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The Augean stables of academic marketing

Alexander Repiev

Beware of false knowledge; it is more dangerous than ignorance.– Bernard Shaw

n 1988, after years of active free-lancing in copywriting, I found myself in the seat of Marketing Manager at the Moscow

office of a London-based blue chip. The USSR was then making a U-turn to a market economy; and in that bizarre environment I was saddled with a host of practical tasks, ranging from the es-tablishing of an effective dealer network to the training of sales-force to advertising. I immediately plunged into the reading of al-most everything relating to marketing I could lay my hands on.

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With a degree in physics, I was used to scientific texts with their logic and consistency, clear-cut formulations and language, rigorous substantiations and proofs of everything, including as-sumptions and validity ranges of models, and lack of unneces-sary definitions and phrase-mongering.

More important, I was used to being able to put the stuff I had just read to immediate use. And so in that marketing reading I was seeking some practical recipes and clues I needed so badly. To my bewilderment, I found nothing of the sort.

Academic marketing tomes contained mostly arrays of defi-nitions, fancy research procedures, and some loose schemes, pre-sented randomly and inconsistently.

All my attempts to employ this “knowledge” failed miserably.

I panicked: it dawned on me that I would have to progress by trial and error, which I did.

Years later, with dozens of practical projects under my belt, I started teaching. I had to go over the academic stuff again. Now most of that academic legacy appeared to me, with more defi-niteness, to be just a heap of unnecessary or even insidious visu-alizations and fantasias.

But I cannot separate myself from those fantasias com-pletely: some of my clients, especially MBAs, like to parade their knowledge of them; some deans demand that I stick to the book in class. This all prompted me to undertake a fresh analysis of some of the holy cows of academic marketing: 4P, SWOT, PEST, Porter’s five forces, Porter’s value chain, Boston matrix, and Ansoff matrix.

All of these and other models have much in common about them.

SONKAcademia try to compensate for the lack of real knowledge

in marketing by a heap of scientific-looking constructs. This game of science in marketing has assumed such threatening pro-portions that Professor Andrew Ehrenberg of the UK coined a name for it – SONK (Scientification of Non-Knowledge). All the holy cows to be considered are prime examples of SONK-ing.

Taught, but not usedDiscussions of nearly all of them contain phases like “most

widely taught – and then probably ‘not’ used,” “fundamentally flawed in terms of practical applicability,” “have only specialized applications.” If so, why teach them?

But more and more of them are included into marketing cur-ricula, taking up more and more tuition time, placing more and more burden of the students’ memory. Woe betide you if you do not remember them, because at an MBA entrance test you may be asked such a nonsensical question:

“Cash cows” – is it a piece of:A. Matrix _________________B. McKinsey matrixC. Porter’s competition modelAnd if you do not want to litter your head with that junk, off

with your head!

Not much “cliento-marketing,” reallyDenizens of Harvard and other shrines of academism seem

to have conflicting views on nearly everything, even on the very foundations of marketing. In a class by themselves are “cliento-marketers” Theodore Levitt and Peter Drucker. Some of their views:

Theodore Levitt: “The marketing imagination is the starting point of success in marketing. It is distinguished from other forms of imagination by the unique insights it brings to under-standing customers, their problems and the means to capture their attention and their customs.”

Peter Drucker: “The aim of marketing is to know and un-derstand the customer so well the product or service fits him and sells itself… The purpose of business is to create and keep a customer.”

On the other hand, their “economo-marketing” colleagues at Harvard and other schools produced constructs, in which the


Client was conspicuous by its absence. Their marketing looks like a branch of economics with its computer-like Client, a homo economicus.

Not surprisingly, the above holy cows graze in academic marketing, management, and economics at the same time, thus obliterating important distinctions between these fields.

The schemes are effective killers of marketing thinking.

Conclusions that result from most of these linear models re-inforce the “we against them” or even “compete-with your-cus-tomer” paranoia (Porter’s five forces). In other words, they en-courage company-centric philosophy

instead of client-centric philosophy

As a result,

Most of Western marketing is more concerned with competition than with the Client.

It is this company-centric thinking of marketing graduates that is largely responsible for their poor performance in business.

Simplistic & dogmatic – A present-day company lives in an extremely complicated, ever changing environment. It is sub-ject to a host of predictable and unpredictable external occur-rences. If we fail to factor in some critical influence, we might end up in hot water. Practical marketing thus deals with an infi-

nite variety of unique cases, each requiring a fine-tuned decision.Marketing analysis generally involves building mental mod-

els of the behavior of Clients, markets, competitors, etc. Ideally, models involve assumptions, validity ranges, and error assess-ments – things unheard of in academic marketing. As a rule, a model requires some simplifications. It is up to the analyst to de-termine the adequate measure of simplification (approximation). Einstein said: “Make everything as simple as possible, but not simpler.” If a model is oversimplified you may lose some impor-tant nuances. That is exactly what happens with many academic schemes!

