Planning

The climax of some traditional approaches to marketing is the production of the marketing plan, which will determine activities for the next year - or at least that is what a number of text-books (including my own) seem to imply. The reality is, as we have seen, rather different. In practice few managers base their day-to-day decisions on the contents of a marketing plan; even though many of them may previously have gone through the motions of producing a plan which was (in theory) intended for just that purpose.

The reasons for this are, as we saw in earlier chapters, eminently practical - their actions are, quite realistically, dictated by the reality revealed by subsequent events rather than the historical theory contained in the plan. But there is also a psychological aspect. As Bernard Taylor[1] says:

"Planning is an unnatural process. It is much more fun to do something." John Preston of Boston College (quoted by Bernard Taylor) went further: "The nicest thing about not planning is that failure comes as a complete surprise, and is not preceded by a period of worry and depression."

Despite these shortcomings in practice, we should not dismiss the production of a marketing plan as a total irrelevance. It may not be as central to marketing actions as theorists would like, but its production still results in some important benefits;

1) REVIEW - the process forces a full review of all the marketing factors, not just those which are currently the focus of attention, albeit that this only happens once a year.

2) AGREEMENT - it acts as a positive stimulus to involvement of a wide range of personnel in the strategic decision-making, and then as a framework for generating formal agreement amongst them.

3) COMMUNICATION - the output, the marketing plan itself, can be an especially useful vehicle for communicating the organisation's marketing intentions more widely amongst its staff.

The traditional framework of marketing planning is best explained by Malcolm McDonald in his book[2]. The main steps in the process he describes are:

The essence of the process is that it moves from the general to the specific; from the overall objectives of the organisation down to the individual action plan for a part of one marketing programme. It is also an iterative process, so that the draft output of each stage is checked to see what impact it has on the earlier stages - and is amended accordingly.

"2. Summary of Performance" - to date, including reasons for good or bad performance

More important, he deliberately separates this three year strategic marketing plan (sometimes just called the 'strategy') from the one year operating plan (often what is called the 'marketing plan' itself), which is derived from the strategic plan (but only after this has been approved).

It can be seen from this list that the short term (one year) plan should concentrate on very specific and quantifiable actions. Indeed, he provides a very useful set of 'forms' which can be filled in to create most of this plan.

My approach is simpler, since it assumes that most of the work has already been undertaken - you have been carrying it out yourself as you have worked your way through this book (and in practice these activities would have taken place across the whole year rather than concentrated into the few weeks of the annual planning process). This is the process, described earlier of 'logical incrementalism'. My planning process is, therefore, a genuine review of what has been happening and what needs to be changed to improve performance in the future.

There are just 5 simple steps, which closely follow the conventional process (the comparable stages of which are shown in the brackets below):

If you need a nmonic to help you remember these stages, then the underlined letters above spell out POTSA (of profit?).

The starting point must be a definitive statement, ideally a formal 'map' of some kind, of where your product/service packages(s) currently is in terms of the market(s). This is arguably the most important step of all, and the one where most organisations fail. If you cannot recognise where you currently are (in terms of what really matters, especially to your customers) then you will not be able to plot how you will reach your objectives.

This was, you will remember, the subject of chapter 5. Here, though, you must condense what then took a whole chapter into just one page (of no more than 500 words and, in any case, preferably shown in terms of diagrams/maps or, at least, in measured numeric terms). If you feel that there must be some explanatory expansion, put this into an appendix - but be ruthless in limiting yourself to one page here. This not only makes the document dramatically shorter than most such exercises, and correspondingly easier for the recipients to read (and hence more likely that they will), but it forces you to decide what really are the key parameters.

ASSUMPTIONS - an especially important outcome of the analysis of the current position, one which justifies a separate subsection (but of just half a page - no more than 250 words in addition to the rest of the current section), is the key assumptions about the future.

It is essential to spell these out. Most companies, however, do not even realise that they make such assumptions. IBM's key product marketing document is titled 'Forecast Assumptions'; and the agreement on what are the assumptions is often the key to understanding the marketing plan.

You should, however, make as few assumptions as possible; and very carefully explain those you do make.

As an extension to this process, when (in the later steps) you estimate the results expected from your strategies, you should also explore a range of alternative assumptions. For example, if you have assumed the market will increase by 'x'%, you might estimate sales from your chosen strategy at 'y' You should, however, also estimate sales a lower and higher rates of growth in the market; say, `At rate of growth of 'x - 2'%, sales will be 'y - 3'. At a growth rate of 'x + 2'% . . . The most useful component of this part of the exercise may well be this 'sensitivity analysis'; since this indicates which factors have the most influence over the outcomes - and hence which factors should be most carefully managed.

The organisation will have existing marketing objectives, by design or by default. These will state where the organisation intends to be in the future and when it intends to be there. Indeed, these marketing objectives may often contribute the most important elements of the overall corporate objectives - where the organisation primarily justifies its existence in terms of what it offers its customers or clients. They must, in any case, complement these corporate objectives (and are usually derived directly from them though, as the two are so closely related, the process tends to be iterative). They typically relate to WHAT products will be WHERE in what markets (and must be realistically based on customer behaviour in those markets). They are essentially about the match between those products and markets. Objectives for pricing, distribution, advertising and so on are at a lower level and should not be confused with marketing objectives. they are part of the marketing strategy needed to achieve marketing objectives.

These objectives must emerge naturally from the core competences enjoyed by the organisation, mediated by the values enshrined in its culture. These elements were explained in the earlier chapter.

