Playing To Win
The Best of Two Years of Strategy — #4
It’s Time to Accept that Marketing and Strategy are One Discipline (April 19, 2021 comes in at #4 (of 104) in popularity. This one was a wild one! Numerous readers took the time to explain to me that I had no idea what marketing was, or strategy was, or both. Many quoted me textbook definitions of the two to demonstrate beyond a shadow of a doubt that the two are different.
At risk of sounding arrogant, I couldn’t care less about how marketing people describe marketing or strategy people describe strategy. Traditional definitions represent the problem, not the solution. Indeed, you can find things that strategy people do that marketing people don’t, and vice versa. That is not the point of the article. The point is that they have converged to such an extent that they are one discipline and should be treated as such in companies. And at business schools, having separate strategy and marketing faculties in business schools is at best a quaint anachronism, but at worst, a terrible way to prepare graduates for the world they will enter.
Please enjoy! Next week: #3.
Marketing & Strategy Started in Separate Places but have Converged
My 29th Playing to Win/Practitioner Insights (PTW/PI) piece is on It’s Time to Accept that Marketing and Strategy are One Discipline. Links for the rest of the PTW/PI series can be found here.
When I work with tech companies, I find it striking how ambivalent most are about strategy. They tend to see it as an unhelpful bureaucratic planning exercise in an industry is too fast moving for strategy. On the former, they are right to be skeptical. As I have written about in this series, most strategic planning is dominantly planning and not strategic. However, the latter is a fallacy that I have also written about in this series. Everybody has a strategy — it is what they do, so whether they admit it or not, every tech company has a strategy no matter how fast-moving its industry is.
But tech companies are almost universally enthusiastic about product marketing. When I ask them, they describe a great product marketer as one who thoroughly and insightfully understands the market and what motivates customers across the various segments; is capable of determining what attributes the product (service) needs to embody to prevail against competition; can wisely choose the segment(s) to target; and is skilled in designing an effective go-to-market as well as the accompanying communications approach.
When I hear that, it sounds very familiar because it is strategy: Where to Play/How to Win (WTP/HTW). This is not surprising because during the late 20th century marketing and strategy began the process of converging and now, they are indistinguishable, so the Silicon Valley view is not wrong: product marketing is strategy. That is why I have made my 28th post in the Playing to Win/Practitioner Insights series It’s Time to Accept that Marketing and Strategy are One Discipline.
How on Earth did this Happen?
Marketing began life as a formal discipline focused on the customer and the company. At its inception in the beginning of the 20th century, its first concern was segmentation of customers. Early marketers tried to create meaningful categories — mainly socio-economic ones in that era — to help companies target their products better. Segmentation of this type guided General Motors to develop “a car for every purse and purpose.” In the 1920s, marketers developed customer research methodologies to help companies better understand their customers. In 1960, Jerome McCarthy created the Four Ps model, the ‘marketing mix’ of product, price, place, and promotion, that helped companies plan how to deploy their resources to encourage customers to purchase their offerings. As a discipline, the focus was on the customer and company, and the interactions between them.
Strategy as a formal business discipline came into existence half a century later in the middle of the 20th century. Its origins were in military strategy, an ancient discipline. Even today, business strategists read Sun Tzu’s The Art of War written in the fifth century BC (as I write this, it ranks 3rd among Strategy & Competition books on Amazon — in an amazing accomplishment for a 2,500-year-old book) and Carl von Clausewitz’s 1832 classic On War. The focus of military strategy has always been on the state and its adversary(s) and the interactions between them. The citizen didn’t play a big role. Military strategy largely assumes that citizens will be happy with and approve of the triumph over a sworn enemy.
Having arisen out of military strategy, business strategy unsurprisingly began with a focus on company (equivalent of the state) and competition (the adversary). Boston Consulting Group founder Bruce Henderson, the father of business strategy, was responsible for the development and deployment of the first successful strategy tool in the 1960’s: The Experience Curve. The approach assumed that production costs dropped by 20–30% with each doubling of cumulative output of a given product. Thus, if a company priced ‘ahead of the Experience Curve’ (i.e., at a price that would be profitable at a cost position which would be achieved only when the company got farther down the Experience Curve) to ensure that it achieved a market share lead over competitors, it would always have a lower cost position than competitors and would continue to dominate the product category in question.
Note that this is all about two actors: the company and the competition. Customers are largely a passive actor in this world. They buy product primarily from the provider that enjoys the lowest cost position and therefore can be sharpest on price.
