This is an MIT Sloan Management Review article. Dozens of markets of all types are in the early stages of a revolution as the Internet and related technologies vastly expand the variety of products that can be produced, promoted, and purchased. Although this revolution is based on a simple set of economic and technological drivers, the authors argue that its implications are far-reaching for managers, consumers, and the economy as a whole. Looks at what has been dubbed the "Long Tail" phenomenon, examining how customers derive value from an important characteristic of Internet markets: the ability of online merchants to help consumers locate, evaluate, and purchase a far wider range of products than they can typically buy via the traditional brick-and-mortar channels. The article examines the Long Tail from both the supply side and the demand side and identifies several key drivers. On the supply side, the authors point out how e-tailers' expanded, centralized warehousing allows for more offerings, thus making it possible for them to cater to more varied tastes. On the demand side, tools such as search engines, recommender software, and sampling tools are allowing customers to find products outside of their geographic area. The authors also look toward the future to discuss second order amplified effects of Long Tail, including the growth of markets serving smaller niches.
This is an MIT Sloan Management Review article. The term "value chain" suggests an orderly progression of activities that allows managers to formulate profitable strategies and coordinate operations with suppliers and customers. Using examples from the telecom, pharmaceutical, steel, and auto industries, the authors argue for a more complex view of value--one that is represented by a "value grid." The grid approach allows firms to move beyond their industry lines to identify opportunities and threats. It pushes managers to understand the power balance between suppliers and manufacturers. The new pathways to value can be vertical (as firms explore opportunities upstream or downstream from the adjacent tiers in their value chain); horizontal (as firms identify opportunities from spanning similar tiers in multiple value chains); and even diagonal (as firms look more integratively across value chains and tiers for prospects to enhance performance and mitigate risk).
Faced with exponential growth and a competitive telecom environment, Bharti looks for ways to better manage its capital expenditures for telecommunications and information technology. One option is to hand over management of its telecom and IT networks to its vendors. Explores the pros and cons of such an outsourcing arrangement for a company in an industry where technological superiority is considered an essential element in competitive strategy.
Examines Boeing's new strategy of offering services to regain market dominance and help its struggling airline customers improve efficiency and profitability.
The top management team at Charles Veillon, a Swiss mail-order company, is considering whether to work with a human rights organization to monitor the labor practices of its suppliers. A particular concern is avoiding child labor and other forms of workplace coercion.
In mid-February 2006, Christopher Smith, a U.S. Republican Congressman, proposed the Global Online Freedom Act, draft legislation that would prohibit U.S.-listed Internet companies from complying with the demands of Internet censorship and the requirement to disclose the personal information of Internet users imposed by the People's Republic of China. These U.S.-listed Internet companies include hardware and/or software vendors and search services providers that enable millions of businesses and individuals to operate on the Internet. The bill was introduced following a congressional hearing in Washington, D.C. called in February 2006, after a number of American Internet companies were found to be participating in the repression of human rights in China. Looks at the dilemma facing multinational firms: how to comply with local laws while at the same time trying to be socially responsible.
Starbucks was founded in 1971 by Jerry Baldwin, Zev Ziegler and Gordon Bowkerthree men from Seattle who loved coffee. By 1995, Starbucks had expanded to 676 stores, all within the U.S. or Vancouver, Canada. Only in the next decade did Starbucks make its first entry into the international markets. By 2006, Starbucks had approximately 11,000 stores, with 70 percent in the U.S. and 30 percent in international markets. Outside observers, however, continually raised questions about the likely future growth of Starbucks and the mix and profitability of its U.S. versus international operations. Starbucks faced the ever-present issues of where and how to further expand its global presence. This case explores Starbucks' possible growth modes-organic, acquisition, joint venture, and licensing-and covers issues that influenced Starbucks' growth strategy, such as same versus new country expansion and profitability fluctuations in international markets.