To be most effective, objectives should be capable of measurement and therefore quantifiable. This measurement may be in terms of sales volume, money value, market share, percentage penetration of distribution outlets and so on. An example of such a measurable marketing objective might be `to enter market A with product Y and capture 10% of that market by value within one year'. As it is quantified it can, within limits, be unequivocally monitored; and correcting actions taken as necessary.

One caveat: formal corporate objectives tend to be documented in terms of profit projections - our managerial culture demands as much - but the unpublished, informal objectives which really drive the actions of most organisations range much wider. It is these wider objectives which need to be taken into account here.

One technique which might be usefully considered at this stage, albeit documented in an appendix even if relevant, is that of 'objective trees':

Rule #168 - OBJECTIVE TREES -

Objectives are usually described consecutively, without any clear relationship between them. A useful technique is to write them in the form of a hierarchy - a tree structure where sub-objectives are clearly related to overarching ones:

KEY/MAIN

OBJECTIVE

_______________________________________

| | |

Objective A Objective B Objective C

_____________________________

| | |

Objective A1 Objective A2 Objective A 3

In practice it may prove more difficult to assign objectives to such a hierarchy, but it should not be impossible - and it often provides a very illuminating insight into the relationship between them, and especially the underlying conflicts between them.

Even so, the relatively general long-term objectives need to be quantified as (progressive) series of targets - given timescales as well as numeric projections. Even intangible objectives, such as those relating to image, should be quantified in terms of measurable marketing research results.

FORECASTING - this is the point at which you are likely to enter into the complicated world of forecasting. This can be, these days, a very complex topic; in my text-book ('Marketing') it is by itself the subject of one of my longest chapters. In the next few pages, therefore, I will limit myself just to guiding you through a small number of the most useful, and most practical, techniques.

Short-Term Forecasting - this is the type of forecasting you will recognise. It is normally based upon a projection of historical trends, usually focused on sales volumes. There are many sophisticated techniques, increasingly using large amounts of computing power, but in essence all of these try to separate out the four main components:

Long term trends probably represent the most important information you are trying to extract from the mass of data before you.

Medium term cycles are supposed to result from regular economic ups and downs (from boom to bust) which used to be encapsulated in a 5 year 'business cycle' which, unfortunately, became unpredictable in the 1980s. The much quoted 'Kondratieff Cycles' are much longer, if they exist at all, being of the order of 25 - 50 years; and hence do not normally enter into shorter term forecasts.

Seasonal is the pattern within a single year, a pattern which most suppliers who are affected by it know well.

Random fluctuations, which do not fit regular patterns, afflict all products and services, and make computer analysis a very difficult proposition.

The end result of all these patterns superimposed may appear very confusing indeed.

Despite all the sophistication on offer, by far the best advice is to keep it as simple as possible.

The human eye is much better at resolving the complications shown above than the most powerful computer.

Rule T169 - the best approach to forecasting (and certainly the best check on any more sophisticated technique) is 'eyeballing' the sales charts! With some practise you should be able to sort out the main features of what is happening - and that is better than most computer models achieve.

Thus, the evidence is that the sophistication adds little or nothing to the accuracy (though it does to the image of the forecasters, and the prices they charge). Worst of all, such unnecessary complexity hinders your understanding of what is going on under the covers of the computer (and hides the fact that most forecasts are really based on human judgement). In any case, even if historical trends are accurately analysed, there is no guarantee that the future will be the same as the past. It is much better that you surface all the assumptions, and make your own judgements in full knowledge of what is involved.

So, I will recommend just two very simple techniques to use (if nothing else but as a check on the forecasts others are trying to sell to you);

EYEBALLING - the technique I mentioned above is the first, and best, method. It merely requires you to plot historical results graphically; and then look for the patterns. Trust your own judgement - until you are proved wrong.

EXPONENTIAL SMOOTHING - this is the mathematical technique which reportedly gives the best results; probably because it is so simple, and consequently easily understood. Indeed, it is a very impressive title for a simple, but useful, mathematical technique; which can quite easily be handled manually. It just allows greater weight to be given to recent periods. Instead of, for example, the average trend over the whole of the last year being calculated, the sales data for each of the months is given a weighting, depending on how recent that month was.

It simply takes the previous forecast, and adds on the latest 'actual' sales figure; except that it does this in a fixed proportion, which is chosen to reflect the weighting to be given to the latest period. The general form is;

where Ft+1 is the new forecast you are calculating, Ft is the previous one and Et is the deviation (or 'error') of the actual performance recorded against that previous period forecast; and 'a' is the weighting to be given to the most recent events.

For example, if a weighting of 0.1 is to be given to the latest figure, then the new forecast will be (Previous Forecast) + (0.1 X Deviation of Last Actual from the Forecast). Note that as the last forecast had in turn been produced by the same process (as had the forecasts over the preceding periods), there is no need to subtract any further figures; since in this way all the earlier sales figures are incorporated (but with 'exponentially' decreasing importance as they recede into the past). Thus, in the example given, the preceding three months are represented to the extent of 9% (0.1 X 0.9), 8% (0.1 X 0.9 X 0.9) and 7% (0.1 X 0.9 X 0.9 X 0.9), and so on. Clearly the higher the proportion of the current month (say 0.3 rather than 0.1) the greater the weighting given to recent periods.

Exponential smoothing will not, in this simple form, allow for seasonality; though more sophisticated (but less easily understood) versions can do this.

