Marketing as Growth Accelerator

(Acceptance speech delivered by Nick Fontanilla, Ph.D. as 2010 president of the Philippine Marketing Association during the induction ceremony on January 27, 2010 at the Manila Polo Club in Makati City)

1. New Drivers

What is the focus of the Philippine Marketing Association in 2010? Let me answer this question by first looking at some significant trends.

There are five new trends that are likely to drive or are driving significant changes in the corporate environment and marketplace. Of course there are more but I would like to focus on these five because they are potentially the important agents for major change. These are the availability of knowledge, open connectivity, the power of the individual, resource networking and emergence of the third place.

1.1. Free Knowledge.

Many companies created tremendous value, both shareholder and customer, by providing their services for free. Yahoo is still available for free. Google created so much value by providing more services for free. You Tube remains a popular site for its free services. All the online social networking sites are joinable for free.

This philosophy of creating value by providing products and services for free is best synthesized in Jimmy Wales' dream that served as the thinking platform for Wikipedia. He said, "Imagine a world in which every person on the planet is given free access to the sum of all human knowledge. That's what we are doing."

How does one create shareholder and customer value by providing services for free? This requires radical thinking. A radical customer-driven thinking. A change in the way that we conceptualize and create value. A change in the way that we interpret our balance sheet.

1.2. Connectivity (pixel)

We are all connected through fewer than six degrees, writes Mitch Joel in his book Six Pixels of Separation. Six pixels mean “that I know someone, who knows someone, who knows someone, who knows someone, who knows someone, who knows someone – who knows you. In other words, you can get to someone within six layers of connection. “That was the past, according to Joel. “In the digital world, there are no degrees of separation between you and your customers. You’re connected to those who are potential customers.

When I registered in Linkedin some years back upon the invitation of a business colleague in Chicago, the site gave an estimate that there were more than 15,000 Linkedin members that were part of my network. And I barely started. My colleague’s network became my connectible network. His networks’ networks also became my connectible network. I have not checked my network now. I would hazard a guess that it is in the millions.

When you think about your Facebook, Myspace, Friendster or Twitter, a personal network of millions is just possible. Imagine the numbers when you have, say, 100 friends within the network, and each of your 100 friends would have their own 100 friends in their respective networks and each pair has only 15 to 20 common friends. That is a problem in Trigonometry. But that should come out to a lot of people within your network.

In other words, when a company thinks hard enough and works smart enough, this company can connect to all its customer, one-to-one, dialogue with the customers, one-to-one, and engage the customers to the extent that the customer becomes a partner and a friend, one-to-one.

1.3. Resource Networking

To be competitive, marketing practitioners must use resources and technologies that are globally up-to-date. To get around the financial constraint attendant to this strategy, successful companies have resorted to resource networking.

Resource networking is a daring strategic platform that businesses use to put together resources and co-create a personalized experience that is purpose driven. This strategic platform was conceptualized by C. K. Prahalad and M.S. Krishnan, both professors at the Ross School of Business in University of Michigan. Labeled N=1; R=G this platform has a business context but had been effectively used in government and politics.

N=1 is a phenomenon where value is co-created by all stakeholders. The focus is on the centrality of the individual. R=G emphasizes that access to resources should be multi-vendor and global. The focus is on access to resources, not ownership of resources which is the traditional method. Using N=1; R=G as the platform, manufacturers access resources that are available from those most capable to deliver them and, in real time, co-create (with one consumer at a time) a personalized experienced.

Krishnan cites Apple as a company approaching the N=1; R=G business model. By accessing appropriate technology wherever it is available at a managed cost, Apple co-creates with every user a selection of favorite songs, one song at a time. The number of products, services and vendors that are involved in this co-creation is amazing. Most of them are not even owned by Apple.

Reflecting forward at what we can do at the local level, N=1; R=G is a strategic model that is ideal for Philippine companies and organizations. The road forward can be less resource hungry, less bumpy. It provides a network for defining and building intelligent models that is socially and financially viable.

1.4. Emergence of the Individual

Hollywood actor Ashton Kutcher has over two million followers in Twitter, an online social media network. Before he worked his way up to this number, he challenged CNN, a global and powerful broadcast network, to a public contest -- to get a million followers in Twitter. Kutcher won. An individual winning over an institution. With what he won, Kutcher donated 10,000 mosquito nets to places that are infested with mosquito.

