MARKETING IN CONSULTING
My experiences have convinced me that marketing is really systems redesign and it can solve seemingly intransigent social and environmental problems that too often and unnecessarily pit interest groups against each other. Marketing, not diplomacy or negotiating skills, can resolve conflicts and actually create immense value rather than make compromises that merely share the pie as it currently exists.
NEVER! UNLESS IT’S CHOICE STUFF
Social marketing is just like regular marketing except behavior is more important than money.
I learned from the experience is you need to look for new dimensions and that often those dimensions can be very different from what currently sells your product. But what I didn’t learn then was new dimensions require more than just a new business model. They require you to change your identity. By dimension, I don’t mean something as precise as the word’s meaning in mathematics. But I mean more than a new angle or niche that increases sales. I mean a genuine change in direction and a re-definition of value. Something that drives everything else and defines benefit.
You can bring emotion into any concept, product or service, even if it’s bug spray. The real challenge is to combine thinking and feeling.
But back then, in the late’ 70s, as much as I enjoyed my work at United Way and the Super Bowl tickets, I got each year (saw the Steelers win twice), I began to worry that my short career in marketing was limited to not-for-profit experience and I would get labeled as such. Today, a person can bridge the gap between the profit and the non-profit worlds because of the success of social enterprises (more on that later), but not back in 1979. Then came the call from McKinsey.
McKinsey had an outstanding reputation. Founded in the mid- ’20s, it had assembled a sterling roster of clients. It did not need to market or sell itself. It was word of mouth and relationships. Despite this, in the ’70s, McKinsey was challenged by a relatively new firm, the Boston Consulting Group. BCG had developed some theories about corporate strategy that became well known and admired. They encompassed these theories in what they called the “growth-share matrix.”
Consulting is hard to put in a box or otherwise package and its benefits aren’t always clear, even if they are real.
The managing partner, Ron Daniel, basically told me to figure out what McKinsey needed and make it happen.
Most of the partners did, in fact, think the biggest part of my job was making sure McKinsey published a lot and looked smart.
There were, to my mind, two dimensions to this space: process and results.
The method and process consultants delivered a set of recommendations, a “solution.” The detective crowd delivered ideas, hypotheses and insights that might lead to, but did not guarantee a strategic breakthrough. The process/perfection box of this matrix was occupied mainly by the big accounting firms at the time who were trying to break into strategy consulting. The upper right box, call it the exploration/insight box, was dominated by McKinsey, BCG and later Bain.
The process guys served the institution. McKinsey and the insight consultants served the CEO.
Practices at firms such as McKinsey were secondary management mechanisms. Most decisions were made at the geographic or office level. McKinsey put practices in place in the 1970s to develop ideas that might be useful in client work and to publish them.
In the late’ 70s, Daniel formally funded three functional practices: strategy, organization and operations. The strategy practice was at the time the big deal. The strategy practice was pretty dull and quantitative. Is a nine-box matrix really that much better than a four-box matrix? The organization practice was livelier.
I found myself hanging out with the organization practice when they met in San Francisco, Toronto, Paris and other nice places. And that’s how I encountered my first great colleague and conspirator at McKinsey, Tom Peters. When I met him in 1980, he was co-authoring a book that would be titled In Search of Excellence. It was unprecedented. Tom, after a few years, left McKinsey and became one of the first of a new breed of management gurus.
The strategy practice asked me to work with them and I, of course, did. Fred Gluck, who would succeed Ron Daniel as managing partner, ran the strategy practice. He knew what he wanted to do. He did not want to publish one big idea on strategy to defeat BCG. He wanted to develop all kinds of ideas and get the partners to try them out and share the results. Fred’s mission was to instill a love for ideas in the firm. I got to help Fred do what he wanted to do and he succeeded. Eventually, he asked me to invent and put in place systems to spread new ideas around McKinsey.
Looking back, within those first few years I had formed, as Jon Katzenbach, one of the senior partners, used to say, my “own little McKinsey”. It was made up of 20 to 30 colleagues and friends who were thought leaders and risk takers. People like Ken Ohmae, for example, the head of McKinsey’s office in Japan.