Long-Term Forecasting tends to be qualitative (as compared with the quantitative, numeric, focus of short term forecasts). It is even more dependent on judgement; and most of the more complicated approaches to it (such as Delphi, or Jury methods) aim to reduce the risks implicit in the judgement by spreading the process over panels of experts. It does not, in the final analysis, absolve the manager from backing his or her own judgement (which is probably better informed, in terms of the specific situation, than that of the 'experts').

Of all the techniques the most useful involves developing complementary scenarios, which allow for the uncertainties involved; as well as expanding the viewpoint of all the managers involved in the process. Unfortunately, in the form most often described it can also be the most complex and sophisticated of these techniques - and in this form perhaps only the very large corporate planning team at Shell have used it really effectively. A much simplified approach, based on the version which Shell recommend for their line managers who are not part of their corporate planning group, is more practical for most organisations:

Rule T170 - SIMPLE SCENARIOS - as described by Shell[3] the four steps to this process are:

1) Identify the important variables

2) Brainstorm to find the possible outcomes

3) Link these together in a series of alternative scenarios

4) Refine these scenarios

1) Identify the important variables - what (in the whole of the external environment, not just the marketing environment) are the most important factors which will determine the future of the organisation.

2) Brainstorm to find the possible outcomes - work through the different outcomes which different alternatives for these variables may lead to.

3) Link these together in a series of alternative scenarios - start to build six or seven scenarios ('stories' about the future of the organisation, or more importantly its market) which are able to contain these different alternatives.

4) Refine these scenarios - then work on the scenarios until they are condensed to two or three meaningful alternative (but complementary) descriptions of the future.

In more detail, each of these steps - which tend to be quite distinct and to take place in phases which will be separated in time - expands to:

1) Identify the important variables - this is usually the climax of the environmental analysis (scanning) work described in the earlier chapter, and undertaken over the few weeks or months before the main planning phase begins. Indeed, the raw material for this planning phase will mainly have been generated while conducting that analysis. It is not, however, the analysis itself which is most important for the input to the scenarios, but the emerging ideas about future trends/events (the tentative assumptions about what the analysis indicates will happen - in terms of the various alternatives) which accompany the process. This is usually a process of informal debate - possibly with yourself, but most often with colleagues - which erupts at various times (spread over months rather than days) as you try to make sense of the information you are gathering. It is often the most stimulating, and enjoyable, part of the whole planning cycle; and, as such (and because of its very informal nature), is often not recognised as part of planning (and is accordingly neglected in theory) - yet it is probably the part of the process which contributes most to the value of successful scenario planning. In the context of formal planning, the only important action should be to note down the alternatives which emerge from these debates; since these then become the most important inputs to the creation of the scenarios.

The first 'formal' first stage of scenario planning is, therefore, to collect these ideas together and determine how they rate on two dimensions:

IMPORTANCE - the topics to be discussed in the scenario planning debates must be those of most importance to the future of the organisation. The 80:20 Rule is just as applicable here. Managers will need to have their attention focused on the fewest possible key issues - since experience has proved that offering a wide range of topics merely allows them to select those which interest them and not necessarily those which are most important to the organisation.

UNCERTAINTY - as described by Shell, the topics covered by scenarios must be 'variable'. That is, there must be a number of possible outcomes to them - since describing the patterns of these alternatives is what scenario planning is all about. If there is certainty (or a reasonable degree of confidence about the likely outcome) then these topics, too, must be taken out of the process; though, if they have passed the importance test, they should be formally described as the shared elements of the scenarios (having the same outcomes for each of the scenarios).

Only those topics (here 5 & 6) in the (shaded) top right quadrant should be considered as part of the scenario process. Although topics in the bottom right hand quadrant (here 2 and especially 1) should not be part of the scenario process, in view of their importance they should be described as part of an introduction to the final scenarios. On the other hand, topics in both the left hand quadrants (here 3 and 4) should be ruthlessly discarded as merely distractions to the planning process.

2) Brainstorm to find the possible outcomes - this the most important part of the formal scenario planning process; however it should be noted that (like much of the overall process) it too is notable for its rather chaotic informality (though here Shell use the term 'brainstorm' in a very general sense, not that used in creativity techniques)! This is the stage where all the participants come together for the debates which lead to the agreed scenarios. It is essentially a group process, since it depends upon the interaction of the individuals to generate the diversity of views which is the strength of the whole scenario planning process.

The initial input to this stage will be the topics generated in stage 1. These are then modified in four main ways:

NEW TOPICS - the juxtaposition of the various topics usually results in more topics being suggested. This is genuine strength of the process in terms of creative decision-making, since it 'forces' the emergence of such new ideas.

RE-DESCRIPTION - whilst the various topics may be agreed in a general sense, it is often the case that the way they are described (by the group rather than by the individual who introduced them) is different - such that the detailed sense may be changed.

IMPORTANCE/UNCERTAINTY - the topics, which to this point have largely represented the views of individuals, are then further edited to make sure that those remaining are genuinely important and uncertain.

OUTCOMES - the true 'brainstorming' commences at this stage, when the links between the various elements are explored and the possible outcomes are debated.

It is possible that this stage will be accomplished in one meeting (albeit, in view of the importance of the process, a long one). More likely is that, as with all the stages, it will be spread over several meetings separated by several days or more - and the separation (which allows individuals to assimilate and expand the ideas generated previously) is often productive in itself.