At best they are reminders and visualizations, many of which are undertakers of crucial detail. Most of them are inher-ently inconsistent and clueless. Some are linguistically helpless. They are effective quenchers of creativity.

Prosthetics of creativityIn this brave new world, wining decisions do not come easy.

More often than not they are a result of some revelations based on experience, hard work, sleepless nights.

And now a bunch of “gurus” confer on you a set of “magic wands,” which are said to be able to quickly solve most of your decision-making problems in business, including even strategiz-ing and planning. What a temptation!

Speaking of SWOT, one author said: “We never abandon familiar ways of doing things overnight, as if by a magic wand.”

We all love easy formulas that would save us the trouble of thinking and hard work. Easy formulas appeal to our psychol-ogy. This explains, by the way, why pseudomarketing is immor-tal – the array of scholastic shticks it generates non-stop is wel-comed by an army of experts in “cover-your-ass” bureaucracy. Scholasticism and bureaucracy, those Tweedledum and Twee-dledee of pseudomarketing, thrive on wishful thinking and “cargo cult.”

I have found that those prosthetics of creativity markedly dwarf one’s idea-generating capabilities, which in the hyper-competitive world may be a sure way to disaster.

Will the Augean stables be ever cleaned out?Peter Drucker said: “There is nothing so useless as doing ef-

ficiently that which should not be done at all.” I do not know whether Drucker meant some marketing academia or not, but his words apply to them all right.

To quote one author: “Editors seem to be the fall guys who are expected to clean out the Augean stables of an increasingly compromised academic literature, when what is needed is a breach in the dam of academic silence.”

Will the editors alone cope? Hardly. Perhaps, “cliento-mar-keters” should join forces and help them a bit with their shovels and brooms.

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The 4P and other little games of “catchy lists”In academic marketing, there is one funny notion that I would like to comment upon. This is the 4P (marketing mix). I must confess I have never understood the meaning and value of that product- and process-centered scheme, which totally ignored the Client.

The game of the 4P is just a treat: some pundits would jug-gle with words to get precisely four P letters – product, price, place (?!), promotion. How many practitioners could explain off-hand the meaning of “place”? And can any practitioners explain what they get from learning all those “pee-pee” wisdoms? “Learned” marketers keep coming up with further “valuable” ad-ditions to that P-zoo – each addition must be a PhD-able affair!

Some of their contributions are probing, packaging, public relations, people, processes, power, partition, prioritize, position, performance, penalty, perception, preservation, and so forth.

Philip Kotler also could not resist the temptation to join in the “pee-pee” race with his valuable additions of Politics and Public Opinion. One of the latest additions I came across was “passion.” What next? Characteristically, nobody proposed prof-itability.

Well then, if somebody does not like the simple notion of “corporate marketing” and prefers the term “marketing mix,” it would be a good idea for him to recall Drucker’s view that mar-keting is the entire business viewed from the Client’s perspec-tive. We get then:

A firm’s marketing mix is all that concerns the Client.

Coming under this definition are a lot of important topics not covered by 4P, the most important being the Client.

Anyway, the “pee-pee” game is quite popular. Says Scott Armstrong of Wharton: “Ask students to describe the most im-portant things they learned from the textbook in a recent market-ing principles course. I have tried this and few are able to think of anything. Those that do, say things like the 4P’s, positioning, and segmentation.” By the way, there are 4A and 4C. Not to be overlooked is the SONK-ing masterpiece of the “Four I’s of ser-vice” (intangibility, inconsistency, inseparability, inventory). You can think at leisure of your “valuable additions” to this I-zoo.

I wonder, are there any 4M in management, any 4F in cor-porate finances, any 4L in logistics, etc.? If not, how do those fields manage without their games of 4?

John Dawes of the Marketing Science Centre, University of South Australia, writes about “Thinking up catchy lists”: “Jay Levinson, author of several marketing books, invented the term ‘guerrilla marketing’, which requires seven ‘ents’, like assortment, commitment, consistent, and so on. His books are hugely success-ful. What is remarkable is that all these concepts should be so valuable, yet all end in ‘ent’. Another example is a European aca-demic who thought up ‘30 Rs’ of marketing. This is catchy list creation masquerading as good ideas. If you have the misfortune to suffer a presentation based on a concept like this, think up your own list. How about the five Os? Originality, Ownership, Obser-vation, Organisation and … Outcomes. That took one minute. It would not be hard to attach descriptions to each that sounded like sensible marketing. Or you could think of words that start or end with the letters the speaker is using. If the speaker was Jay Levin-son, you could call out that he forgot ‘resentment’. This could en-dear you to the audience, though not the speaker.”

Thank God, in the alphabet, there are still so many letters to play around with! You can also play around with numbers. One example is “The 100 Questions Every CEO Needs to Answer” in “Counterintuitive Marketing” by Clancy and Krieg.