Individuals, not social institutions, are beginning to have more social, political and economic power. One person who advocated for more community support on an ailment that has never been taken seriously for research and development sent an appeal to an open-ended audience via the world wide web. Millions replied. The government and the private sector moved to provide financial and technical support. The EDSA II revolution happened so fast mainly because individuals, equipped with cell phones, provided the critical mass to engage the government in a solid fight against corruption.

Each person, through the use of technology, can reach millions in an instant and create a response that is equally instant. Everyone has basically the same access to information and knowledge at a socialized cost, and to opportunities that before were reserved to the privileged few.

This is not a social development where individuals escape from the protection and care of communities, but one where the individuals, liberated by freer access to knowledge, purposely become the powerful and effective instruments of communities for positive change.

David Mercer presented a thesis that the primary social force for change and development will be the individual. Individuals have liberated themselves from strictly social beings who depend so much on social institutions to social beings who are less dependent on others to innovate, discover, advocate and earn.

Mercer believes that over the longer term, full flowering of this individualism will represent nothing less than a quantum leap in social organization and that the “philosophy of individual empowerment is likely to be the greatest force for change….”

1.5. Third place

What is your Third Place? Home is my First Place. Office is my Second Place. Church, of course, is above these places. My Third Place is Starbucks. Many others consider the Mall as their third place.

Billy Coburn strikes a complete note on this question in his article Cafés of community: the Starbucks principle.

Home is a good thing. Home for the holidays. But home is not the only thing. In fact, sometimes family closeness gets just a little too close, especially during the holidays. After a few days of togetherness — right about now, three days after Christmas — many of us would probably welcome a little time away from home.

That second place, home being the first place, is usually work. At work we form friendships, socialize and spend a considerable chunk of the week. It’s a place where we practice our vocation and participate in a community of colleagues. But home and work are not enough. Sometimes we need to get away from work.

We need a third place.

No one understands this better than Howard Schultz, founder and CEO of Starbucks. Schultz founded Starbucks on the premise that Americans are missing a third place in their lives — a place that his coffeehouses can fill.

He understood that in America, as well as in Italy, it’s not about coffee, it’s about connection. That’s the Starbucks Principle. And for many, it seems to be working.”

It works for me. Perhaps, it works for many Filipino consumers, too. I remember, during disasters and special events, only one store would be open. Generous use of electricity. Of the space. Of the tables. And services within the Café. That’s the Third Place. This needs radical thinking and understanding of the consumer behavior.

2. THE PMA

2.1. Marketing at the Crossroads

What does this mean for marketing and for corporate development? At the 2003 CMO Summit and from the random notes of Yoram Wind of Wharton School:

“….Marketing should be an engine of growth and profitability for the organization. It should link the insights from the market with the strategies of the firm to drive the creation of value through developing relationships with customers. Marketing should create and build leadership brands that consumers love and it should lead the continued transformation of the company. A McKinsey study presented at the Summit noted three primary opportunities for driving growth: Integrating customer insights more broadly into business functions, integrating business strategies with brand strategies, and Integrating marketing and go-to-market execution. Marketing perspectives can serve as an engine for growth through several approaches: Creating market-driven vision and value proposition, using market insights to drive innovation, leveraging technology and marketing to create convergence, and rethinking customer experience and relationships. Marketing, at the interface between the organization and the environment, can provide new opportunities for value creation and growth. It should be a concern to the entire organization. Marketing provides opportunities by identifying opportunities to serve unmet needs of current customers or new customers for the company’s current and new products and services. A focus on growth requires an integrated approach, cutting across the organizational functions and activities.”

These notes from Yoram Wind support the validity of the five emerging trends which highlight the centrality of the customer in an organization’s corporate culture.