3) Link these together in a series of alternative scenarios - the next stage follows much the same process of informal debate. Again, as with all the stages, it is important that the six to eight people who (ideally) are involved should not be constrained by any hierarchical pressures - all must be able to contribute equally (there should be no chairperson in the conventional sense). Here, however, the emphasis is on finding patterns. The topics are gradually aggregated together into clumps of topics, or 'mini-scenarios', which seem to make sense. This sounds difficult, but in practice you quickly discover that there are six to eight of these groupings into which most of the topics naturally fall. Why this should be is not obvious, it may be that this is a natural limit imposed by the human mind, but by the end of this stage you will typically have 6 - 8 clumps of topics which hang together fairly well.

4) Refine these scenarios - this is the most unnatural, and usually the most difficult, stage. You have to reduce the 6 - 8 'mini-scenarios' to just two or three final scenarios. There is no theoretical justification for this, just a very practical one. In one form or another, these scenarios will be delivered to other managers (line managers usually) to be used as a basis for planning. It is our experience (and that of Shell) that these managers cannot usefully deal with 6 - 8 scenarios (and will tend to invalidate the whole process by selecting the one or two they most like!), but will respond correctly if just two or three are provided to them.

The challenge, therefore, is to find just two or three 'containers' into which the topics can be sensibly fitted. This typically requires a considerable amount of debate - but usually it generates as much light as it does heat. The demanding process of developing these basic scenario frameworks often produces fundamental insights into what are the really important drivers for change affecting the organisation. The final three scenarios (for I would suggest that this is the ideal number to work to - Shell now can use just two, but that is after more than two decades of experience with three) are used in a number of ways:

CONTAINERS FOR THE TOPIC (GROUPS) - they are a logical device for presenting the individual topics (or coherent groups of these) so that managers may make use of these. In this context, which scenario contains which topic, or issue about the future, is irrelevant.

TESTS FOR CONSISTENCY - even at this stage it is necessary to iterate, to check that the contents are viable and make any necessary changes to ensure that they are; here the main test is to see if the scenarios seem to be internally consistent - if they are not then you must loop back to earlier stages to correct the problem.

POSITIVE PERSPECTIVES - the main benefit deriving from scenarios, however, comes from the alternative 'flavours' of the future their different perspectives offer. It is a common experience, when the final scenarios emerge, for the participants to be startled by the insight they offer as to what the general shape of the future might be - at this stage it no longer is a theoretical exercise but becomes a genuine framework (or rather set of alternative frameworks) for dealing with the future.

It is often used in Shell, even though the planners there have the resources to use much more sophisticated approaches.

The six to eight people taking part in the debates should, in any case, be in a conference room environment which is isolated from outside interruptions (which may mean that it has to be in a hotel, say, away from the day-to-day demands of the office). The only special requirement is that the conference room has at least one clear wall on which Post-It notes will stick (and most walls, in my experience, pass this test - I have used it just as effectively in hotel lounges in small towns in the Third World as in the headquarters of multinationals).

At the start of the meeting itself the topics, which were identified in the first stage of the scenario planning process, are written (preferably with a thick magic marker, so they can be read from a distance) on separate Post-It Notes. You can use different colour schemes to identify different types of topic if you want; but I find it best just to use one colour, black - since any scheme of organisation will almost certainly be overtaken by later developments (when the different colours only cause confusion).

These Post-It Notes are then, at least in theory, randomly put on the wall. In practice, even at this early stage the participants will want to cluster these in groups which seem to make sense - the only requirement (which is why Post-It Notes are ideal for this approach) is that there is no bar to taking them off again and moving them to a new cluster. As part of this process, or later, you can change the descriptions quite simply by crossing out the old (so you still have an 'audit trail') and writing in the new.

The most important stage comes next, when the participants try to group them to make the 6 - 8 'mini-scenarios'. This is where the Post-It Notes are almost essential - they will continue to stick no matter how many times they are moved around (and they may be moved dozens of times over the length - perhaps several hours or more - of each meeting). While this process is taking place the participants will probably want to add new topics - so more Post-It Notes are added to the wall. In the opposite direction, the unimportant ones are removed (possibly to be grouped, again as an 'audit trail' on another wall). More important, the 'certain' topics are also removed from the main area of debate - in this case they must be grouped in clearly labelled area of the main wall.

It is important that all the participants feel they 'own' the wall - and are encouraged to move the notes around themselves. THE RESULT IS A VERY POWERFUL FORM OF CREATIVE DECISION-MAKING FOR GROUPS, WHICH IS APPLICABLE TO A WIDE RANGE OF SITUATIONS (but is especially powerful in the context of scenario production).

As the clusters, the 'mini-scenarios', emerge the associated notes may be stuck to each other rather than individually to the wall - which makes it easier to move the clusters around (and is a considerable help during the final, demanding stage to reducing the scenarios to two or three).

The great benefit of Post-It Notes is that there is no bar to changing your mind. If you want to rearrange the groups - or simply to go back (iterate) to an earlier stage - then you strip them off and put them in their new position. One extra technical device, a Polaroid camera, is a help here. Every so often take a picture of the wall to record where you are - and do so, especially, before you make any major changes - so that you have a record which enables you return to where you were when a new approach turns out to be a blind-alley!

It helps to produce a table with the scenarios listed across the top and the key actors down the side so that you can record what each of these groups feels about each scenario (and what the reaction of each is to the outcomes). It also helps if a number of planners/managers repeat the process (and then debate their views to achieve a consensus).