SWOT analysis

SWOT analysis was proposed as an indispensable technique for organizations to describe their Strengths, Weaknesses, Opportu-nities, and Threats in the form of a handy matrix:

Internal factors Strengths Weaknesses

External factors Opportunities Threats

Hey presto! One step to automatic winning decisions? Yeah, just wait. With so much SWOT software around, it looks like ex-ecutives will soon get those decisions at a click.

The SWOT analysis is claimed by many business academia to be almost a silver bullet for decision-making in all sorts of busi-ness situations, especially in marketing. SWOT seems to be central

to formal business education. Unlike many schemes that are said to be “widely taught, but not used,” SWOT is widely used.

Unfortunately, more often than not, the role of this analysis is misconceived, it is misapplied, and its results are misinterpreted.

A tool, or an exercise in futility?The years intervening since the proposal of SWOT in the

1960s by Albert Humphrey have seen a severe division of opin-ion on SWOT. For instance, one of SWOT’s critics, Scott Arm-strong of Wharton, in his paper “Don’t do SWOT” reports that he “has been unable to find any evidence to support the use of SWOT.” Henry Mintzberg of McGill University in Montreal

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suggests that SWOT is the main cause of what is considered an excessive formalization of the strategy making process.

The following are a potpourri of worried opinions:“If used simplistically, the SWOT framework is a ‘naïve’

tool which may lead to strategic errors.”“Use of the SWOT framework tends to be most closely asso-

ciated with the ‘mechanistic’ approach and suffers as a conse-quence of this association.”

“Bad practices in SWOT analysis include the use of clichés or statements based on unsubstantiated evidence.”

“This usage rarely amounts to much more than a poorly structured, very general, hastily conducted exercise.”

Years ago I stopped using SWOT. The SWOT reports I see at companies are essentially sets of generic platitudes, often the same from year to year. It is only rarely that those reports are employed as a basis for any useful practical decision.

The practical results of SWOTs are not impressive, how-ever. A poll of 212 managers from Fortune 1000 companies indicated that SWOT harmed performance. Some concluded that the process was so flawed that it was time for a “product recall.” One expert said that he preferred to spell out SWOT as a “Significant Waste of Time.” Well, if it were just waste of time! Let us take a look at a couple of examples of SWOT “results” from the Internet.Wal-Mart. Strengths – Wal-Mart is a powerful retail brand. It has a reputa-tion for value for money, convenience and a wide range of prod-ucts all in one store. Weaknesses – Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. Opportunities – To take over, merge with, or form strategic al-liances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. Threats – Being number one means that you are the target of competition, locally and globally.Nike. Strengths – Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that “Business is war without bullets.” Weaknesses – The organization does have a diversified range of sports products. Opportunities – Product development offers Nike many opportu-nities.Threats – Nike is exposed to the international nature of trade.

World-shaking revelations, eh? But somebody takes such sophomoric exercises seriously!

Dozens of SWOTs I have seen are like these – just scratches on the surface. Exercises in banality, or even in futility. Only a naïve one would base one’s serious decisions on SWOT results.

Inconsistencies The SWOT scheme is fraught with inconsistencies. We will

consider some of them.Internal – external. The matrix is neatly divided into inter-

nal and external factors: strengths and weaknesses must ONLY be internal; opportunity and threats, ONLY external. But why? Life is more complicated than that.

Admittedly, there may well be some corporate things that are inherently internal (e.g., production flow, inventory storage) or in-herently external (e.g., political and legal environment, climate), but there are also things that have both internal and external as-pects to them. One example is product quality. Whereas fabrica-tion quality is largely an internal affair, marketing quality is exter-nal – it is judged by an indifferent Client.

Speaking of Clients (buyers), the diagram of the client-ori-ented company metaphorically shows the Client at the center of an organization, but physically Clients are external. Also, many SWOT templates in the literature consider marketing a strictly internal thing, disregarding the fact that marketing is done in the mind of the Client.

Some authors maintain that strengths and weaknesses can only be viewed as such when they are so perceived by Clients. In other words, those academics believe that a Client at a supermar-ket must have some supernatural capabilities of gaining insights into your company’s in-house developments by simply looking at your product.

Furthermore, SWOT dictates that all the threats and opportu-nities occur strictly outside a company. However, there may be real threats and opportunities within the innards of an organiza-tion.

Also, Threats and Opportunities are said to be factors over which a firm has no control. But how about outside things over which a firm generally does exercise some control, e.g., suppli-ers, outsourcing, franchising, etc.?

What is the SWOT objective? Present-day SWOT theories say that SWOT starts with specifying the objective of a business venture or project. But then a hapless student runs into the words of the recognized marketing pundit Theodore Levitt: “Manage-ment by objectives works if you know the objectives. Ninety percent of the time you don’t.”

At the same time, lots of SWOTs are done without any spe-cific objective. See the examples just cited.