In April 2004, Singapore's Straits Times alleged in an article that T.T. Durai, CEO of the National Kidney Foundation (NKF), had been drawing on public donations to pay for his generous salary, perks, and expenses. The media also discovered that Durai had installed extravagant fittings, including a gold-plated tap, in his office bathroom. Singaporeans, especially donors, were outraged at how the NKF had mismanaged donor funds. Finally, after intense public pressure, Durai and the NKF Board resigned in July 2005. Illustrates the importance of governance, transparency, and public accountability among social enterprises, and the consequences of weak internal controls over financial reporting.
Founded in April 2004 by a former sports agent and a famed blackjack player from MIT, PROTRADE offered an Internet-based stock market for athletes. The start-up company utilized sophisticated algorithms--which were substantively derived from a book and its protagonist--to compute the value of athletes' performance. PROTRADE was targeting primarily two markets: the online sports content market and the fantasy sports market. Tracks the company's progress from idea to launch and focuses on its strategic alternatives for generating revenues.
Cementos Lima S.A, is a leading organization in the Peruvian cement sector, with 44% of the national market share and a growing presence in certain international markets. Parallel to the growth of the company, population centers have grown up in the areas adjacent to the cement plant. As time goes by, the neighboring communities have come to literally surround Cementos Lima S.A. and have developed a complex relationship with the company. On one hand, the residents in these areas are directly affected by the company's industrial operations, which produce negative effects on the environment. On the other hand, these same individuals benefit from the company's social initiatives over time. As the organization's social actions began to evolve, from disarticulated and basically philanthropic practices towards an attempt at more formal and effective projects in the community, a "breaking point" is produced in the company's management focus. This situation is generated by the company's plans for export growth, which implies physical expansion of their activities, and as a result a larger impact on the surrounding community due to the necessary increase in the transportation flow of primary materials and finished products. To meet its new transportation needs, the company has planned two major projects. Both projects require the approval of the neighboring community, as part of the authorization process established by municipal authorities. In the face of observed reluctance among the neighboring communities to approve these projects, company officials have begun to reexamine the way they have been managing community relations and the importance that these relationships have in achieving their strategic objectives.
In 2004 and 2005, The Theatre Practice (TTP), an established theatre company in Singapore conducted a series of drama workshops for service staff of InterContinental Singapore. In the absence of performance metrics, TTP had to convince managements of other hotels and service firms that theatre techniques could help to build the soft skills critically needed by service workers in Singapore.
Fusilier Technology is in disarray. Its vice-president of sales is leaving, the company's new growth strategy to sell customized business solutions has stalled, and sales have been flat for five years. Bill MacLeod, Fusilier's CEO, has to choose between two very different candidates for the top sales job: a veteran sales director who has excelled under the old order and a brash outsider who has experience selling solutions but doesn't know the industry. With an outside board director pressuring him to accelerate the pace of change, MacLeod ponders which candidate can best help the company make the transition. Fusilier's new solutions strategy has made the decision that much more difficult. Under this model, the company must revamp its incentives, training, and processes for deploying the sales force. Historically, compensation has been based largely on an individual rep's results, and sales training has focused on product features and cost-performance advantages, not on the business issues facing customers. Now salespeople need to understand, promote, and select from an entire portfolio of products and services offered both by Fusilier and its business partners. What's more, they need to collaborate with Professional Services, the new consulting unit whose mission is to jump-start the solutions-centric approach. Whom should MacLeod hire for the top sales job, and what should he do to put Fusilier back on a growth track? In R0607A and R0607Z, four experts comment on this fictional case study: Alston Gardner, founder of OnTarget, a sales training and consulting firm; Steve Kerr, a managing director and the chief learning officer of Goldman Sachs; Randall D. Kelley, a partner of the executive search firm Spencer Stuart; and Andrea L. Dixon, an associate professor of marketing at the University of Cincinnati.
