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Long Range Planning

35/5 October 2002

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Charles Baden-Fuller Editorial

    Hidden Value in Customer Markets
    Strategy has a number of key principles that endure. One of them is that the style of thinking determines the strategy. If the approach is wrong, then the strategy will also be wrong. The cognitive mindsets of managers and those around them are often key to the approach*. The recent dot-com bust exposed the extent to which managers and their advisors followed the mindset of the moment, which relied on weak business models and poor strategic thinking. But it is not just the dot-com area that needs attention, as the papers in this issue show.

    Our opening piece is essential reading and gives a warning shot to the complacent multinationals that they are tackling the emerging markets incorrectly. Niraj Dawar and Amitava Chattopadhyay draw attention to the persistent failures of Western firms that hone solutions successful for richer, mature markets rather than taking a different approach when tackling emerging markets. The resulting failure can only be resolved with a major rethink. The authors' model for the multinational strategy in emerging markets challenges much conventional thinking, but is still capable of being leveraged across time and space.

    Sue Tempest, Christopher Barnatt and Christine Coupland also question the strategic mindset when asking how firms should deal with the aging population in Western economies. They argue the current approaches ignore supply and demand side opportunities because of unfounded assumptions about the older age groups, their capabilities and their potential spending power.

    Hidden Value in the Board Room
    The recent corporate scandals lead by the revelations at Enron, World Com and Anderson have highlighted the need for the spotlight to be turned onto the boardroom. Much has been made of the need in larger companies to have a separation of powers between the Chairperson and the Chief Executive, but few have explained how the relationship should work. As we know, structure is not everything, the processes have to work as well. John Roberts fills the gap with a superbly well-crafted piece. He examines how the members of the Board should relate to each other to build and more effective unit capable of organising and running the corporation.

    In the smaller firm, the question of governance often turns on individuals, and Hans Wissema's paper talks of the dangers of being blind to the obvious hazards and so making expensive mistakes. Although Wissema suggests that executives should be able to avoid such mistakes by taking more care, the cognitive researchers would suggest that the problems run deeper and lie in the whole approach and make up of the executives. In either case, we should think about how to avoid these red lights.

    *Porac, J.F.,Thomas, H, & Baden-Fuller, C. 1989. Competitive groups as cognitive communities: The case of Scottish knitwear manufacturers. Journal of Management Studies, 26: 397-416.

Executive Summaries

Sue Tempest, Christopher Barnatt and Christine Coupland
Grey Advantage: New Strategies for the Old. sue.tempest@nottingham.ac.uk

    As the long-term view ceases to be fashionable, and flexible planning to cope with an uncertain future becomes the watchword, one thing at least seems a planning certainty – we are all getting older. With one fifth of us soon to be ‘retired' and the number of active workers per pensioner decreasing all over Europe, firm's traditional attitudes to the ‘third age' – both as employees and as customers - will need radial re-appraisal if they are to make anything of the potentially substantial ‘Grey Advantage'.

    Using demographic analyses to review the effects of the ‘Age-Quake', the authors examine and challenge three perceived ‘grey discontinuities' of declining physical, mental and economic activity of the ‘grey' population as workers, as well as traditional perceptions of homogeneity of taste amongst third-age consumers in terms of their appetite for products, services and experiences.

    From case studies they show how those firms that have investigated the ‘grey potential' find employees with more mental agility and better work-attitudes than younger workers, while marketeers discover, against expectations, that it is the young whose tastes are predictably similar, whilst older consumers' demands are diverse, individual and imaginative. The authors finish by offering two generic strategies to assist managers in pursuit of ‘grey advantage' with the strategic alignment of their organizations towards addressing this increasingly economically active sector at an individual rather than a one-dimensional level.

Hans Wissema Missing or Ignoring Warning Signals. jgw@wissema.com

    For the motorist, driving though a red light may save time, but will probably lead to disaster – but most of us have done it at one time or another. This research behind this article reveals that many highly successful managers have also, at some point in their career, missed and ignored warning signals and persevered with business mistakes even after they had become evident. How did it happen? How can it be avoided?

    Illustrated with ‘blow-by-blow' case-history management disasters, this article examines the reasons behind this phenomenon, drawing attention to some of the typical characteristics ‘red light behaviour' and why some decision-makers benefit from ‘red-light sensitivity' while others – through poor structures or information, through haste, pressure or ego, through ‘group-think' or lack of trust in their intuition – make errors, and risk compounding them with further misjudgements. Structures for analysing past decisions, learning how not to let mistakes cloud the future, and the advantages of contra-thinking in the decision-making situation are suggested as strategies to avoid future disasters.

John Roberts Building the Complementary Board: The Work of the Plc Chairman. j.roberts@jims.cam.ac.uk

    Most companies in the UK have now separated the roles of chairman and chief executive. This structural change in boards has created new challenges within board relationships. How can a creative partnership be built between executives and non-executives which balances the requirements to support and control? The research reported here suggests that the chairman's attitude to executive power and their willingness to build their own company-specific knowledge are key to their work in creating the conditions for board effectiveness.

    Drawing upon directors' experiences, this article illustrates what are termed 'complementary' board relationships through which a chairman can contribute directly to the performance of the chief executive, as well as create the conditions for other non-executives to contribute to the performance of the executive team. The article also describes the negative dynamics of 'complimentary' board relationships and how, often inadvertently, these can create ‘disconnects' in key board relationships which weaken effective board accountability and create the conditions for an external crisis of confidence.

Niraj Dawar and Amitava Chattopadhyay Rethinking Marketing Programs for Emerging Markets. ndawar@ivey.uwo.ca

    Whether you make beer or cola, skin cream or washing powder, breakfast cereal or crop spray, cars or credit cards, the prospect of the fabulous potential size of the emerging markets of China, India, Indonesia, and Latin America is enough to set Board mouths watering throughout the developed world. But, as this article points out, the strategy of exporting a product tailored, priced and marketed for the developed world and simply waiting for consumers to get round to your way of thinking is regularly met with well-deserved failure.

    The article offers numerous emergent-market case studies to highlight thought-full and though-less strategies. Which company runs video vans round Indian villages to show illiterate consumers how to use their product? And which company spent millions on a slick high-color TV commercial campaign without realizing most sub-continent TVs were still in black and white? Their proposition is that product development and marketing strategies for emergent markets must be rethought from the ground up to take account of three key factors - low incomes, consumer and infrastructural variability, and the low cost of labor - that characterize emerging markets, and they illustrate how to incorporate these realities into marketing programs, as well as discussing the implications of such an approach for the multinational's core strategic assumptions.

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