From Tokyo, I branched out to Sydney and Melbourne where McKinsey had very good thinkers. One was John Stuckey, who was beginning to develop some solid ideas about corporate strategy. Another was Clem Dougherty, who knew the best Australian wines well before they were discovered.
Back in New York, I started working closely with several other partners. John Sawhill was one of them. He was head of the energy practice.
I also worked closely with a partner named Lowell Bryan. He wrote a book titled Breaking up the Bank.
My strategy — well, let’s call it a rough plan — was to find a few smart, well-intentioned partners and gain attention for their ideas and intentions. Partners such as John and Lowell made that strategy work.
I wasn’t surprised when, in 1982, Fortune published a cover story titled “Corporate Strategists Under Fire.” It was written by my good friend Walter Kiechel. It basically said that the recent theories about corporate strategy were overrated and that BCG’s strategy matrix was too predictable and blunt.
The copy read, “McKinsey has come roaring back — pushing to develop new ideas, hiring strong people, building on what its competitors view as its unassailable asset, the strength of its long-standing relationships with clients.” If you read the article, you got the sense that management consultants were not highly regarded professionals. That ring of consultants was a ring of thugs. We are the biggest thug in that ring. I said, “We have to get out of the ring.”
CREATING THE LEADERSHIP FACTORY
McKinsey, at least the senior partners who hired me, wanted me to succeed. It was a place that could be very supportive and then crush you in the next moment. That was McKinsey. An enigmatic place that loved you and threatened you and demanded excellence.
But there were ups and downs. Shortly after getting elected partner, I discovered I had a brain tumor. It was large, painful, but likely benign. It had to come out. Fred started introducing me as the McKinsey partner who had his brain removed. That’s when you know you belong, and I belonged at McKinsey.
Marvin Bower, McKinsey’s venerable founder, became my mentor. The first thing I did when I joined McKinsey was read Bower’s book Perspective on McKinsey.
It was Bower who, when he officially took over as managing partner in 1952, hired the first MBAs as consultants, believing that we would deliver more value with brains than experience. He asked me not to use the words marketing and brand, and speak more about our reputation and relationship building. I followed his values and principles, and used them to guide what I was trying to do.
Marvin kept my feet on the ground. I remember once I tried to write a policy on speaking engagements and when we should accept them. In any case, I wrote a policy that basically said make sure the speaking opportunity is worth your time and McKinsey’s. He said, in a voice that got high and squeaky as he approached 80, “Bill this is fine. You make several good points, but maybe you should start by saying that when someone here is deciding to accept a speaking engagement, he should first ask himself if he has anything worthwhile to say.” Yes, I felt pretty stupid.
Michael Porter said many smart things, but maybe the smartest was, “Don’t aspire to be the best or the biggest; aspire to be unique.”
I followed my usual plan, wandering and wondering around, asking the partners, now my partners, what makes McKinsey unique. Tom Peters agreed that it was the right question, but didn’t have an answer. However, Carter Bales did. Carter was a senior partner in the New York office.
“We are a what?” “A leadership factory. We produce leaders. We produce more CEOs than any other institution.”
Marvin always insisted that when we consulted, we served the CEO and not one of his division heads. That we took what he called an “integrated top-management perspective.” On the other hand, Bain and BCG tended to serve companies and even industries. So, was McKinsey essentially an elite group of future leaders serving leaders?
Once we discovered, or rediscovered, our strength, we needed to do something about it. In fact, we did three things.
- First, Carter and I changed McKinsey’s standard recruiting pitch. When we went to campus, Carter made it very clear that no one was to talk about making partner.
- Second, we beefed up our placement capabilities.
- Third, I continued to raise the bar on our external communications.
What, after all, do consultants offer? Three things: people, skills and knowledge.
Eventually, we formed the McKinsey Global Institute. Its work, which married macro- and micro-economic analysis, greatly enhanced and extended McKinsey’s reputation.
History teaches us there were two messages at the entrance to the Oracle at Delphi. Honor the Stranger. And First Know Thyself.
I can give you some examples of game changers who insisted on seeing the world differently. One of them was Rawleigh Warner. Rawleigh was the chairman of Mobil Oil. He did not fit the profile of the heads of major oil companies. Rawleigh mentioned a couple of things about marketing and design that intrigued me. Early in the conversation, he said that when he took over, he wanted to humanize Mobil. People, the people who buy gas, saw it as a big, powerful, international company with little regard for the masses.