We have to admire salespeople's resilience in the face of endless rejection, their certainty that things will work out in the end. At the same time, we're repelled by what their job can do to them. (Think Death of a Salesman and Glengarry Glen Ross, dramatic portraits of hollowness and moral capitulation.) Just what type of person goes into sales, and how do salespeople cope with their jobs? For insight into these questions, HBR approached G. Clotaire Rapaille, a psychologist, anthropologist, and marketing guru who researches the impact of culture on business and markets. In particular, he studies archetypes--the underlying patterns in psychology that illuminate the human condition--and shows organizations how to use those patterns to sharpen their sales and marketing efforts. He points out, for instance, that a keen understanding of the Great Mother archetype has helped Procter & Gamble achieve great success with Pantene hair products. By promoting nutrition--and reminding consumers that hair must be nurtured--the Pantene brand appeals to the maternal instinct. Rapaille says that salespeople have their own archetype: They are Happy Losers who relish rejection and actually seek out jobs that provide opportunities to be turned down. That, of course, has implications for how they should be managed. Rapaille's research shows that the leading motivator in sales is not money; it's the thrill of the chase. "Hold huge company meetings where you give a salesperson the gold medal of rejection," he advises. "Jonathan sold 500,000 computers last month, but he was rejected 5 million times! It may sound ludicrous, but this is the way to get fire in the belly of your sales force--particularly in America, where beating the odds is highly prized."
Every year, the research firm CSO Insights publishes the results of its Sales Performance Optimization survey, an online questionnaire given to more than 1,000 sales executives worldwide that seeks to examine the effectiveness of key sales practices and metrics. In this article, two partners from CSO provide the 2005 and 2006 survey highlights, which describe the challenges today's sales organizations face and how they're responding. An overall theme is the degree to which the buy cycle has gotten out of sync with the sell cycle. Buyers have always had a buy cycle, starting at the point they perceive a need. Sellers have always had a sales cycle, starting at the point they spot a prospect. Traditionally, the two have dovetailed--either because the seller created the buyer's perception of need or because the buyer pursued a need by contacting a salesperson (often for product information). Now the buy cycle is often well underway before the seller is even aware there is a cycle--in part because of the information asymmetry created by the Internet. The implications for managing a sales organization are profound in that sales training must now address how reps handle an environment in which buyers have more knowledge than they do. The authors offer evidence that sales executives are taking--and should take--aggressive action to train and retain sales talent, manage the sales process, and use sales support technologies to meet the challenges of this new environment.
If your salespeople aren't sure who their boss is--the district manager? the regional manager? the customer?--it could be a sign that your company's sales force controls are working at cross-purposes and that your sales function is in trouble. Sales force controls are the policies and practices that govern the way you train, supervise, motivate, and evaluate your sales staff. They include the types of compensation you offer your people and the criteria your sales managers use to evaluate the reps' performance. These controls let salespeople know which trade-offs the company would prefer them to make when the inevitable conflicts arise between what they want to do (spend lots of time and money to get a sale) and what they actually can do (use limited resources and still get the sale). When sales force controls aren't aligned--when, say, the system simultaneously encourages reps to be entrepreneurial but also to file detailed call reports and check in frequently with their bosses--individuals become discouraged and unproductive, and they eventually leave the company. The authors' research suggests there are significant differences between the control systems of companies that encourage salespeople to put the customer first--outcome control (OC) systems--and those that encourage reps to put their managers first--behavior control (BC) systems. In this article, they list the characteristics of OC and BC systems, describe the potential fallout from conflicts within these systems, and explain how you can tell which control system is appropriate for your firm. In most cases, the right choice will be a consistent system somewhere in the middle of the OC-BC continuum.
Sales departments tend to believe that marketers are out of touch with what's really going on in the marketplace. Marketing people, in turn, believe the sales force is myopic--too focused on individual customer experiences, insufficiently aware of the larger market, and blind to the future. In short, each group undervalues the other's contributions. Both stumble (and organizational performance suffers) when they are out of sync. Yet, few firms seem to make serious overtures toward analyzing and enhancing the relationship between these two critical functions. Curious about the misalignment between Sales and Marketing, the authors interviewed pairs of chief marketing officers and sales vice-presidents to capture their perspectives. They looked in depth at the relationship between Sales and Marketing in a variety of companies in different industries. Their goal was to identify best practices that could enhance the joint performance and increase the contributions of these two functions. Among their findings: The marketing function takes different forms in different companies at different product life cycle stages. Marketing's increasing influence in each phase of an organization's growth profoundly affects its relationship with Sales. The strains between Sales and Marketing fall into two main categories: economic (a single budget is typically divided between Sales and Marketing, and not always evenly) and cultural (the two functions attract very different types of people who achieve success by spending their time in very different ways). In this article, the authors describe the four types of relationships Sales and Marketing typically exhibit. They provide a diagnostic to help readers assess their companies' level of integration, and they offer recommendations for more closely aligning the two functions.
