The "Law of the Situation" was enunciated in 1904 by the so-called "grandmother of the administration", Mary Parker Follet (1868-1933). His theories on business administration are as valid now as more than 100 years ago, since he was the forerunner of teamwork, humane treatment of the employee and two-way communications between managers and subordinates, but what concerns us now is what which was later called the "Law of the Situation" or what is the same: "What business are we in?", a question that every entrepreneur must ask himself to judge the real dimension of his product or service.
The client of Mrs. Follet, the first American management consultancy, was a company whose executives claimed to be in the window blind business, but by citing the "Law of the Situation" managed to convince them that they were actually in the business. control of light, which tremendously broadened the company's marketing horizon.
The answer to the question, what business are we in? It is more important than you think, since properly answered, you can improve the way you sell your product, better target advertising or differentiate training for your sales force. Examples that can guide you:
The LEGO Company believes that it is not in the toy business but rather the children's development business. This has already led to some important line extensions and activities. Lego has successfully tested a line of construction products designed especially for retirees. They know very well that in advanced countries the elderly population is growing more than before. And what does this have to do with the development of children? Clear! Lego managers also take into account the child in all of us. (one)
What business is Rolex in? In the one with the clocks? Lost. Mark H. McCormack, in an excellent work entitled What They Don't Teach You at Harvard Business School, recounts the experience he had during a dinner with André Heiniger, at that Rolex President time. A friend came up to greet Heiniger and asked him:
* "How's the watch business doing?"
* "I have no idea," Heiniger said.
The friend laughed. There was the head of the most prestigious watch manufacturing company in the world saying that he had no idea what was happening in his industry.
But Heiniger was serious. "Rolex is not in the watch industry," he continued. We are in the luxury industry. " (two)
When the late Charles Revson, founder and former president of Revlon, was asked if he was in the cosmetics business, he explained:
"In the factory cosmetics are made, but at the counter I sell hope", a creative reply that does not merit further explanation. (3)
Wondering what business he was in led Xerox to radically change its strategy. That is why you now know it as "The Document Company", not as a copier company. Just as Kodak executives know they are not in the photography business, but in the memory business.
That's why AT & T's mission statement revolves around communications, not telephones; Exxon's mission statement revolves around energy, not oil; Union Pacific's mission statement revolves around transportation, not railways, and Universal Studios' mission statement revolves around entertainment, not movies. (See Fred Davis, Strategic Management, page 96). So if you want to define your business, you might as well take the following into account.
Don't offer me things
Don't offer me things, offer me the means to look good.
Don't offer me shoes, offer me comfort for my feet and pleasure in walking.
DO NOT offer me houses, offer me security, comfort and a clean and pleasant place.
Don't offer me books, offer me hours of pleasure and the benefits of knowledge.
Do not offer me records, but the delight and the sound of music.
Do not offer me tools, but the advantages and the pleasure of making beautiful objects.
Do not offer me furniture, offer me comfort and the tranquility of a cozy place.
Do not offer me things, offer me ideas, emotions, environment, feelings and advantages.
Please: Don't offer me things. (4)
What you sell is defined by the customer
Most of the time, what you think you sell is not what the customer buys. A seller may believe they are selling a home, but the buyer may be buying status or social class. Let's see what one of the marketing wizards, Ted Levitt, has to say in "Creative Marketing."
“… A product has meaning only from the point of view of the buyer or the end user. Everything else is derived. Only the buyer or the user can assign value, because this resides only in the benefits that he wants or perceives. " (5)
A product is a bunch of things; It is the total package of benefits that the customer receives when they buy it. A car is not simply a tangible machine to get around, differentiated visibly or measurable by design, size, color, options, horsepower, or miles per gallon. It is also a complex symbol that denotes condition, taste, rank, achievement, aspiration. The effort that it makes to reduce the time to select, train, supervise, motivate and expand its network of distributors, also suggests that these factors are integral to the product that people buy and therefore are aspects by which it can differentiate them. (6)
The great management theorist of the 20th century, Peter Drucker, is also of the opinion that it is the customer who defines the product:
“What a company thinks it produces is not of prime importance, at least it is not for the future of the company or for its success. What the customer thinks they are buying, what they consider to be valuable and compelling, determines what a business is, what it produces, and whether or not it will prosper. Furthermore, what the customer buys and considers valuable is never a product, it is always a utility, that is, what the product or service does for him. The customer is the foundation of a company and is the one who keeps it alive. " (7)
What Does Harley-Davidson Sell?