Who should conduct a SWOT analysis? One often comes across examples of purely marketing SWOTs, and SWOTs done by one person. It is clear, however, that for this exercise to carry at least some weight, it should be performed by a team of man-agers that represents a broad range of perspectives, such as mar-keting, sales, finances, manufacturing, R&D, logistics, etc., un-der the guidance of a skilled moderator.

Practically, however, it is next to impossible to get a produc-tive team like that. And even if you do, you should hardly expect

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much creative thinking from them. Experience has amply shown that even if the SWOT factors are identified by a group of well-informed insiders, those are just regurgitations of the conven-tional wisdom of people within the firm.

One expert says: “If done properly, SWOT is difficult for most organizations, because people are not comfortable looking at, and facilitating multi-dimensional analysis, which is what SWOT is intended to be used for.” My experience of cross-func-tional teams tells that their members are often uneasy, especially revealing weaknesses of respective departments.

Most leaders disregard the output of a SWOT analysis – es-pecially if it does not agree with their pre-conceived ideas of what is the right solution or approach.

SWOT-ed competitors. Oddly enough, SWOTs are per-formed on competitors as well. I wonder how should respective SWOT groups be manned? Should they include executives from a respective rival organization? Or maybe it would help to have a couple of extrasensory perception gurus around? Or a crystal ball? And how many competitors should be SWOT-ed? Dozens, hundreds, thousands? To quote one source: “In competitor analy-sis, marketers build detailed profiles of each (!?) competitor in the market.”

Well, but what important inferences are they supposed to make from those profiles? If they mean business, of course.

How long should it take to conduct a proper SWOT? Some say that it takes a couple of weeks, with many brain-storm-ing sessions and all; others believe that a couple of hours is enough. Even with a bunch of competitors.

Content of a SWOT analysis. There are so many opinions as to what should be covered by a SWOT analysis that I do not envy an inexperienced practitioner who considers conducting a SWOT. It is abundantly clear that respective SWOTs based on different inputs are bound to lead to different outcomes.

To conclude, this constellation of inconsistencies makes the outcome of a SWOT anyone’s guess.

Variants and substitutesIn addition to “basic” SWOT, academia are churning out a

stream of its versions. Examples are “dynamic SWOT” and “POWER SWOT,” “POWER” here being an acronym for Personal experience, Order, Weighting, Emphasize detail, and Rank and pri-oritize. There is also SWOTT, the last T standing for Trends.

Academia have come up with a SWOT version known as TOWS. I found the following explanation: “The only difference

between TOWS and SWOT is that TOWS emphasizes the exter-nal environment whilst SWOT emphasizes the internal environ-ment.” It’s funny, to say the least.

There is no shortage of propositions of SWOT substitutes. So, Scott Armstrong recommends that firms “follow a formal written process to: (1) set objectives; (2) generate alternative strategies; (3) evaluate alternative strategies; (4) monitor results; and (5) gain commitment among the stakeholders during each step of the process.” Dr. Armstrong laments: “Few, if any, organizations use this five-step procedure for planning.” Guess why?

There is a more fascinating candidate SWOT substitute called SLOPE. This technique allegedly helps organizations assess their Strengths, Limitations, Obstacles and Potential Excellence. Its in-ventor Shona Moody proudly proclaims: “SLOPE is an organiza-tional management tool for the new Millennium.

It replaces and outshines popular SWOT analysis and allows organizations to conduct their own analyses without the need to hire expensive consultants.” Stunningly enough, the author of this “metaphor-based strategy formation tool” has based her “theory” on the well-known Greek myth of Sisyphus – a metaphor of pointless or interminable activities. A fitting analogy!

Other substitutes are “telescopic observations strategic framework,” SOAR (Strengths, Opportunities, Aspirations, Results), to name but a few.

To SWOT, or not to SWOT?To SWOT, if what you need is just a rapid assessment, a

static picture, an initial catalog of issues to be considered at leisure. If properly executed, SWOT may help you to arrange questions and facts to serve as a kind of preliminary check-list. SWOT sketches can do for a slide presentation, a “pencil-and-napkin” discussion, and so forth.

Not to SWOT, if you expect from this simplistic matrix some valuable insights in dynamic real life. The SWOT jigsaw is static and fragmented; it is basically rear-view thinking. Meanwhile, like it or not, breakthrough business decisions call for future-oriented, systems (synthetic, holistic) aha-thinking. And so it is only at your peril that you can take these rough sketches seriously enough to base on them some critical inferences, least of all to formulate any fateful strategies and plans.

A comprehensive marketing audit or any other systems analysis may well turn many a table on SWOT’s rough assessments.

PEST analysisAlso referred to as STEP.