Although companies devote considerable time and money to managing their sales forces, few focus much thought on how the structure of the sales force needs to change over the life cycle of a product or a business. However, the organization and goals of a sales operation have to evolve as businesses start up, grow, mature, and decline if a company wants to keep winning the race for customers. Specifically, firms must consider and alter four factors over time: the differing roles that internal salespeople and external selling partners should play, the size of the sales force, its degree of specialization, and how salespeople apportion their efforts among different customers, products, and activities. These variables are critical because they determine how quickly sales forces respond to market opportunities, influence sales reps' performance, and affect companies' revenues, costs, and profitability. In this article, the authors use time-series data and cases to explain how, at each stage, firms can best tackle the relevant issues and get the most out of their sales forces. During start-up, smart companies focus on how big their sales staff should be and on whether they can depend on selling partners. In the growth phase, they concentrate on getting the sales force's degree of specialization and size right. When businesses hit maturity, companies should better allocate existing resources and hire more general-purpose salespeople. Finally, as organizations go into decline, wise sales leaders reduce sales force size and use partners to keep the business afloat for as long as possible.
Most CEOs who specialize in turning around struggling companies focus on costs. But for Fred Hassan, chairman and CEO of Schering-Plough, the primary focus in a turnaround is the top line. Since 2003, when Hassan took the helm at the global pharmaceutical company, he has overseen a remarkable recovery in performance. And consistent with his philosophy, the turnaround started with sales. Considering sales reps as less than crucial to strategy, Hassan cautions, is a big mistake. At Schering-Plough, he has concentrated on motivating and organizing salespeople to create trusting relationships with doctors. "You have to differentiate the salesperson in the customer's mind--just like you differentiate brands," he explains. A doctor may see 60 pharmaceutical reps on a regular basis but actually trust far fewer. To earn a spot in this inner circle, Schering-Plough reps try to turn each customer encounter into an occasion to help doctors provide better care for their patients. Schering-Plough also restructured its sales forces so that reps carry not just one kind of product, as they do in most pharmaceutical companies, but several. Covering a broad range of treatments gives reps more ways to build value-adding relationships with doctors. In this interview, Hassan discusses his success at Schering-Plough and his experiences at other pharmaceutical companies. During his career, he has built a reputation for being in tune with the front lines, as well as for reaching out to the managers who supervise salespeople. He has found that this level of personal attention not only makes reps feel respected, but also gives him valuable strategic insights.
Anyone in sales will tell you that social networks are critical. The more contacts you have, the more leads you'll generate and, ultimately, the more sales you'll make. But that's a vast oversimplification. Different configurations of networks produce different results, and the salesperson who develops a nuanced understanding of social networks will outshine competitors. The salesperson's job changes over the course of the selling process. Different abilities are required in each stage of the sale: identifying prospects, gaining buy-in from potential customers, creating solutions, and closing the deal. Success in the first stage, for instance, depends on the salesperson acquiring precise and timely information about opportunities from contacts in the marketplace. Closing the deal requires the salesperson to mobilize contacts from prior sales to act as references. Managers often view sales networks only in terms of direct contacts. But someone who knows lots of people doesn't necessarily have an effective network because networks often pay off most handsomely through indirect contacts. Moreover, the density of the connections in a network is important. Do a salesperson's contacts know all the same people, or are their associates widely dispersed? Sparse networks are better, for example, at generating unique information. Managers can use three levers--sales force structure, compensation, and skills development--to encourage salespeople to adopt a network-based view and make the best possible use of social webs. For example, the sales force can be restructured to decouple lead generation from other tasks because some people are very good at building diverse ties but not so good at maintaining other kinds of networks. Companies that take steps of this kind to help their sales teams build better networks will reap tremendous advantages.