketing strategy answers the question: “How should we do business in these markets?”
  • In other words, what special actions should we take to succeed in each of our markets: what differentiation and positioning do we want to achieve, what will our relative advantage be, what will our product mix be (product, price, location and sales promotion).
  • For example – Teva decided to attain an advantage in the generic drug market by offering customers the lowest prices. It therefore had to grow quickly through mergers and acquisitions (and become experts at it, since most mergers and acquisitions fail), and concurrently streamline and reduce manufacturing and operational costs (by investing in technological R&D, mechanization and automation). Teva is currently the largest and most efficient generic drug company in the world, which is the relative advantage it has over its competitors.
• It is noteworthy that planning a business strategy is the only stage where we can try (and must!) decide who our customers will be. After deciding on our business objectives (how much money we want to earn), we check out different markets and disqualify those that cannot yield the desired profit. At this stage, it is our full right to refuse to work with certain markets and all the customers in that market. Only if we find a large enough, and preferably growing market that is not too competitive and suits our capabilities – we select it, and thereby commit to working with the customers in that market.
• In contrast, when we plan a marketing strategy we do not choose our customers, who already come part and parcel with the market. After choosing a market (at the business strategy stage), we must honor the customers in our market and tailor solutions, goods and services to them. The customer becomes the king. However, we can segment our customers and focus only a portion of them. However, these segments are already a part of the market we have chosen, and we must work with them, get into their heads, listen to what they want, understand them, please them, and develop a unique way of working with them.
   

Ideas for innovation in wallets

The following ideas were developed using various thinking tools, and do not exist at present (to the best of our knowledge):

1. An anti-pickpocket wallet (beeps when it’s taken out of a pocket).
2. A photo wallet (with an LCD screen on one side, and memory – so that you can display photos of the entire family).
3. A wearable wallet (made from flexible material that can be worn around your wrist).
4. An inseparable wallet (beeps when it is separated from its owner – but requires a subcutaneous chip to be implanted…).
5. A thrifty wallet (scolds when money is taken out of it: “Stop spending!” “Save up!”).
6. A disposable wallet (red stripes appear when the leather is worn, encourages its owner to replace it with a new wallet).
7. A changing wallet (with transparent external panels where you can insert pieces of cardboard or paper with different designs).
8. A glow-in-the-dark wallet (easy to find).
9. A wallet with a coin meter (contains a device that can count and notify how much change is in it).
10. A reversible wallet (that can separately hold two currencies of bills and coins – such as dollars and shekels).
11. A placebo wallet (bait for pickpockets, you put it in your back pocket to ensure that your real wallet isn’t stolen).
12. A winter wallet (with a special compartment for tissues). 

• Articles on Systematic Innovation 
• We will be glad to read your comments and suggestions

Managing without (!) objectives

The tip this time is based on Elioz Rabin’s book “The Book”. Elioz claims that rewarding salespeople for achieving sales goals leads to decreased (!) revenues. His explanation is simple: Successful sales people will easily achieve their goal and stop there (in order not to develop expectations that are too high for the next quarter). Unsuccessful sales people will realize that they don’t stand a chance of meeting those goals and they give up without even trying. Only the salespeople that almost meet the goals (an insignificant minority) will make an effort and slightly improve their performance.

Elioz explains that results oriented goals restrict the outcome by their very nature. They dictate the definition of “success”, and do not enable truly remarkable success from happening. Elioz claims that it is better to blur the required goal, which will be accompanied by feelings of discomfort and harder work, because the employees are unsure of what will make management happy.

If you need to set goals, Elioz claims that it’s better to set action and work (input) goals and not just results (output) goals. For example – it’s better to measure how many meetings every salesperson had with his or her clients. In this way, a successful salesperson that sold a great deal at the beginning of the week will be required to keep up the pace and meet with numerous clients later in the week as well. Moreover, this is how something that is completely in the salesperson’s control is measured, and it can also help mediocre salespeople to improve. In contrast, measuring desired results can be discouraging (which happens, for example, when a client places a huge order and then has to cancel because of extraneous circumstances. Why should this turn a great salesperson into a poor one?).  

So, if you want the sky to be the limit, perhaps the time has come to stop setting such clear goals…
 

• A column about Elioz Rabin’s “The Book” appears here.
• Additional Management articles appear here.