The Augean stables of academic marketing
Alexander Repiev
Beware of false knowledge; it is more dangerous than ignorance.
– Bernard Shaw
I
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 establishing of an effective dealer network to the training of
salesforce to advertising. I immediately plunged into the reading
of almost everything relating to marketing I could lay my hands
on.
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 assumptions and validity ranges of models, and lack of unnecessary 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 definitions, fancy research procedures, and some loose schemes, presented randomly and inconsistently.
All my attempts to employ
this “knowledge” failed miserably.
SONK
Academia 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 proportions 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 used
Discussions 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 curricula, 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 matrix
C. Porter’s competition model
And if you do not want to litter your head with that junk, off
with your head!
Not much “cliento-marketing,” really
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 definiteness, to be just a heap of unnecessary or even insidious visualizations and fantasias.
But I cannot separate myself from those fantasias completely: 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.
Denizens 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 “clientomarketers” 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 understanding customers, their problems and the means to capture
their attention and their customs.”
Peter Drucker: “The aim of marketing is to know and understand 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 Cli-
The Augean stables of academic marketing
ent 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 reinforce the “we against them” or even “compete-with yourcustomer” paranoia (Porter’s five forces). In other words, they
encourage 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 subject to a host of predictable and unpredictable external occurrences. If we fail to factor in some critical influence, we might
end up in hot water. Practical marketing thus deals with an infinite variety of unique cases, each requiring a fine-tuned decision.
Marketing analysis generally involves building mental models of the behavior of Clients, markets, competitors, etc. Ideally,
models involve assumptions, validity ranges, and error assessments – things unheard of in academic marketing. As a rule, a
model requires some simplifications. It is up to the analyst to determine 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 important 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 inherently inconsistent and clueless. Some are linguistically helpless.
They are effective quenchers of creativity.
Prosthetics of creativity
In 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 strategizing 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 psychology.
This explains, by the way, why pseudomarketing is immortal –
the array of scholastic shticks it generates non-stop is welcomed
by an army of experts in “cover-your-ass” bureaucracy. Scholasticism and bureaucracy, those Tweedledum and Tweedledee 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 hypercompetitive 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 efficiently 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, “clientomarketers” should join forces and help them a bit with their
shovels and brooms.
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The Augean stables of academic marketing
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 juggle with words to get precisely four P letters – product, price,
place (?!), promotion. How many practitioners could explain offhand 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”
additions 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 profitability.
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 marketing is the entire business viewed from the Client’s perspective. 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 important things they learned from the textbook in a recent marketing 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 service” (intangibility, inconsistency, inseparability, inventory).
You can think at leisure of your “valuable additions” to this Izoo.
I wonder, are there any 4M in management, any 4F in corporate 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 successful. What is remarkable is that all these concepts should be so valuable, yet all end in ‘ent’. Another example is a European academic 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, Observation, 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 Levinson, you
could call out that he forgot ‘resentment’. This could endear 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, Opportunities, and Threats in the form of a handy matrix:
Internal factors
External factors
Strengths
Opportunities
Weaknesses
Threats
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?
Hey presto! One step to automatic winning decisions? Yeah,
just wait. With so much SWOT software around, it looks like executives 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 business
The years intervening since the proposal of SWOT in the
1960s by Albert Humphrey have seen a severe division of opinion on SWOT. For instance, one of SWOT’s critics, Scott Armstrong of Wharton, in his paper “Don’t do SWOT” reports that
he “has been unable to find any evidence to support the use of
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The Augean stables of academic marketing
SWOT.” Henry Mintzberg of McGill University in Montreal
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 associated with the ‘mechanistic’ approach and suffers as a consequence 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, however. 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 reputation for value for money, convenience and a wide range of products 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 alliances 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 opportunities.
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 internal 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 inherently external (e.g., political and legal environment, climate),
but there are also things that have both internal and external aspects to them. One example is product quality. Whereas fabrication quality is largely an internal affair, marketing quality is external – it is judged by an indifferent Client.
Speaking of Clients (buyers), the diagram of the clientoriented 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 supermarket 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 opportunities occur strictly outside a company. However, there may be real threats and opportunities within the innards of an organization.
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., suppliers, 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: “Management 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 specific 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 managers that represents a broad range of perspectives, such as marketing, sales, finances, manufacturing, R&D, logistics, etc., under the guidance of a skilled moderator.
Practically, however, it is next to impossible to get a productive team like that. And even if you do, you should hardly expect
much creative thinking from them. Experience has amply shown
that even if the SWOT factors are identified by a group of well-
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The Augean stables of academic marketing
informed insiders, those are just regurgitations of the conventional 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 crossfunctional teams tells that their members are often uneasy, especially revealing weaknesses of respective departments.
Most leaders disregard the output of a SWOT analysis – especially 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 performed 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 analysis, 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 brainstorming 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 substitutes
In 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 prioritize.
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 external environment whilst SWOT emphasizes the internal environment.” 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 inventor Shona Moody proudly proclaims: “SLOPE is an organizational 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-andnapkin” 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 analysis
Also referred to as STEP.