PEST analysis stands for “Political, Economic, Social, and Tech- nological analysis” and describes a framework of factors used in

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macroenvironmental scanning. It is basically a check list to look into external factors that might affect some corporate decisions. In the literature one can find more detailed prompts called “tem-plates,” e.g., like this (http://www.businessballs.com):Political current/future legislation home market European/international legislation regulatory bodies and processes government policies trading policies funding, grants and initiatives home market lobbying/pressure groups international pressure groups wars and conflict

Economic home economy situation home economy trends overseas economies and trends taxation specific to product/services seasonality/weather issues market and trade cycles specific industry factors market routes and distribution trends customer/end-user drivers interest and exchange rates international trade/monetary issues

Social lifestyle trends demographics consumer attitudes and opinions media views law changes affecting social factors consumer buying patterns fashion and role models major events and influences ethnic/religious factors advertising and publicity ethical issues

Technological competing technology development research funding associated/dependent technologies replacement technology/solutions maturity of technology manufacturing maturity and capacity consumer buying mechanisms/technology technology legislation innovation potential technology access, licencing, patents intellectual property issues global communications

Although this list may look exhaustive, it can easily be shown that it overlooks some issues that may be important and even crucial in some situations. Examples are the role of women in households’ buying decision making, feminization, globaliza-tion, computerization, Internetization, sexual revolution, terror-ism, crime, foreign language proficiency, education level, brand consciousness, etc,

It basically overlooks climatic changes and differences, which is getting ever more important now that the globe’s cli-mates are getting warmer. Also left out are natural resources, available both locally and internationally, e.g., oil, gas, electric-ity, water, timber, land; and geographical issues, e.g., distances to some important locations.

These deficiencies are not catered for by the scheme’s exten-sions, such as STEEP, PESTEL, PESTLE (Political, Economic, Socio-cultural, Technological, Legal, Environmental), PESTELI or LEPEST. Recently this zoo was even further extended to STEEPLE and STEEPLED, including ethics and demographics. SLEPT stands for Social, Legal, Economic, Political and Tech-nological factors. This adds enormously to confusion and mem-ory burden, without any noticeable improvements to the picture.

To conclude, this is a workable check list, although with a lot of loopholes. If taken as a military style instruction, without imagination, which is all too often the case in business, this scheme may lead to wrong decisions, by overlooking some criti-cal factors. Anyway, it may be better than no analysis of external factors at all.

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http://www.businessballs.com/


Porter’s five competitive forces

This “framework” is highly praised by academia, and not so by practitioners. When I first saw this diagram years ago, it set me wondering as to how I was supposed to employ it to solve a bun-dle of my everyday problems. The model appeared to be abso-lutely useless. It also gave rise to a host of questions of varying nature – marketing, logical, psychological, and “technical.” Let us begin with what lies on the surface.

Why “forces,” if the diagram talks about some threats and powers (or rather influences)? What is one supposed to make of the arrows? What does the arrow in the center box actually repre-sent? The pretty symmetry of the picture engendered some queer views: “Supplier power is a mirror image of the buyer power.” Really?

Why do the arrows point to “Industry competitors”? Is it supposed to sort of hint that, when thinking about competition, we should pay a shade more attention to the… competitors? Why then in the following version of the “forces” competitors are no more important than, say,… customers (as competitors)?

Some authors maintain that Porter’s five competitive forces have to do with MICROeconomics, whereas his schemes are called “The five forces that determine industry profitability” and “Industry attractiveness,” thereby suggesting that they are con-cerned with MACROeconomics.

What is the purpose of the model?I must confess that I could not work it out. And it looks like

I am not alone. In the literature, there are a bouquet of profes-sional opinions about the purpose of Porter’s five competitive

forces, ranging from “understanding where power lies in a busi-ness situation” to “to identifying whether new products services or businesses have the potential to be profitable.”

Anyway, there must have been some purpose, however flimsy, in Dr. Porter’s academic mind. May be, it is simply to re-mind unwitting practitioners that there is such a thing as compe-tition and that it should be addressed? – If so, thanks for that breath-taking discovery!

Or perhaps Porter intended to stun practitioners by suggest-ing that companies must compete not only with their competitors per se but also with their suppliers, customers, employees, and the world at large?

If the purpose was to help practitioners to perform some macro- or microeconomic analyses in the present-day extremely involved business environment, the model is too primitive for that. More primitive than SWOT. Using it for some serious anal-ysis may cause you to overlook many fateful issues.

Among the other flaws of this simplistic framework, critics note that it only fits static markets. It is not able to take into ac-count new business models and the dynamics of markets. Also, it does not take into consideration strategic alliances, electronic linking of information systems of all companies along a chain, virtual enterprise-networks, to name but a few. It overlooks a host of most important influences.

This model is concerned, directly or indirectly, with several fundamental notions. Dr. Porter lumps together industry com-petitors, suppliers and, of all things, buyers and calls them all… competitors. Oddly enough, he seems to have never heard the word “partners.”