It was about to be only a memory within the North American industry, after being beaten by Japanese motorcycles, such as Honda, Kawasaki, Suzuki and Yamaha, heavy, low-priced and well-built machines. Fortunately, in 1982, when it was on the verge of bankruptcy, the 13 members of the management team decided to buy it from its owner, the American Machine and Foundrry Company (AMF), who believed that it sold motorcycles. The new president, Vaughn L. Velas, passionate about motorcycling, in addition to seeking the advice of W. Edgard Deming on quality matters, proceeded with his team to define what they sold.
Rapp and Collins in their book "Winners of Maximarketing", put it this way:
“… Harley_Davidson does not sell engineering specifications, even though you must mention some of them. What he sells is a mystique, a great adventure, a brotherhood, a personal statement, a romance, a social opportunity, a fountain of youth, a relief, a lifestyle. " (8)
"We are not only manufacturing motorcycles, we are passing on a legend", can be read in its mission statement. (9)
Regarding Japanese competition that has tried to mimic Harley's aggressive marketing, Michael O'Keefe, formerly HD's marketing manager, said:
“We would like them to do better. We would do better if there were more motorcyclists; even I would congratulate them on their success. Their problem is that they still see it as a business. For us it is something more: a fun and a passion, a reason for being very ours. " (10)
This is the key to HD's success and why it remains an American icon: PASSION. If you as an entrepreneur or manager feel that way about your product or your brand, your success is assured.
"Our business is not flying airplanes."
The case of Scandinavian Airlines System, SAS is well known, which came close to bankruptcy in 1981, before it was led by one of the best managers of the 20th century, Jan Karlzon, at that time a brand-new and energetic 39-year-old executive., from one of the SAS subsidiaries. (See "Service Management" by Karl Albretch and Ron Semke, 11)
While almost every other airline was cutting back with an energy that bordered on desperation, Carlzon decided to go in exactly the opposite direction. He embarked on a feat of life and death to make a complete turnaround at SAS, and his strategy totally changed the company's attitude to its customers.
What followed was a complete turnaround of spectacular success, as SAS went from an $ 8 million loss to a gross profit of $ 17 million on sales of $ 2 billion in just over a year. SAS was declared "Airline of the Year" and was proclaimed the most punctual airline in Europe. The company fought for, and more than did, a recognition as "the airline for the businessman." What was the miracle due to? The previous president believed he was in the business of flying airplanes, that they were selling seats, Karlzon was not. Most of his success was attributed to the effects of a deceptively simple marketing philosophy: making sure that what the customer wants to buy is being sold.
“Look - Carlzon said to everyone who wanted to hear it in the company - for too many years we have been oriented towards production. We have been concentrating almost all our attention on the material aspects of flying airplanes, and not enough on knowing what our client wants and if what he wants we are giving it to him. It is time for us, as a company, to change the course of our attention. Our business is not to fly airplanes, but to attend to the travel needs of our public. If we can do this better than other companies, we will solve the problem. Otherwise, we will not solve the problem or deserve to be in business. (12)
I wish to repeat the following:
"Our business is not to fly airplanes, but to attend to the travel needs of our public."
Mr. Manager: What do you sell?
It is important that you know what you sell, because the success or failure of your business may depend on that. Frank Lorenzo, the once authoritarian President of Continental Airlines, also believed that he was selling seats and that nearly bankrupted the airline and put him out of work.
Fortunately, a brilliant manager, Gordon Bethune, succeeded Lorenzo and changed the direction of the company. Read what Brian O'Really wrote in Fortune Americas, September 9, 2002.
“In February 1994, when Gordon Betune took over as Continental's Chief Operating Officer, the words 'motivated' and 'happy' were not enough to describe any employee. Back then, the Houston-based company was an amalgamation of five airlines merged by Frank Lorenzo, an industry executive who had a bad reputation for his management skills. Lorenzo made a big strategic mistake. He concluded that airplane seats were a basic commodity and that the airline with the cheapest fares and the lowest costs would be dominant. " (13)
So Lorenzo believed he sold seats and low prices, Bethune, quality service. Results?