This is, once more, a powerful test of the consistency of the scenarios - if there are an inconsistencies then it is back to iteration! More important, though, it gives a powerful insight into not just what the events in the future might be but into how the key players may respond.

Governments often use this technique by itself, without scenarios, to see how the various actors may react to political/diplomatic developments (and in this case it becomes an expensive process since those role-playing the key actors, often at great length, have to be experts) - but combining it with scenarios (and even limited by your own expertise) is still more powerful.

Returning, from this long diversion into some of the technicalities of forecasting, to the overall planning documents which are the main subject of this chapter, the importance of setting measurable targets (so the progress may be monitored and changes made to plans to allow for any divergence) is such that this justifies a separate main section in the marketing plan - though once again only of one page in length (no more than 500 words - but further explanations may be included in an appendix).

MAP - as this is the key stage of the development of strategy, a further page should be dedicated to four (two dimensional) maps of the eight most important parameters; showing on each the current position (along with that of the customers' ideal and that of key competitors - once more as described in chapter 4), the targeted future positions and the planned path to these. This should primarily be used to summarise the whole plan - but should in the process be used as a further check on the validity of the proposed moves. Full sized maps (along with further dimensions if needed) should be relegated to an appendix.

This step, documented yet again on just one page (no more than 500 words), should simply explain what marketing strategy is to be adopted to move the organisation, over the longer-term, from its present position to its targeted ones. These strategies describe, in principle, the 'how'; how the objectives will be achieved. James Quinn[4] gives a succinct general definition "A strategy is a pattern or plan that integrates an organisation's major goals, policies and action sequences into a cohesive whole."

This strategy statement can take the form of a purely verbal description of the strategic options which have been chosen. Alternatively, and perhaps more positively, it might include a structured list of the major options chosen.

One aspect of strategy which is often overlooked is that of timing. Exactly when is the best time for each element of the strategy to be implemented is often critical. Taking the right action at the wrong time can sometimes be almost as bad as taking the wrong action at the right time. Timing is, therefore, an essential part of any plan; and should normally appear as a schedule of planned activities in the last section of the document - but must also be allowed for at this stage in the strategies themselves.

Having completed this crucial stage of the planning process, you will need to re-check the feasibility of your objectives and strategies in terms of the market share, sales, costs, profits etc. which these demand in practice. As in the rest of the marketing discipline, you will need to employ judgement, experience, market research or anything else which helps you to look at your conclusions from all possible angles.

Finally, the shorter-term (more certain) elements of the strategies need to be translated into the necessary actions (and related timescales). Again this should not take more than one page - though this time in the form of a table which describes the key activities in terms of the most relevant parameters. Their prioritisation levels and resource requirements should be listed, at least, along with their quantified targets and times.

Allowing for updating, in this way, emphasises the true role of the plan and its relationship to the subsequent monitoring.

This may mean that the amount of information on the page may then demand a very small type size is used! The acid test, however, is how short it is. Longer than ten pages (excluding any appendices) may mean that it is not read.

The content of each section should be dictated solely by what is important to the organisation - the philosophy we have been following throughout the book. No doubt you will wish to use many of the ideas contained in this book to test their relevance to your own needs; but only those which are genuinely relevant to your needs should be employed - and even then only described (at the length which reflects their specific value) in the appendices. This is a very different approach to that traditionally employed - where the techniques employed at each stage tend to be pre-specified by the 'experts' who have devised the planning process. Of these techniques the most prevalent is probably that of SWOT:

This groups some of the key pieces of information into two main categories (internal factors and external factors) and then by their dual positive and negative aspects (Strengths and Opportunities, as the former aspects, with Weaknesses and Threats representing the latter);

The internal factors, internal to the organisation - but relating to its strategies and position in relation to its competitors, may be viewed as strengths or weaknesses depending upon their impact on the organisation's positions (for they may represent a strength for one organisation but a weakness, in relative terms, for another). They may include all of the four Ps; as well as personnel, finance etc.

The external factors, presented by the external environment and the competition, again may be threats to one organisation while they offer opportunities to another. They may include such matters as technological change, legislation, socio-cultural changes etc, as well as changes in the market-place or competitive position.

You should note, however, that - even if its use is justified - SWOT is just one aid to categorisation. It is not, as many organisations seem to think, the only technique.

since its major weaknesses far outweigh any benefits it offers! In particular, it tends to persuade companies to compile lists rather than think what is really important to their business. It also presents the resulting lists uncritically, without clear prioritisation; so that, for example, weak opportunities may appear to balance strong threats.

As you might expect, I favour the freedom offered by the 'Analytical 4 Step'. This does not impose alien structures on your planning - but lets you develop your ideas to exactly match what the organisation needs.

In general, the most useful strategic planning techniques (such as logical incrementalism and the competitive saw) have already been taught in the earlier chapters, but there remains one group of techniques which tend to be associated very closely with planning (and are also more correctly seen as techniques of corporate planning). These are the ones relating to balancing 'product portfolios' - the planning of the overall collection of product/service packages so that the result is a balanced performance for the organisation:

This is a little taught matrix, but one which is probably used more than others by practising corporate strategists. Once again, though, it can only be used at the business unit level and above - since it is a device for managing portfolios rather than individual products or services.

The factors it plots are more 'intuitive' than those used by some other approaches. Thus, the vertical axis simply plots the 'product/market attractiveness'; in other words how worthwhile is the business. The horizontal axis covers 'business strength/competitive position'; what is the organisation's competitive advantage in each. In its correct usage, calculating these positions can be a long process. Though in essence they still reflect judgements, these are carefully weighted. In unsophisticated hands, however, that can lead to a false sense of security!). The whole process requires considerable explanation; so look up the details in a specialist text if you want to use this approach with the correct precision!