Descartes said: “Refine the meaning of words, and you would save humanity from most of its delusions.” Let us do some refining for Dr. Porter to save business humanity from a multitude of his linguistic and marketing delusions. Sadly, the Harvard professor does not feel the intricate interplay between the fundamental notions involved.

Competition and competitorsMerriam-Webster defines “competitor” as “one that com-

petes: as a: rival b: one selling or buying goods or services in the same market as another.” Competition is “rivalry between two or more businesses striving for the same customer or market.”

Western marketing tradition views marketing as a kind of warfare. A competitor is an enemy to be outperformed, ousted, destroyed. Any company craves to have as few competitors as possible. We will come back to this “wisdom” when we discuss buyers and suppliers.

“Industry competitors” vs. “bargaining power of buy-ers.” It is easily seen that these two “forces” are interdependent –

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the bargaining power is a function of the competition intensity and commoditization.

“Industry competitors” vs. “potential entrants.” Gener-ally, the “ensemble” of competitors are in a state of dynamic bal-ance – companies keep appearing and disappearing at rates con-ditioned by a multitude of circumstances, including the average life time of companies in an industry. And so the threat of “po-tential entrants” may be compensated for by the opportunity of potential “extrants.”

Internal competition. Business writers sometimes talk about “internal competition.” For example, the Chevy division would compete with the Pontiac division for some market seg-ments.

Suppliers. Should you really view your suppliers as com-petitors (enemies)? It is common knowledge that a prerequisite for lasting profitable relations in business is a WIN-WIN ar-rangement with your suppliers. It pays to regard your suppliers as partners.

Oren Harari, Professor at the Graduate School of Business in the University of San Francisco, tells an interesting story: “Intel’s senior vice president Ken Thompson delivered a speech to a large audience of the company’s principal suppliers. What Intel needs, said Thompson, are suppliers who can help Intel compete. Intel wants suppliers who can be ‘a sustainable source of big ideas’ in production efficiency, cost containment, and even rev-enue-line enhancement. In other words, said Thompson, ‘lead us! Know our business so well that you can take us by the hand and point us in new directions.’”

Competitors are not talked to this way!Complementors. Other partners are complementors (col-

laborators). It is a term used to describe businesses that directly sell a product (or products) or service (or services) that comple-ment the product or service of another company by adding value to mutual customers; for example, Intel and Microsoft (Pentium processors and Windows), etc.

Products. Conspicuous by their presence in the model are products. A business situation is pretty much dependent on their nature, marketing quality, availability, and so forth.

Customers The most striking “wisdom” in this revelation of Dr. Porter’s

is the “buyer” bit. It is worth a closer look.What is a customer, buyer, Client? In many markets buyers

are overproposed and armed with the Internet. They are spoiled and cynical. And they sometimes exercise their “bargaining power.” They are kings. This is all tacitly incorporated into the notion of buyer, customer, client. It is a given.

Interestingly, one Harvard professor (Peter Drucker) was a strong believer that “the purpose of business is to create and keep a customer.” Now another Harvard professor believes that buy-ers are competitors. If we all agree that a competitor is an enemy

to be outperformed, or even destroyed, we end up in an impasse.What shall we do with our clients after all – shall we create

and keep them, or shall we destroy them? Shall we scrap the no-tions of customer satisfaction and the client-oriented organiza-tion, etc.? Shall doctors view their patients as competitors? Shall teachers view their students as competitors? Shall media view their respective readerships and viewerships as competitors?

Further, Porter does not make an explicit difference between end users and resellers. If you’re selling to big box retailers, you may well be at the mercy of their pricing, inventory maintenance, returns, and in-store advertising policies. Your products, how-ever, may be well accepted by end users. These two types of clients may require different decisions, policies, selling points, and so forth. Their competition intensity may differ.

Porter’s scheme corruptsthe thinking of practical marketers.

There is another Porter’s brainchild.

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Porter’s value chain

This scheme is too scholastic, irrelevant, and ambiguous even for academic marketing. How is it supposed to be put to any use, however flimsy, by a practitioner? Shall it be viewed as a primi-tive linear operation of addition of some mysterious “values”? If so, are there any equations to calculate respective “primary” ad-ditives? How is one supposed to take in inputs from “support” activities? What are the measurement units here? If the only pur-pose of this construct is simply to tell us that contributors to a firm’s business are all the corporate functions, why so much fuss over such a glaring piece of banality? These are just some of the most elementary questions that this scheme evoked in my mind. There are dozens of others unanswered questions.

I read that highly tooted Porter’s five forces and value chain “form the core of most MBA programs.” Really? Poor MBAs! I showed the above diagram to my students and asked them to guess its purpose. Most could not make head or tail of it. Some suggested that it might be a manufacturing process chart or an il-lustration of the way costs build up.