As a result of this evolution, when I began my career of working with companies on strategy in 1981, I observed marketing as a discipline primarily concerned with the interaction of companies and customers versus strategy which was concerned with the interaction of companies and competitors. Of course, competitors weren’t 100% absent for the marketing discipline. The product and price aspects of the 4P’s needed to be considered relative to competition. But when working with marketers, I typically had to push them pretty hard to consider how competitors would react to their prospective 4P choices. Similarly, customers weren’t 100% absent for strategy. Somebody was buying those products influenced by the learning curve. Yet I always wondered why strategists didn’t pay more attention to customer behavior.
For each discipline, the dominant focus was on two of the three central actors in business: companies for both disciplines plus customers for one, plus competitors for the other. But over time, both disciplines recognized that they needed to integrate the third actor more centrally into their work. Michael Porter provided a push to include the customer more centrally in strategy with his introduction of differentiation as a generic strategy. For that strategy, a company had to deeply understand customers to provide unique value to them. Later, elements of design, including the deep, ethnographically driven understanding of users and rapid, iterative prototyping with them, were incorporated into strategy.
At the same time, marketers increasingly recognized that the role of competitors needed to be integrated more fully into their discipline. For example, in 1985 the Journal of Marketing Research, the premier academic journal in marketing, dedicated an entire special issue to Competition in Marketing. In 2009, marketing guru Professor Philip Kotler declared the marketing discipline to be in its fifth era, the Holistic Marketing Era, which recognized the more inclusive view of actors that the marketing discipline had adopted in the modern era.
The full addition of competitors to the marketer’s focus and of customers to the strategist’s focus have caused the jobs of marketers and strategists to converge on the same thing. At their best, both marketers and strategists seek to determine WTP/HTW and use similar tools to evaluate customers, competitors, and the company to make that decision. They now have the same job — just with different titles.
Now I realize that within the marketing function, there are some specialists who do things like buy media or supervise the creation of advertising copy. And in the strategy function, there are specialists who work on M&A deals or in project management. I also recognize that all strategists haven’t integrated the customer into their considerations and all marketers haven’t fully integrated competitors.
But done correctly, the core job of marketers and strategists have become the same. If a marketer does a great job at considering customers, competitors, and the company to make an excellent WTP/HTW choice, there is nothing important left for the strategist to do. And if a strategist does a great job at considering customers, competitors, and the company to make an excellent WTP/HTW choice, there is nothing important left for the marketer to do.
Duplication in the Modern Corporation
As a consequence, the modern corporation embodies massive duplication. It doesn’t need both a marketing function and a strategy function. They are as likely to get in one another’s way as to add value. I fear, in fact, that the existence of both gets in the way of each becoming fully tripartite — i.e., fully incorporating customers, competitors and company into their decisions.
I have no intent to disparage either function. I love both marketers and strategists! The disciplines behind both functions have gotten better and better over time. That is a good thing. But the inadvertent outcome of the growth in the disciplines has been a collision between them.
The bottom line is that you don’t need both functions in the modern corporation. I can only imagine the reaction: that’s not possible, Roger. But look at P&G — world’s 15th largest market capitalization company and most successful consumer packaged goods company. It has no strategy function. Beginning the late 1980s, its marketers broadened their skillsets to incorporate the tripartite view. Converging to a single function is bold; but it is neither undoable nor harmful when done.
Duplication in Business Education
I know of no business school on the planet that does not have separate marketing and strategy departments. Because business schools specialize in being slow to adapt and those disciplines have always been separate and distinct, they remain that way today, and will persist. As a result, business schools are a force in ensuring the continuation of a phantom distinction that is not helpful to students or the firms that hire them.
If you are running a company, converge marketing and strategy. I couldn’t care less what you call it. You just don’t need two functions doing the same core job (with perhaps some unique sidelights). Keep great people from both current functions — it isn’t a takeover of one by the other. Just don’t have them competing to make the same set of choices.
If you are working in the bowels of a marketing or strategy function, collaborate with the other function. You are doing the same job. The worst possible outcome is to have a marketing plan and a strategic plan that are inconsistent. Work together as collaborating teammates to make a single one. That will contribute most to business success.
If you are a business school Dean, or you are a Marketing or Strategy Professor, I know you won’t merge departments, so I won’t even ask. I know that already, you can barely keep behavioral marketing and econometric marketing from insisting on splitting into two separate departments to stop the internecine warfare. But for the sake of the students, teach one thing. I don’t care who teaches it — marketing professors or strategy professors. But don’t teach as if the task of strategy and of marketing are different: they aren’t. Otherwise, you will continue to confuse students and send them out into the world destined to perpetuate the current corporate duplication and dysfunction.