What seems, at first sight, to be even more complex is that it is a 3 x 3 matrix; where most others in management theory make do with 2 x 2 matrices. In practice, this adds little to the complexity - and much to the flexibility, as you will see below from the outcomes for the various boxes:

Thus, the addition of the 'grey' area, diagonally across the middle (where the instruction is to 'evaluate') softens the harsh yes/no outcomes which are characteristic of 2 x 2 matrices. The whole approach can, however, be considerably simplified without losing its inherent value:

For most, relatively unsophisticated, users this simpler version (which we dub the 'Three Choice Box') offers a more immediate picture; which still retains the flexibility, and intuitive practicality, of the original. It has the great virtue that it surfaces the many subjective decisions which lie beneath the surface of the original. Here only you decide where your entry lies within it - you cannot here sub-contract the decisions to fancy mathematics. Both the attractiveness of the product/market and the strength of the business involved are clearly subjective (if informed) values. It also highlights the fact that there is a spectrum of outcomes.

To help provide more information immediately to hand, it is conventional to show the chosen position as a circle (whose area is proportional to the size of the market) with a solid (pie) sector within this whose size represents your share of that market.

The most often taught matrix, again for use with portfolio strategy, is the BOSTON MATRIX. Like the Boston Advantage Matrix, described in the earlier chapter, it was developed by the Boston Consulting Group for use in a narrow range of portfolio situations (which, unfortunately, represent just a few per cent of those which typically face organisations). It works well in such situations where, in essence, (typically as a conglomerate) you are balancing cash-flow across a range of market leaders in quite distinct markets (and, most usefully, in high-tech markets which are growing rapidly). The axes (which are relative market share and market growth rate) indicate the special nature of this matrix; and tend to be counter-intuitive, so that managers find them difficult to understand. If you find that you need to use this matrix, once again find the specialist book which explains its CORRECT use in detail (but, beware, few texts actually give details of the correct usage).

My main reason for mentioning it is to WARN YOU OF THE DANGERS POSED BY ITS INCORRECT USE! It is one of the two or three most frequently taught management 'theories'; but it is probably the least used in practice. It is almost invariably taught incorrectly (except in the best business schools; and even in these its limitations are perhaps stressed less than they might be).

The main problem is that, like many management theories, it has been corrupted by later additions; aimed at making it easier to use by the less sophisticated manager. Thus, the version which is usually taught (and certainly the one which is remembered) uses very memorable descriptions for the quadrants;

The main danger which afflicts this gross oversimplification is that it is very seductive, and in the seduction almost all the value of the original is lost. Managers forget that the axes are quite specific and, instead, categorise the positions of their own 'product' offerings by gut-feel. As a result the positioning within the matrix reflects personal prejudices rather than (as in the original) objective facts. Worse still, what these positions mean is then distorted by the emotive labels given to the boxes. The 'Cash Cow' has to be milked. It has no future, even though, as we saw earlier with the Rule of 123, such offerings represent the future of the organisation as well as its past. Stars demand our attention, which may result in too much emphasis on new products at the expense of the main strength of the business.

Perhaps the most important shortcoming of these techniques, especially of the Boston Matrix, is that they emphasise the short-term (and operating costs). As you will have realised, we believe that marketing must be seen as an investment. Its most important impacts build over the longer term - and should be viewed as investments on the balance sheet rather that as costs on the operating statement. This was covered in earlier chapters in terms of the extensions of the competitive saw to the 'stepped saw' and then to the concept of 'marketing depreciation', both of which emphasised the longer term effects. At this point we will, however, take the philosophy even further in the 'Investment Multiplier'. The impact of this is best seen in comparison with the Boston Matrix, to which it is an alternative, and indeed the provisional title for the theory was the 'Boston Strangler'!

This new theory does, though, require as long an explanation as that for the original Boston Matrix (one reason why the seemingly simple 'Cash Cows' version of the latter is more popular). This is, therefore, an explanation which you may want to quickly skim before concentrating in more depth on the practical rules which are derived from it:

Thus, in the earlier chapters we saw that the most successful brands have very long lives, and the Rule of 123 celebrates this fact since it is the normal state in stable markets (that is in markets where brand leadership positions do not change, even over the longer term). Thus a new product/service package entering the market (which, in a more positive vein than the equivalent Problem Child of the Boston Matrix, we would call a 'STARTER') can be plotted (in terms of the investment being made in it) on two dimensions; that of the cumulative investment level itself, and that of time:

If the product/service is (like the great majority) unsuccessful (called in our terminology a 'LOSER' rather than a Dog), the investment is eventually cut off and 'death' occurs (but at the hands of the product owner, not as the 'natural' occurrence predicted by the Product Life Cycle)..

If it is in the state of limbo where it is not clear whether or not it will be a long term success (though it may be one in the shorter term - the timescales involved are such that the true long-term potential may not be obvious for a decade or more), the investment will continue; until, most often, it plateaus. Thus, when it is realised that it does not after all have major potential (in view of its equivocal position, we would describe this as a 'RUNNER' rather than a Star) further investment is usually limited.