First, they hired Eliot Noyes (another member of the Harvard Five) to redesign Mobil’s gas stations. In essence, Noyes put big umbrellas over the pumps. Second, Mobil started to sponsor a television series entitled Masterpiece Theater. It was first-class drama that exposed the American public to great literature. Third, Mobil regularly bought space on the editorial page of the New York Times to make its case for why it and the industry had America’s interest at heart and priced its products so that it could provide better products in the future.
I suggest again that marketers are space benders. They see the possibilities of new dimensions as well as new dimensions within old ones.
The question for a marketer, or a CEO for that matter, is not only is there a new and powerful dimension lurking out there, but how soon do you need to pursue it? Often, it is sooner than you think. That was the essential message of Clay Christiansen’s book The Innovator’s Dilemma.
There is a lesson here. If you are looking for a new dimension to the market-space, don’t ask your big customers.
My McKinsey partner, Dick Foster, wrote Innovation: The Attacker’s Advantage. In the book, Dick tracked the functionality of a new technology against the resources put into its development. Not against time, but money. The result was an S-curve. Progress is slow at first, then accelerates and then slows down as the new technology peters out. Making things more complicated, there is another S-curve that tracks how much a customer appreciates the new functionality. People slowly learn to love the new benefits, then can’t get enough of them, but soon enough is enough.
The combined result of these two curves is that marketers’ reaction time gets compressed.
A BCG partner and friend of mine, Luc du Brabandere, wrote The Forgotten Half of Change. In the book, he argues that if you want to change, you must change twice. You must change reality as well as perception.
In the mid- ’80s, Ohmae walked into my office, looked at me and said, “Convenience.” I said to Ken, “Convenience?” He said markets for consumer products will be dominated by convenience.
The biggest mistake a young marketer can make is to assume that the space has been mapped, the matrix has been set and its dimensions permanently defined.
POETS & LINGERIE
After McKinsey, I joined BCG as the partner responsible for innovation, marketing and communications. I ran that unit with George Stalk. His book on “time-based competition” is a classic.
Michael Silverstein. He talked about a concept called the “democratization of luxury.” The idea was that there is a lot of room to increase the price of your product if you add an element of luxury to its benefits. A few years after I met Michael, I worked with him on a book entitled Trading Up. Michael argued that new luxury often had three different kinds of benefits: technical, functional and emotional.
Quality and format dominated the music space. But the Walkman brought the dimension of place. The sound moved with you.
New dimensions don’t always bring unblemished value. Sometimes there are benefits lost along established dimensions.
But I would like to believe that advertising is both an art and a science. Something to which someone’s heart as well as head needs to be brought to bear. Something that combines both logic and emotion. Something that moves our souls as well as appeals to our reason.
Emotional involvement in the product or service is prime territory for competition and growth. The discovery and delivery of new market dimensions may in the future be a much more collaborative effort and the nature of the collaborations will itself be a potential new dimension — as much so as the actual product or service. Reputation, authenticity and trust will be factors in these new “communities” we used to call market segments. Brave new world.
THE FINAL YEARS AT MCKINSEY
Around 1985, I was asked to take over the McKinsey Quarterly, which was a pretty modest publication that carried no original material. I hired one of the best young editors from the Harvard Business Review, Alan Kantrow, to come in and make it into something and he did.
About the time I took over the Quarterly, Fred Gluck asked me to develop a knowledge management system. And that’s what I did, with tremendous help from a young guy named Brook Manville. Basically, we put two systems in place. One contained information on clients and the nature of our engagements. The other was a source of documents that practices designated as shareable and useful. We named the whole thing PDNet. We tracked what was ordered — what was “selling”. Marketing wasn’t. Pricing was.
The new systems changed people’s behavior. They also changed how we thought of ourselves — our identity. We were more than great consultants, gunslingers who could solve any problem.