“In 1994, the airline posted revenue of $ 5.7 billion and losses of $ 619 million. During the first nine months of 1999, earnings have increased 4.4 percent to $ 331 million, and revenues for this year will likely exceed $ 8 billion. The company had been saved. " (14)
So you better define what you sell well.
Whips for horse carriages.
Today you will not find any whip factory for those who used to drive horse carriages. They disappeared with the advent of the automobile, but by the end of the 1880s there were very prosperous factories.
Unfortunately, the companies that made these attachments thought of only in terms of the end product that their customers bought. With the rise of the automobile, the demand for whips dropped significantly. But at the same time, people using the new means of transportation needed protective glasses, gloves, travel blankets and scarves. As the years went by, as the horse carriage whip industry disappeared, companies that made auto accessories grew very fast. The mistake was that the whip makers didn't understand that they were actually in the transport accessory business. If they had understood this,they could have thought ahead and become the companies that created and marketed the many, many accessories that were devised for the automobile. (Consultant's Manual, Greenbaum, page 28, 15.).
In his classic work How to write a good, the pioneer of direct marketing, Victor Schwab, cited by Rapp and Collins (4) tells the story of how, some 200 years ago, Dr. Samuel Johnson opened the auction of the old brewery Anchor in London. (16)
"We are not here to sell boilers and vats, but rather the possibility of enriching ourselves beyond the dreams of greed."
Schwab's work also recounts how Daniel Webster may have auctioned off a friend's farm in New Hampshire:
“Friends: We are not auctioning Tom Brown's 34 excellent dairy cows… or his 80 acres of good land. … Or his solid house that has seen 20 winters go by. No. I am going to give you the opportunity to bite into a red apple whose juice will run from the corner of your mouth… to smell the aroma of freshly cut straw… to drink the clear water of a mountain stream at your table… to feel the snow crunch under your feet… and to have the best neighbors in the world. " (17)
Alfred Hitcock himself, the famous British film director, specialized in horror films, when one of his admirers asked him what business he was in, he hesitated for a moment and then, as a skillful marketer, he replied:
“I'm in the meat business of chicken".
Ask yourself, ask your employees, ask the consultant of your choice.
"What business are we in?" It can take surprises.
Cited Bibliography
1. RAPP, S. and COLLINS, T. Winners of maximarketing. Edit. McGraw-Hill Interamericana, México, DF Translation. of the 1st. Ed. In English. 1994. pp. 225-256.
2. McCORMACK, MH What they won't teach you at Harvard Business School. Lasser Press Mexicana, SA México, DF Translation from English. 1992.244 p.
3. KOTLER, P. and ARMSTRONG, G. Marketing Fundamentals. Editorial Prentice-Hall Hispanoamericana, SA, México, DF Translation of the 2nd. English edition. 1991; p.256.
4. DAVIS, F. Concepts of strategic management. Prentice-Hall Hispanoamericana, México, DF Translated from the 5th edition in English. 1997; pp.92.
5. LEVIT; T. Creative Marketing. Continental Publishing Company. Mexico, DF 4th. Print. Translated from English. 1987; p. 192.
6. Ibid, 130.
7. DRUCKER, P. Managemente: Task, Responsibilites and Practices. Harper & Row, New York. 1974. pp. 61.
8. RAPP / COLLINS, Opus Cit., 234.
9. DAVIS, Opus Cit., 93.
10. RAPP / COLLINS, Opus Cit., 237.
11. ALBRETCH, K and ZEMKE, R. The service management. Editorial Legis, Bogotá, Colombia. Translation from English. 1990; pp. 22-26.
12. Ibid, p.25.
13. O'REALLY, B. Fortune Americas, September 9, 2002.
14. Ibid, p. 18.
15. GREENBAUM, TL Consultant's Manual. Editions Díaz de Santos, Madrid, Spain. Translation from English. nineteen ninety six; p.232.
16. McCORMACK, Opus Cit., 167.
17. GREENBAUM, Opus Cit., P.130.