Just a few products or services will reach long-term positions, at 1 or 2 or 3, but these will be the major cash generators which drive successful organisations (and are called by us 'WINNERS', not the rather derogatory Cash Cows). Thus, eventually, the investment levels - for a successful brand - are likely to reflect its profit performance. High investment will return high profits (once again, assuming success) and lower investment lower profits. Hence, the investment graph also is a good (albeit indirect) indicator of performance.

The difference in philosophy is most evident in the terminology; of Runners versus Stars and Winners versus Cash Cows. We believe that Winners are to be cared for (and not Cash Cows to be milked), where Runners have to be carefully assessed (and not automatically presumed to be future Stars).

If you plot the historical performance of your current brands (allowing for them to plateau as investment is eventually matched by depreciation) it is likely that you will get a pattern such as:

This can be simplified if we ignore the cumulative figures building during the launch, and extend the plateau back to the launch time:

It should be obvious, from this, that the normal pattern is of an inverted pyramid. The higher performance brands are also the longer lived ones.

The 'Investment Multiplier' incorporates this 'Rule of History' by simply mirroring in the future what has happened in the past:

The 'multiplier' in this case is not that shown on the vertical axis, since it is assumed that one way or another the performance (the profit out, say) is roughly proportional to the investment put in. It is, instead, the life of the brand. A successful high investment brand multiplies its return by having a longer life - over which the annual returns accumulate.

We can, finally, apply the boxes equivalent to those of the Boston Matrix (with their new terminology):

This diagram still contains the important lesson of the Boston Matrix, that of impending mortality. Complacency, even when you have the brand leader, is ultimately rewarded by death (a message even more strongly conveyed by the Competitive Saw). More than this, though, it graphically illustrates the odds against long-term success; and the significant leverage to be gained if success can be achieved. Most important, it highlights the importance of maintaining those few winners; where the Boston Matrix, and much of marketing mythology, takes exactly the reverse view (and demands that you milk them to death!).

Even with all this marketing theory available to them, many organisations by default 'do nothing'. They simply do not recognise the need for change, or they are afraid of what it involves. These organisations have, justifiably, been criticised for this - and not a few of them have later paid a high price for their neglect.

There is, therefore, a commendable incentive for management to 'do something'. This is truly commendable, where a sound course of action is obvious.

This approach, though, becomes a problem in its own right when no obvious solution is immediately to hand. The pressure to 'do something' quickly turns into pressure to 'do anything'. Managements, accordingly, tend to grasp at very short-term fixes, while they try to find the right long-term one. The problem is not that these fixes are inherently damaging to the organisation, but that their very existence tends to predetermine (incrementally, if not logically) the long-term solution chosen.

1) If you do not know what to do, then doing nothing will force those closer to the problem (the staff on the ground) to take the necessary actions instead. They are, in any case, the people most likely to develop the best short-term fixes - and to implement them, where their ownership of the problem is likely to ensure that the fixes are the best possible.

2) The long-term solution can then be investigated without any need to take account of these fixes - there is no obligation to incorporate them incrementally in any final solution. More important, the final solution can be implemented without any arguments as to how it interfaces with these fixes.

It is a very brave philosophy, which demands a management which is confident of its own position, but it can remove many of the short-term pressures which lead to panic - and thence to disaster.

Returning to marketing planning in general, the most important aspect is normally not the output (the plan) but the PROCESS leading up to it. Very real benefits can be derived at each of the stages:

At this stage there may be, if the process is well managed, considerable benefit to be gained from the active involvement of a wide range of staff. This must, as a matter of principle, include all the managers who will be asked to implement it, but it should also be extended (albeit indirectly, via Inner Marketing) to the largest possible number of other employees. Involvement in the planning of their own future is highly motivational for all levels of staff and management. On the other hand, exclusion from the process leads to frustration and fear.

CORPORATE MISSION - in recent year it has become very fashionable to describe a 'corporate mission'; which provides the context for the corporate objectives. Most organisations now routinely include such a statement as part of their annual report. This 'corporate mission' can be thought of as a definition of what the organisation is; of what it does: "Our business is......"

Unfortunately, as with most fashions in management theory, it has now become an almost meaningless appendage. To be effective it should not just be a routine gesture, but must have the power to determine the future of the organisation. Indeed, perhaps the most important factor in successful marketing is a genuine 'corporate vision' rather than a bland 'mission'. Surprisingly, this is one which is largely neglected by marketing textbooks; though not by the popular exponents of corporate strategy - indeed it was perhaps the main theme of the book by Peters & Waterman[5], in the form of their 'Superordinate Goals'. Theodore Levitt[6] says "Nothing drives progress like the imagination. The idea precedes the deed."

If the organisation in general, and its chief executive in particular, has a strong vision of where its future lies then there is a good chance that the organisation will achieve a strong position in its markets (and attain that future). This will be not least because its strategies will be consistent; and will be supported by its staff at all levels. Even Robert Townsend[7] echoes the statement in his comment that "Things get done in our society because of a man or woman with conviction." Such visions tend to be associated with strong, charismatic leaders.

What is a worthwhile vision is, however, usually open to debate, indeed to considerable debate; and hence the reason that the theme was explored at some length in the section on 'Conviction Marketing' in the chapter on Advertising.

The review process should, again if properly managed, lead to a stimulating challenge to the embedded wisdom. It has to be recognised, though, that the 'logical incrementalism' described in the earlier chapter is more often replaced by 'illogical incrementalism'. Thus, a decision taken on the spur of the moment - with little thought - subsequently becomes institutionalised as a strategy which is never challenged (regardless of whether it is right or wrong).