That wasn’t enough for Fred. One Friday morning, he called me into his office and handed me some papers. “What do you think?” I gave them a quick read. They were memos about recent practice meetings. “I don’t like them.” “Okay, Mr. Smarty Pants. Why don’t you fix them?” I called Bill Price, my longtime editor and right-hand man, and told him we would be doing some work over the weekend. First, we figured out the format. One page, not white, printed front and back. Title (not cute, short), five paragraphs with sidebars. First paragraph, here’s a problem you will likely encounter (like organization design, logistics, etc.). Second, here is how we typically think about that problem. Third, here’s a different way. Fourth, here are the titles of a couple of documents you can read if you’re interested. They are on PDNet. Fifth, here are the names of people you can call.
Ellen Nenner started to produce a little red book we named the Knowledge Resource Directory. Names, phone numbers, documents, you name it.
We learned that sometimes if you want to own an idea, you should give it away. Through the Quarterly and our press relations, we learned that clever research can be the best way to convey an idea.
Besides Marvin Bower, who was always my source of guidance on McKinsey values, I served two managing partners for whom I had a great deal of respect. Ron Daniel was the first. The other managing partner was Fred Gluck, who took over in the late ’80s after Ron.
Marvin gave McKinsey its values, Ron gave it its class and Fred gave it its love for ideas. But the next managing partner, Rajat Gupta, well, he gave it politics and greed. I am totally biased about this assessment because Rajat pushed me out of McKinsey.
I thought we had begun to publish too much and that the quality was not consistent.
That said, the managing partner has a right to assemble his own team, and Rajat didn’t want me on his team.
BCG called me (word got around) and asked if I had any interest in joining them as a partner. I said yes.
ADVENTURES IN E-COMMERCE LA-LA LAND
About two months after leaving McKinsey, I got a phone call from John Hogan. He asked me to consider cutting short the vacation and joining Mitchell Madison Group, a small consulting firm he and several other former McKinsey colleagues had founded.
The heart of their strategy was to be number two next to McKinsey in serving financial institutions in the New York City arena. They focused on sourcing work. Believe it or not, banks buy a lot of paper despite all their investments in information technology.
I was going to help develop the “narrative” and write what is called the “green book” that investment bankers use to attract interest. Had I done anything like this before? Nope. The reason MMG called me was very simple. His name was Tom Steiner and he had founded MMG.
A few months later, one cool Saturday morning in New York, we sold the firm. For 2.5 times its revenues. The buyer was USWeb/CKS, a roll-up of small IT firms and consultants, and a roll-up of communications and website experts.
I was made SVP of knowledge development and started trying to figure out how to capture and grow our different disciplines.
So my first few years after McKinsey were quite a roller coaster ride.
THE BOSTON CONSULTING GROUP
Heraclitus wrote that you can’t step in the same stream twice. I knew that. Yet, a few years after leaving McKinsey and wandering around in e-commerce, I decided to take that second step. I accepted an offer to join the Boston Consulting Group as a partner.
The job was to co-lead a unit called the IMC, which stood for Innovation, Marketing and Communications. Marketing for BCG still meant big, published ideas. The idea of actually owning an issue was foreign. More fundamentally, there was no theory or framework for innovation.
I realized that for the first time when I saw a video of Bruce Henderson, BCG’s founder. I couldn’t believe how dissimilar Bruce was from Marvin Bower. Bruce was a salesman and an engineer (Vanderbilt). He wanted to fix the world. Marvin was a lawyer. He wanted to create a profession (consulting). Bruce thought in terms of systems dynamics. Marvin thought in terms of policies and principles.
I thought hard, of course, about how to position BCG against the dimensions of the strategy space and, in particular, how it was different from McKinsey. BCG could not come close to competing on the leadership dimension.
I thought there might be another dimension where BCG had an advantage that had to do with competitiveness and winning. BCG was fond of the phrase “breaking compromises”. They wanted more for their clients than bottom-line improvement. They looked for breakthroughs.
Turning around a sick company is hard enough. Turning around a successful one is much harder. At a successful company, leadership doesn’t have the luxury of losing money, which takes care of a lot of excuses for not changing. At an unsuccessful company, the first order of business is to stop supporting the things that lose money: unprofitable products and struggling stores. Boom! Profits go up, and you’re a hero.
The key to turning around a successful company is finding the areas of competitive advantage and driving trains, planes and automobiles through them. You must push that advantage to ever-greater heights, even to the point at which other companies may complain.
