The year ahead for strategy: we’ve got a fight on our hands

Marketing isn’t a cost centre any longer.

Source: The year ahead for strategy: we’ve got a fight on our hands

It’s a sad state of affairs when people feel the need to argue that ‘marketing is no longer a cost centre’.

I know we lost this battle to the finance monkeys years ago – and to the neoclassicists and shareholder value ideologues – but it’s still ridiculous.

It’s a world gone topsy-turvy, a dystopian reality where somehow value creation is a cost, and everything is valuable.

We’re living in the Upsidedown.

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Peter Drucker, The Practice of Management, 1954

Culture when it takes us captive | CultureBy – Grant McCracken

A very important idea, explored more broadly in Richard Foster and Sarah Kaplan’s ‘Creative Destruction’. I have an idea for a design research/ethnography approach to transformation built on this…

Every organization operates out of an idea of itself. (We call this idea several things: our “business model,” our “value proposition,” our “core mission.”)

Of course, we would like to think this idea is perfectly adapted to reality, that it is the best, most sensible, way of extracting value from the world.

But sometimes our idea falls out of its “match” with the world. And now that the world changes so often and so fast, this happens a lot. “Idea” and “world” are no longer dance partners.

Part of the work of management is detecting these moments of disconnect and restoring the connection between our idea and the world.

If, on the other hand, we neglect (or refuse) to restore the connection, something bad happens. We are taken captive by our culture.

Source: Culture when it takes us captive | CultureBy – Grant McCracken

Nike’s Londoner ad is great creative, but is the city-focused strategy right?

I love this description. Love it.

The anthropologist Grant McCracken once called branding a “diecasting mechanism”, in which cold commodities are painted with cultural meaning through the process of advertising.

Source: Nike’s Londoner ad is great creative, but is the city-focused strategy right?

I did some work a while back looking at the decline of Gap over the past 15 years. Despite the many narratives about changing tastes, culture, competition, etc., the reality is that so much of its decline can be put down to its decision to protect profit by cutting investment in marketing, and more specifically, television advertising.

Seriously, Gap didn’t advertise on TV for the best part of 7 years.

For a brand which a) sells something close to cold commodities of the clothing world, and b) had a brand built defined by ’90s cultural relevance, in turn created through iconic ads of the ’90s (everyone in vests?), the decision to cut advertising was specifically the decision to go from cultural relevance toward commodity.

It wonders then why it struggles to shift inventory, why its pricing comes under pressure, why it relies on discounting to sell through, all of which in turn creates profit pressure, which in turn forces it to cut marketing… and so on. All the while its brand deteriorates in the minds of the market.

Brands are still one of the most misunderstood phenomenons in business, despite the fundamental role they play in growth, profitability, capital velocity and cash flow. Hell, despite the fact that for most consumer businesses they are the valuable important asset.

And people still get away with cutting spending to juice profits, neglecting the fact that marketing isn’t a cost so much as an investment in a brand asset, itself the store of future cash flows…

There’s a long, boring paper I’m writing on the role of accounting standards in creating a misleading mental model of marketing, but that’s for another day…

In the meantime, hold onto Grant McCraken’s thoughts above.

 

 

America Is Not a Democracy – The Atlantic

It’s a suspicion stoked by the fact that, across a range of issues, public policy does not reflect the preferences of the majority of Americans. If it did, the country would look radically different: Marijuana would be legal and campaign contributions more tightly regulated; paid parental leave would be the law of the land and public colleges free; the minimum wage would be higher and gun control much stricter; abortions would be more accessible in the early stages of pregnancy and illegal in the third trimester.

Source: America Is Not a Democracy – The Atlantic

The Theory of the Business

 

The root cause of nearly every one of these crises is not that things are being done poorly. It is not even that the wrong things are being done. Indeed, in most cases, the right things are being done—but fruitlessly. What accounts for this apparent paradox? The assumptions on which the organization has been built and is being run no longer fit reality. These are the assumptions that shape any organization’s behavior, dictate its decisions about what to do and what not to do, and define what the organization considers meaningful results. These assumptions are about markets. They are about identifying customers and competitors, their values and behavior. They are about technology and its dynamics, about a company’s strengths and weaknesses. These assumptions are about what a company gets paid for. They are what I call a company’s theory of the business.

Source: The Theory of the Business

The Bankruptcy of Modern Finance Theory – American Affairs Journal

Every strategic planning session ever.

The man who would go on to become the youngest recipient of the Nobel Prize in economics, Kenneth Arrow, began his career during World War II in the Weather Division of the U.S. Army Air Force. The division was responsible for turning out long-range weather forecasts.

Arrow ran an analysis of the forecasts and found that his group’s predictions failed to beat the null hypothesis of historical averages. He and his fellow officers submitted a series of memos to the commanding general suggesting that, in light of this finding, the group should be disbanded and the manpower reallocated.

After months of waiting in frustration for a response, they received a terse response from the general’s secretary. “The general is well aware that your division’s forecasts are worthless. However, they are required for planning purposes.”27

Source: The Bankruptcy of Modern Finance Theory – American Affairs Journal