MARKETING MYOPIA - Theodore Levitt[8], in his very influential article stated that;

"The viewpoint that an industry is a customer-satisfying process, not a goods-producing process, is vital for all businessmen to understand. An industry begins with the customer and his needs, not with a patent, a raw material, or a selling skill. Given the customer's needs the industry develops backwards, first concerning itself with the physical delivery of customer satisfactions. Then it moves back further to creating the things by which these satisfactions are in part achieved. How these material are created is a matter of indifference to the customer, hence the particular form of manufacturing, processing, or what-have-you cannot be considered as a vital aspect of the marketing."

His reason for this emphasis, supported by considerable anecdotal evidence in the rest of the article, was that most organisations defined their business perspectives (now more often referred to as the 'corporate missions' described earlier) too narrowly; typically based upon the technological processes they employed (but, at best, upon internal factors). His view, which was enthusiastically seized upon by the more adventurous organisations, was that the link with the consumer, the 'customer franchise', was the most important element.

The corporate vision must, therefore, be defined in terms of the customer's needs and wants.

Adopting a wider perspective helped many organisations to better appreciate how they could develop. Some organisations, though, took the process very literally. Holiday Inns, for example, decided it was not in the 'hotel business' but in the 'travel industry' and a acquired a number of businesses, including a bus company. It soon learned, however, that its management skills were not in those areas; and divested itself of them, retrenching to the business it knew best (though at least defining it in customer terms).

On the other hand, Levitt recognised the danger of the possible over-reactions in his later book, where he added the comment;

"Marketing Myopia was not intended as analysis or even prescription; it was intended as manifesto. It did not pretend to take a balanced position....My scheme, however, tied marketing more closely to the inner orbit of business policy."

The last sentence seems, at least to me, to be the best comment on the true importance of his contribution.

This debate should be as wide ranging as possible. Nothing should be exempt from scrutiny, and no idea should be dismissed until fully considered. The range of creativity tools, such as brainstorming, should also be brought into play. It is the one chance, during the year, to think the unthinkable.

Probably the most productive part of the whole process is, though, the opportunity to gain a shared understanding of what the marketing plan means - the fact that it has been 'published' in no way guarantees that it is understood by the recipients.

RESIDENTIAL MEETING - this internal communication process is best accomplished in an extended meeting away from the pressure of day to day business; a two to three day meeting in a suitable hotel is normally the way this is achieved. The fact that this is an extended meeting, in a neutral environment, is critical - the discussion in the bar at the end of the day is probably just as important as that in the formal meeting, and the forced concentration over a lengthy period on the issues brings any misunderstandings over their interpretation to the surface. The meeting will inevitably cover far more then is eventually enshrined in the plan itself, and in the process will bring home to the participants (who must include all the key managers responsible for implementation, not just the favoured few) the 'flavour' of (and philosophy behind) what is intended. It is this shared 'flavour' which will inform their actions over the succeeding year - and is the most potent outcome of this part of the process.

But this part of the process should go even further, to obtain agreement from all those involved; and thence to obtain their wholehearted commitment.

RINGI - as we have already seen, in the earlier chapter, this approach is best exemplified by the Japanese Corporations. Their decision-making process typically requires that all managers involved in the implementation formally sign an agreement to this effect, the documents called 'ringi'. It is quite normal for as many as 50 managers to sign. The decision-making process is, therefore, much more complex than its Western equivalent - and can take that much longer (though the Japanese have learned to manage it better, so the difference is not that great).

Their gain, though, is in the implementation phase. This is where delays happen in the West. Managers who have not been consulted often pose problems when they are asked to implement the decisions (and may not even be able to implement them). The Japanese managers, in contrast, are already fully committed; and the implementation phase goes much faster. As implementation typically takes far longer than the decision-making, this represents a major gain for the Japanese.

One final caveat about communicating the plan to your staff, and indeed about communicating with them in general.

This is not to say that you should talk down to them - the odds are that most members of your staff will be more intelligent, and capable of rationally handling quite complex arguments (if they are properly explained), than is generally allowed for. Instead, it is to quite specifically warn you against the use of specialised words which are only meaningful to experts.

Regrettably, experts tend to use long words as a matter of course, especially the specialised language of their chosen 'professions'. This is part of building their image, and of creating professional status - by keeping the lay-person an outsider. Some of these terms are genuinely useful as professional shorthand - you will have recognised their use in this book - but they do not lend themselves to wider usage. The result is, too often, expert gobbledygook - often compounded by experts hiding behind it when they have a weak case to make.

So you will need to fillet out all superfluous jargon. Keep it simple is the best approach.

This has a further benefit. In trying to reduce your ideas to something others can understand, you will have to really understand what they mean - and in the process you will gain further insight into what they mean (and you will unearth problems you simply hadn't thought of).

[1] B Taylor, Corporate Planning for the 1990s: the new frontiers, Long Range Planning, vol. 19, no. 6 (1986)

[2] M H B McDonald, Marketing Plans (Heinemenn, 2nd edn, 1989)

[3] Contribution by Graeme Galer to an Open University computer conference 1992

[4] J B Quinn, Strategies for Change: Logical Incrementalism (Richard D Irwin, 1980)

[5] T J Peters and R H Waterman, In Search of Excellence (Harper & Row, 1982)

[6] T Levitt, The Marketing Imagination (Free Press, 1986)

[7] R Townsend, Up the Organisation (Coronet Books, 1971)

[8] T Levitt, Marketing Myopia, Harvard Business Review (July-August 1987)