What’s more, at a successful company, it’s harder to keep a turnaround going than to start one. At least five rules are required.
- All Investments Must Be Fast, Focused and Fundamental. Every project we undertook had a market-demonstrated payback of 12 to 18 months. If it didn’t, we broke it up until its pieces did.
- Don’t Let People Raise Obstacles to Change Unless They Also Propose Solutions.
- Say Yes or No, but Never Say Maybe I believe that the greatest stress on any organization is unclear direction. The “three-legged horses” have to be shot. I said yes, or I said no. I never said maybe.
- Keep Your People — Employees, Customers, Suppliers and Financiers — Informed.
- Leaders Do Not Get More Than One Chance. One of the greatest threats to a successful turnaround is keeping the people who do not deliver anything except excuses.
For almost two decades, BCG’s primary vehicle for delivering its ideas was its Perspectives — short (800- to 1,000-word) essays that could fit into an executive’s jacket pocket and be read on a plane.
I spent five and a half years at BCG. Just as at McKinsey, I enjoyed some great and productive friendships. Some notable publications and ideas resulted. But that wasn’t the real game. George and I failed to gain acceptance of a new model for innovation. The IMC had one of the biggest discretionary budgets at BCG. Money wasn’t the problem. It was behavior. Back to the challenge of social marketing. I also failed to convince practice leaders to focus on value propositions rather than frameworks and methodologies.
Professional service firms need to prove to potential clients that they will be worth their fees and deliver value. To do so, they often resort to value “proofs”. These proofs are usually examples of their past work. Or they detail methodologies — XYZ named processes — that guarantee good results. Both can work, but over the years I had come to believe that a more effective approach to convincing clients that your firm can really help them is to develop compelling value propositions.
There is a rigor and logic to strong value propositions.
- First, they contain a definition of the problem or opportunity. Convincing value propositions start with three or four insights about the situation.
- Second, a good value proposition describes the managerial challenges that result from your basic beliefs regarding success and failure. Having defined managerial challenges, a good value proposition then needs to address a basic question in an honest but not arrogant way.
- And finally, a strong value proposition needs to answer one last question: why us?
MARKETING IS SYSTEMS REDESIGN
I took over as CEO of a consulting firm in Boston that advised family-owned businesses — huge companies actually. Most of their consulting was pattern recognition and hand-holding, but the partners were professional and served their clients well.
In Europe, regulators are very cautious about communicating with the private sector. They certainly are not encouraged to. They regulate companies but don’t talk to them.
Here’s Forrester on the process: “The most intense disagreements usually arise, not because of differences about underlying assumptions, but from different and incorrect intuitive solutions for the behavior implied by those assumptions. In building a system dynamics model, one starts from the structure and the decision-making rules in a system. Usually there is little debate about structure and the major considerations in decisions. When a model has been constructed from the accepted structure and policies, the behavior will often be unexpected. As the reasons for that behavior become understood, I have often seen extreme differences of opinion converge into agreement.”
I needed to ask myself, and now you, gentle reader, if the basic idea I’ve been advancing — that marketing’s primary task is to create new dimensions in a market-space — is still relevant and useful in highly complex industries and environments. I believe it is, but it needs to be reshaped. First, the market-space itself must be thought of as a dynamic system, not just a multidimensional matrix. Second, dimensions themselves may be better defined as superordinate goals that the various stakeholders need to embrace and see as consistent with their goals.
The Nobel prize winner John Nash, in fact, proved that win-win outcomes are more likely than win-lose outcomes, but it is hard for participants in a market to see this or to make it real. At best, they see ways to compromise and find common ground. But they rarely see the opportunity for higher ground.
I believe that marketers — not regulators, policy experts, insurers or patient advocates — can make Nash’s theory a reality and add tremendous value to society.
The way to prosper and make progress is to give and to get at once. Exchange but not compromise.
Whereas the formula used to be create, communicate and capture value, in multi-stakeholder markets it becomes create, capture and share more value.
Basic checklist McKinsey published in a staff paper in 1988: Benefits explicit, specific, clearly stated. Price explicitly stated. Target customer clearly identified. Clear how this value proposition is superior for target segment. Evidence of adequate demand. Evidence of acceptable returns. Viable in light of competitors’ value propositions. Achievable with feasible changes in current business system. The best of several value propositions considered. Clear and simple.