Many asked me to clarify the meaning of “firm infrastruc-ture” and “operations.” I undertook an Internet search only to discover that different treatments include under these headings dissimilar functions, some of which are covered by other entries of the “chain.” For “firm infrastructure,” examples are “human resource management,” “sales and marketing,” “marketing and legal compliance,” “a strategic plan, corporate governance, sales and marketing plans and operational strategies,” and what not. Explanations of “operations” appeared to be more obscure. When I supplied the name of the scheme, discussions invariably boiled down to the meaning of “value.”

Older students said that the scheme reminded them of one Karl Marx’s dogma taught in all Soviet colleges – that of “sur-plus value,” which was allegedly produced, right at workplace, by workers underpaid by capitalist pigs. Soviet students used to ask the teachers the awkward question – what will happen if that “pig” fails to sell the products? A dogmatic Soviet teacher would not have an answer. Surprisingly, no answer has been supplied by the Harvard pundit either.

What is “value”? While searching for answers to this question on the Internet,

I came across a well-grounded paper by John Ramsay of the UK. The following are some excerpts from its section called “There is no such thing as a value chain”:

“My interest in this subject started a year or so ago at a con-ference where I came across the world’s greatest living expert on the use of the word “value” in the purchasing field. He was an American in the fifth year of a PhD on the subject, I sidled up to him in the corridor one day after listening to him deliver a paper on the subject and said: ‘Listen Steve, you’re the world’s greatest expert on value in purchasing. I’m confused – what precisely IS value?’ and his reply was ‘I used to think I knew, but now I’ve really no idea.’ …what kind of thing do the words “customer value” refer to? – is it physical or mental, abstract or concrete, monetary or psychic?”

John Ramsay supplies an extensive potpourri of definitions from economics, marketing, accounting, strategy, operations man-agement. Most of them suggest that “value” is a fairly vague idea in a person’s mind – one man’s junk is another man’s treasure.

Funnily, some zealous authors even indulge in “value” pseudo-math: Customer value = Perceptions of benefits / Total cost of ownership; Customer value added = Perceived worth of the company offer / Perceived worth of competitive offers. Why ratios, not deltas, by the way? Or logarithms? Or differentials?

Misleading Commenting on the basic idea behind Porter’s chain, Ram-

say says: “You begin to wonder what kind of chain was in Porter’s mind. Personally I have no idea… The value chain metaphor appears to be entirely misleading.”

I agree with Ramsay: “Value appears to be an abstract men-tal phenomenon and therefore it cannot be delivered, or offered, or received, or described using any of those other verbs that imply the existence of a concrete object that is being manipulated. Con-sequently it cannot be passed along from department to depart-ment… Imagine a company that is currently successfully selling a product, when along comes a competitor with a superior offering. The first company’s sales dry up. So, their product used to ‘have’ value, but now it possesses none?”

Porter gives his own definition: “Value is the amount buyers are willing to pay for what a firm provides them.” His mechanistic dia-gram suggests that value accrues, so that buyers must be “willing to pay” increasingly more for articles along the chain, e.g., more for semi-finished products than for raw materials. Is it always so?

The saying goes that a chain is only as strong as its weakest link. Frankly, I could not tell the weakest among the extremely

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weak links of this famous chain.A student of business may be embarrassed by the misfit be-

tween Porter’s value chain and the idea of another Harvard pro-fessor, Peter Drucker: “Marketing and innovation produce re-sults; all the rest are costs.” He will also be unpleasantly sur-prised to find many versions of the chain. Interestingly, Michael Porter’s book “On Competition” carries two versions. Some academia also talk about “value networks” and “value grids.” One example of value network:

As is so typical of ivory-tower marketing, this is an “institu-tional” view of the business world, with the company (not the Client) at the hub. Can adherents of such views build a client-ori-

ented company? What do you think, gentlemen?There are also other schemes, e.g., Philip Kotler’s:

* * *A professor thus presented to the students his very personal

judgment of Porter’s achievements: “This man had locked him-self in a library for a few years, had analyzed some companies and than he managed to summarize nearly the whole science of microeconomics in one single simple model.”

The mountain gave birth to a mouse. A dead mouse. An-other Blatant Nonsense Effect “made in Harvard.”

I was amused to learn that Porter was an aeronautical engi-neer. Thank god he is not anymore: with his logic he could ruin many a NASA project. I reckon, however, that his sophomoric academic constructs drastically increased the mortality rate of marketing projects, and maybe even of organizations.

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Boston MatrixAlso called the BCG Matrix, the Growth-Share Matrix and Portfolio Analysis

The matrix is a brainchild of the Boston Consulting Group. It was devised in the 1970s as a simple method for helping corpo-rations decide which parts of their business they should allocate cash to. Since the 1970s, many things have changed dramati-cally. Specifically, it has become much easier to borrow money cheaply making this less of an issue.

One author said: “If you enjoy visual representations and vivid descriptions of your business then you’ll love the Boston Matrix!” I don’t love it.

