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Introduction: Move to the Market

It is in vogue to aspire to become market-driven. CEOs exhort their employees to get closer to customers, stay ahead of competitors and make decisions from the market back. While this rhetoric is now commonplace, successful market-driven organizations still are rare. Too often, even the best-intentioned senior managers have been unable to translate their aspirations into action. Their organizations haven't grasped what it means to be market-driven or they lack the commitment to make the deep-seated changes that are needed.

Why should organizations strive to become market-driven? Our answer is that in an era of increasing market turbulence and intensifying competition, a robust market orientation has become a strategic necessity. Only with superior skills in understanding, attracting and keeping customers can firms devise strategies that will deliver superior customer value and keep this strategy aligned with changing market requirements. Even firms with world-class technology and innovative business models have to stay close to their customers and ahead of competition to realize their full potential.

The power of a market-driven organization can be seen in the success of companies such as Intuit, Wal-Mart, Virgin Airlines, Disney, Gillette, and many others who have used a superior relationship to customers to gain advantage over rivals. In contrast, the stories of IBM's loss of control of the PC market, Motorola's stumble in shifting from analog to digital cellular systems, and Sears, Roebuck's difficulties in the early 1990s show how a failure to align the organization to the market can quickly and seriously erode competitive performance. In fact, a growing body of research supports the insight that market-driven organizations outperform their peers.

Given the benefits of becoming market-driven, why do so many organizations fail to do so? The first reason is confusion about what it means to be market-driven. Some companies have become "customer compelled," jumping to meet every customer whim without a clear strategy. As a backlash, a growing group of firms argues that there are times when it is better to "ignore the customer." As discussed in Chapter 2, both these views are misconceptions with unfortunate consequences.

The second reason is that the culture, capabilities and configuration of most organizations are more a hindrance than a help. In working with executives to apply the concepts of my 1990 book, Market Driven Strategy, it became clear that most firms lacked the means to implement such an approach to a strategy. Their internal processes, structures, incentives and controls were in the way. As one 3M manager summed up their problem, "The fact that we are a: multi-dimensional, multi-functional, multi-regional and multi-plant organization is not the customer's fault."

What does it mean to be market-driven? How does this orientation to the market improve performance? How can companies build successful market-driven organizations? I have spent the better part of the past decade pursuing these questions. This work began in earnest with a conference on "Organizing to Become Market-Driven" I coordinated as executive director of the Marketing Science Institute in 1990. It continued in executive programs and consulting with more than a thousand senior executives around the world. Through this work and through my research I have developed insights into distinguishing features of the market-driven organization.

Part I of this book examines the many organizational elements that work together supportively in a market-driven organization. Those with the greatest leverage on performance are an externally oriented culture, capabilities for market sensing and market relating, and a configuration that aligns vertical functions and horizontal processes. All of these elements work together to foster a market orientation. We will study each element in turn and then show how best to integrate them to support the chosen strategy.

Part II then explores the distinctive market-sensing and market-relating capabilities that are at the heart of market-driven organizations. These firms stand out in their ability to continuously sense and act on events and trends in their markets. They also are better at anticipating how their markets will respond to their actions. Not surprisingly, these organizations also have superior capabilities for relating to their markets. They develop intimate relationships with their customers, instead of seeing them as a means to a series of transactions. These capabilities are built upon a shared knowledge base that is used to gather and dissemi-nate knowledge about the market. We show how these capabilities are developed and applied to gain a competitive advantage in consumer and business-to-business markets.

Finally, Part III offers a road map to managers who want to align their organizations to the market. How do companies navigate from an internal focus to a market focus? The first step is to reshape the organization to create a stronger market focus. Second, we explore the strategic thinking used to set the direction by combining top-down guidance and bottom-up market insights. Finally, we describe the six conditions needed for a successful change process. We illustrate this process through case studies of three companies (Owens Corning, Sears and Eurotunnel) who transformed themselves into market-driven organizations, and turned around their fortunes in the process.

How does your organization measure up? At the end of the book, we offer a diagnostic questionnaire to help you assess the progress of your organization in becoming market-driven. These tools can help you identify specific strengths and weaknesses, to guide your efforts to strengthen a market orientation. If you prefer to start with an assessment of your own situation, you might want to flip to the back of the book and work through the questionnaire now. Then you can pay particular attention to areas of weakness as you move through the book.

Although becoming market-driven still is challenging, the path toward improvement has never been clearer. Many pioneering firms have already broken the trail, and the insights of their experience are distilled in this book. Advances in network technologies -- including the Internet, intranets and extranets -- have created new opportunities to develop a market-driven organization more quickly, efficiently collect and disseminate information and build relationships with customers. This technology brings us closer to realizing the ideal of an organization that is continuously responsive to the changing requirements of customers.

Your organization can gain tremendous benefits from becoming more market-driven. Whatever your industry and current level of market orientation, aligning your organization more closely to the market can give you enduring advantages over rivals, provide insights into new opportunities and help avoid costly missteps, contributing to overall performance. While there are no simple recipes for creating a market-driven organization, this book offers frameworks and proven strategies that can help you achieve the advantages, performance and profits that accrue to such organizations.

Copyright © 1999 by George S. Day