Philip Kotler and John A. Caslione have seen it all in the worlds of strategic marketing and management. Through booms, busts, inflation and recession, the pair have separately observed and guided businesses during good times and bad. So they decided to join forces and create a book to help leaders guide an organization through any situation, catastrophic or otherwise. What’s interesting is that they began writing
“Chaotics: The Business of Managing and Marketing in the Age of Turbulence” shortly before the global financial crisis got underway.
Caslione answered some questions for Smart Business about the “Chaotics” management method.
‘Chaotics’ mentions 10 common innovation mistakes. Why are businesses prone to making these mistakes over and over?
A lot of [bad behavior] comes from a point of trying to dramatically reduce costs. [Businesses] do it in not a surgical or thoughtful way and not looking at it in respect to the current business model and how the business model is evolving. One of the biggest victims of cost-cutting mistakes is innovation. … The companies that have historically done the best are the ones that (continue) to innovate. They’re not missing a beat. They are subscribing to the philosophy of ‘save the strong, lose the weak,’ by losing fringe programs. They cut those out immediately. But when it comes to their core programs, innovations that have been planned for quite awhile, they continue on with those.
Another mistake that frequently gets made during tough times is to discount prices. Explain why adding value is the best alternative to cutting price.
As soon as you start to cut prices, you’re training the marketplace to negotiate first on price and not on value. Underlying this, there’s an even more dangerous message. During difficult times, when we start to discount the prices of our core products and services, we’re basically implying two things to a customer: No. 1, when he or she paid the full price, he or she was being a bit foolish. We’re saying, ‘You didn’t have to do that, we just made a profit.’ No. 2, once the recession is over, we’re going to jack prices back up to higher levels and the presumption is that the customer will pay it again. That doesn’t sit well with any customer.
Your core products, you don’t discount. You can bundle, (and) you can add additional value around that to keep the price the same. What the smart companies are doing is they’re having separate offerings. They’re saying that this is a value offering that will sit side-by-side with our primary offering. There will be certain savings aspects that will be implicit in the value offering, and it will be at a lower price. The customers and the consumers that want to look for a lower price and still have reasonably good quality will opt for the value-offering portfolio. Then, when they feel comfortable financially, they can migrate to the higher-priced standard offering.
‘Chaotics’ instructs executives to see change firsthand. How should they approach this direction?
There are eight components to the ‘Chaotics’ management system, and the first one is to have an Early Warning System (EWS). EWS has been around for years. We have them in meteorology, in business, in many fields. Where we’ve gone with the Internet and real-time communications means that we’ve got to have our feelers out there. We’ve got to increase the number of early-warning touch points. We have to enhance the number of stakeholders as part of our sphere of influence beyond the traditional foursome of customers, employees, management and shareholders. We have to include some of the soft cues and start to see trends before they even become trends, when they just start to emerge. From this, we can create scenario planning.
How to reach: www.chaoticsstrategies.com