Business situations are generally equations with many un-knowns. But, like other marketing schemes borrowed from eco-nomics, the Boston Matrix neatly reduces that infinite complex-ity to a couple of cases:

Dogs. These are products with a low share of a low growth market. They are said not to generate cash for the company, but rather absorb it. It is recommended to get rid of these products and/or business units. Well, but many SMEs in many low growth markets have a low share, and yet make money.

Cash Cows. These are products with a high share of a slow growth market. They generate more than is invested in them. It is recommended to keep them in your portfolio of products.

It is noted that the term “cash cow” is also used sarcastically to describe a customer or organization that has no control over its spending.

Question marks (Problem Children). These are products with a low share of a high growth market. They consume re-sources and generate little in return. They absorb most money as you attempt to increase their market share.

Stars. These are products with a relatively high share in high growth markets. Stars tend to generate high amounts of in-come. It is recommended to keep and develop your stars.

Assumptions and problemsThe Boston Matrix relies on relative market share, rather

than profits, since it assumes that market share carries more in-formation; and if you have a high market share you will al-legedly be making much money due to scale economies. Is it true? Nope.

As Richard Miniter showed in his book “The myth of mar-ket share. Why market share is the fool’s gold of business,” life is not that simple. There is no rigid correlation out there between market share and profitability. And economies of scale are not always feasible. Miniter reasons that it makes more sense to be a profit leader, rather than a market leader. Profit leaders nor-mally view growing market share as a by-product of their activi-ties. He substantiates his views with a plenty of examples.

The Boston Matrix is thus a tool for those who love the fool’s gold of business.

Furthermore, experience of Xerox under David Kerns has shown that it is more productive to concentrate on customer sat-isfaction instead of market share.

A tacit assumption behind the Boston Matrix is the Product Life-Cycle. Thus, following the PLC, successful products will steadily process around the quadrants in anticlockwise fashion; start-ing as problem children, then moving through stars to cash cows, and then on to dogs and extinction. Some authors believe that this thinking is dangerous, since it tempts managers of successful, ma-ture products to prematurely anticipate their move into decline.

The Boston Matrix is widely criticized by academia and practitioners alike as a gross oversimplification, which is respon-sible for many a facile decision in business. Ample evidence has been amassed that the cash flow techniques are only applicable to a very limited number of markets (where growth is relatively high, and a definite pattern of product life-cycles can be ob-served, such as that of ethical pharmaceuticals). In the majority of markets, its use may give misleading results.

As with most marketing techniques, there are a number of alternative offerings vying with the Boston Matrix. The next most widely reported technique is that developed by McKinsey and General Electric; which is a three-cell by three-cell matrix – using the dimensions of “industry attractiveness” and “business strengths.” It approaches some of the same issues as the Boston Matrix, but from a different direction and in a more complex way. It is used less, or is at least less widely taught.

Ansoff matrixAlso calledAnsoff Product-Market Growth Matrix

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This piece of visualization was created by Igor Ansoff. It sug-gests four possible product/market combinations: Market penetration (existing markets, existing products):

Market penetration occurs when a company enters/pene-trates a market with current products.

Product development (existing markets, new products): A firm with a market for its current products might embark on a strategy of developing other products catering to the same market.

Market development (new markets, existing products): An established product in the marketplace can be tweaked or targeted to a different customer segment.

Diversification (new markets, new products): the firm grows by diversifying into new businesses by developing new products for new markets.The matrix is said to allow marketers to consider ways to

grow the business via existing and/or new products, in existing and/or new markets. Really? The idea is so elementary that it hardly needs any visualization. One can come up with a multi-tude of such nearly useless “visualizations.”

A couple of comments, anyway.What is a “new” product? What measure of “newness” sug-

gests the use of the “Product Development” strategy?If we consider that a product, in the ultimate case, is a combi-

nation of good(s) + services + atmosphere, then any minor change in any or several of these components will result in a new “exist-ing” product.

Further, any new “existing” product means a new penetra-tion. In other words, it brings us back to square one. Literally.

We will thus go in a circle.

* * *

What do you expect from a practitioner armed with such an “armamentarium”? But it is just the warming up. Awaiting the hapless student are a myriad of further scholastic constructs, such as:

Invest in, Market in, Product in, ММТ, Value Reporting, AIDMAA, PIMS, GE-model, IPO, АВС-analy-sis, XYZ-analysis, Product Life-Cycle, Survival Matrix, ETOM, QUEST, Balanced Score Cards, Key Perfor-mance Indicators, DPM, SCAN-analysis, Breakeven Analysis, Cluster Analysis, McKinsey analysis, Nielsen retail index, Attwood panel, Nielsen research panel, MLU, VALS, Four I’s of service, Multi-Attribute Product Model, Acceptance Curve, ASSPAT, CRA, SAM, IPMAP, TOMI, QP, BRQ, ACCA, DAGMAR, DIBABA, IIRM.

To name but a few.

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