PEST analysis stands for “Political, Economic, Social, and
Technological analysis” and describes a framework of factors
used in 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 “templates,” e.g., like this (http://www.businessballs.com):
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The Augean stables of academic marketing
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, globalization, computerization, Internetization, sexual revolution, terrorism, 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 climates are getting warmer. Also left out are natural resources,
available both locally and internationally, e.g., oil, gas, electricity, water, timber, land; and geographical issues, e.g., distances to
some important locations.
These deficiencies are not catered for by the scheme’s extensions, 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 Technological factors. This adds enormously to confusion and
memory 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 critical factors. Anyway, it may be better than no analysis of external
factors at all.
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The Augean stables of academic marketing
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 bundle of my everyday problems. The model appeared to be absolutely 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 represent? 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)?
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
remind unwitting practitioners that there is such a thing as competition and that it should be addressed? – If so, thanks for that
breath-taking discovery!
Or perhaps Porter intended to stun practitioners by suggesting 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 analysis 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 account 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 competitors, 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 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 concerned 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 professional opinions about the purpose of Porter’s five competitive
forces, ranging from “understanding where power lies in a busi-
Merriam-Webster defines “competitor” as “one that competes: 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 buyers.” It is easily seen that these two “forces” are interdependent –
the bargaining power is a function of the competition intensity
and commoditization.
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The Augean stables of academic marketing
“Industry competitors” vs. “potential entrants.” Generally, the “ensemble” of competitors are in a state of dynamic balance – companies keep appearing and disappearing at rates conditioned by a multitude of circumstances, including the average
life time of companies in an industry. And so the threat of “potential 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 segments.
Suppliers. Should you really view your suppliers as competitors (enemies)? It is common knowledge that a prerequisite for
lasting profitable relations in business is a WIN-WIN arrangement 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 revenueline 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 (collaborators). It is a term used to describe businesses that directly
sell a product (or products) or service (or services) that complement 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 buyers
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 notions of customer satisfaction and the client-oriented organization, 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, however, 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 corrupts
the thinking of practical marketers.
There is another Porter’s brainchild.
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 primitive linear operation of addition of some mysterious “values”? If
so, are there any equations to calculate respective “primary” additives? How is one supposed to take in inputs from “support”
activities? What are the measurement units here? If the only purpose 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
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The Augean stables of academic marketing
illustration of the way costs build up.
Many asked me to clarify the meaning of “firm infrastructure” 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 “surplus 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 conference 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 management. 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?
phor appears to be entirely misleading.”
I agree with Ramsay: “Value appears to be an abstract mental 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. Consequently it cannot be passed along from department to department… 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 diagram 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
weak links of this famous chain.
A student of business may be embarrassed by the misfit between Porter’s value chain and the idea of another Harvard professor, Peter Drucker: “Marketing and innovation produce results; all the rest are costs.” He will also be unpleasantly surprised 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 “institutional” view of the business world, with the company (not the
Client) at the hub. Can adherents of such views build a clientoriented company? What do you think, gentlemen?
There are also other schemes, e.g., Philip Kotler’s:
Misleading
Commenting on the basic idea behind Porter’s chain, Ramsay says: “You begin to wonder what kind of chain was in Porter’s mind. Personally I have no idea… The value chain meta-
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The Augean stables of academic marketing
* * *
A professor thus presented to the students his very personal
judgment of Porter’s achievements: “This man had locked himself 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. Anoth-
er Blatant Nonsense Effect “made in Harvard.”
I was amused to learn that Porter was an aeronautical engineer. 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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The Augean stables of academic marketing
Boston Matrix
Also called the BCG Matrix, the Growth-Share Matrix and Portfolio Analysis
Assumptions and problems
The matrix is a brainchild of the Boston Consulting Group. It
was devised in the 1970s as a simple method for helping corporations decide which parts of their business they should allocate
cash to. Since the 1970s, many things have changed dramatically. 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 unknowns. But, like other marketing schemes borrowed from economics, the Boston Matrix neatly reduces that infinite complexity 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 resources 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 income.
It is recommended to keep and develop your stars.
The Boston Matrix relies on relative market share, rather
than profits, since it assumes that market share carries more information; and if you have a high market share you will allegedly
be making much money due to scale economies. Is it true? Nope.
As Richard Miniter showed in his book “The myth of market 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 normally view growing market share as a by-product of their activities. 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 satisfaction 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; starting 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, mature 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 responsible 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 observed, 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 matrix
Also calledAnsoff Product-Market Growth Matrix
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The Augean stables of academic marketing
 Market development (new markets, existing products): An
This piece of visualization was created by Igor Ansoff. It suggests four possible product/market combinations:
 Market penetration (existing markets, existing products):
Market penetration occurs when a company enters/penetrates 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.
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 multitude of such nearly useless “visualizations.”
A couple of comments, anyway.
What is a “new” product? What measure of “newness” suggests the use of the “Product Development” strategy?
If we consider that a product, in the ultimate case, is a combination of good(s) + services + atmosphere, then any minor change
in any or several of these components will result in a new “existing” product.
Further, any new “existing” product means a new penetration. 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, АВСanalysis, XYZ-analysis, Product Life-Cycle, Survival Matrix, ETOM, QUEST, Balanced Score Cards, Key
Performance 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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