New-age marketers don’t need to be computer programmers, but they will need to do a little modeling and read primers like Donella Meadows classic, Thinking in Systems, that will help them get a better understanding of how system constraints once released can lead to abundances and back to constraints.
THE MODERN SOCIAL MARKETER
My definition of marketing is pretty expansive, including, as it does, systems redesign.
I met Jimmy Wales, the founder of Wikipedia, only once, but it was a memorable encounter. Jimmy is a great example of a social entrepreneur. He saw a problem — unequal access to knowledge — and he set out to fix it. He set out to make all the knowledge in the world available to all the people on earth in all the languages we use.
Bill Drayton, former McKinsey founded an organization called Ashoka. Drayton created Ashoka about 40 years ago.
Ashoka’s slogan is “innovators for the public.” Bill believes that almost any social problem — in education, healthcare, the environment, you name it — can be successfully addressed by imaginative and determined people who dedicate their lives to developing new markets and systems. Ashoka funds these entrepreneurs with small stipends to cover just their living expenses so they can pursue their ideas full-time.
Social entrepreneurs create systems that work more for everyone by changing policies and decision making. They ask the right questions.
Marketing is about defeating the people in charge. About defeating the people who would keep an industry unchanged, who would write policy that limits prices and competition — timid, unimaginative participants who insist that the customer is always right. It was Drayton, all 135 pounds of him, who helped me understand that marketing is about creating new systems that house new markets that explore new dimensions that create new value.
IDEAS AND PEOPLE
Thinking about the dimensions of market-spaces defined in Cartesian or other ways can be rigorous and quantitative. But it is still better to be roughly right rather than precisely wrong when thinking about how fast and how much a new dimension will emerge.
Jay Forrester is considered the inventor of system dynamics. There are a lot of smart people in the world who still think statically rather than dynamically. They think they can change one variable or one relationship in a system and that the rest will remain unchanged.
“Many people forget,” he recently wrote, “that in ancient times everyone drank beer because the water was so bad. The fermentation process killed most of the bugs and made it safer than normal water. In other words, just about every great person from ancient times was slightly drunk when they did their best work.”
THERE MAY BE HOPE
Is there a right version of capitalism? Most of the recent critics believe in capitalism and advocate collaboration between the public and private sector and more enlightened (read less greedy) leadership by CEOs.
A few months after the Kindle version of my memoir appeared, I heard from my former McKinsey colleague, Brook Manville. We talked for an hour and a few months later his blog appeared. He entitled it “Why Reinventing Systems Beats Just Solving Problems.” He tells his readers that my views on marketing are really about leadership. Whether you are the CMO, CSO or CEO, your job is to go beyond problem solving and be a systems designer. He closes with five propositions for today’s leaders:
- System change begins with systems thinking. Get familiar with the basics of information stocks and flows, feedback loops, intervention points, etc.
- Humanize your systems thinking with intangible values too. Consider things like different stakeholders’ sense of identity.
- Harness action with superordinate goals. Bring marketing-style savvy to explain why overcoming this or that big challenge really matters to people.
- Run experiments and keep learning. Systems reinvention must be an ongoing process.
- Embrace the energy of capitalism. You need stakeholders around the table to fight each other. Avoid feel-good corporate social responsibility and beware of zero-sum games.
WHAT IS THE MOST POWERFUL DIMENSION?
Time present and time past
Are both perhaps present in time future,
And time future contained in time past.
If all time is eternally present All time is unredeemable.
T.S. Eliot, Four Quartets, Burnt Norton
If you are a CEO or a market manager or strategist and you don’t see the word “time” in the plan or proposal, throw it out. The big picture will be missing.
When my McKinsey partner, Kenichi Ohmae, told me years ago that “convenience” would become a powerful dimension in the consumer space, he was really talking about time. Because convenience saves time. But the time dimension of a product or service can be much more subtle and complex.
Old people, it turns out, don’t like to buy things that remind them they are old. They would rather suffer.
There are things that come with time — reflection, love, dignity and courage. How can we make them come sooner, or more surely? How can we give people the courage to change? Because the other side of time is change.