But more than the centrality of the customer, marketing practitioners should create a new form of thinking that does not only look at the needs of the customers. This new thinking considers a marketing approach that positively transforms organizations, consumers and communities. In other words, marketing practitioners must create marketing that is meaningful for the people that it serves.
What is marketing that is meaningful? Bob Gilbreath, Chief Marketing Strategist of Bridge Worldwide, says that marketing has meaning when it adds value to people’s lives, whether or not they immediately buy what you are selling. I attended the national advertising congress organized by the Philippine Junior Marketing Association where more than 2,000 marketing students and teachers attended.

Jos Ortega, past president of Philippine Marketing Association and CEO of J. Walter Thomson presented selected outstanding ads. His own favorites. One of these was D7 from Thailand. D7 is a ready-to-drink coffee in can. The Ad has several versions, each version showing a typical Thai bureaucrat behavior that is negative and regressive.

The Ad shows a D7 can suddenly slapped on the cheeks of the bureaucrat. That reverses the behavior of the public servant and transforms this person into an efficient and dedicated public servant. A message is splashed on the screen saying – WAKE UP THAILAND. The intention is clear. The message simple but meaningful.

This is where marketing and marketing practitioners should be headed. Becoming an engine for corporate growth by creating marketing that is meaningful and value-adding to people’s lives.

2.2. The Philippine Marketing Association

WHAT DOES THIS MEAN FOR THE PHILIPPINE MARKETING ASSOCIATION AND FOR MARKETING PRACTITIONERS?

- WE MUST RECOGNIZE THE ROLE OF MARKETING AS A GROWTH ACCELERATOR, AND IN TRANSFORMING COMMUNITIES AND PEOPLE.

- PHILIPPINE MARKETING ASSOCIATION MUST PROVIDE THE EXPERTISE TO DISCERN WHAT SUCCESSFUL MARKETING STRATEGIES ARE AND HOW THESE CAN SERVE AS GROWTH ACCELERATORS.

- PHILIPPINE MARKETING ASSOCIATION MUST BECOME THE VENUE FOR THIS DISCERNMENT AND FOR SHARING THESE BREAKTHROUGHS TO PHILIPPINE INDUSTRIES AND TO MARKETING PRACTITIONERS IN OTHER COUNTRIES.

3. The 2010 PMA Board

Every Philippine Marketing Association Board of Directors follows the tradition of raising the bar of excellence through innovation. The 2010 Board will not be any different. The new Board commits to continue the tradition of raising the standards of excellence. We hope to do this by using the accomplishments of past Boards as a springboard for creative engagement and by highlighting the significance of marketing as a discipline in an environment that is looking for more effective approaches for sustainability and long term viability.

Our theme for 2010 is Marketing as Growth Accelerator. The theme is suggestive of the role of marketing in accelerating corporate growth, promoting sustainable development, and advancing relevant advocacy. In 2010, we intend to highlight marketing breakthroughs – successful marketing strategies and programs – that provided companies and organizations with the competitive edge and served as an engine for corporate or institutional growth.

We will endeavor to engage all our stakeholders including marketing-related associations, marketing professionals, government, students and faculty, and our members through sharing, dialogue, participation, fellowship and partnership wherever and whenever these are appropriate. Lined up in 2010 are traditional PMA events and programs that will showcase marketing as a driver and growth accelerator.

We invite everyone to participate in this year’s activities and to be part of this community of professionals with the vision of promoting and sharing best practices and excellence in marketing.

Shaking Off the Cobwebs in 2009

How do we shake off the mustiness in 2009 and get a pretty good start in 2010?

One way is to relive the good old memories in 2009 and previous years. The time I spent with the regular members of the Loboc Children’s Choir tops them all. The choir had a practice in their make shift studio. We were invited to listen in up close. That was far more special than being in the front row in an auditorium.

A secondary treat when you catch them in practice is that you get to see and listen to the second liners – the six to eight-year old kids who will carry on the tradition of top level international singing. I was able to listen to and watch the regulars perform again in October 2009. They were still awesome and oh, so grown up.

Another way is to look at the present as part of your desired future. Writer C.C. Noble says that “you must have long term goals to keep you from being frustrated with shortterm failures.” I agree. The future is our hope. And the best way to prepare for that future is to begin. Viewing the present from the perspective of a desired future gives more meaning to the challenges, difficulties, problems and mustiness of the past.

To shake off the cobwebs of 2009, I am looking forward to 2015 when Acre, Inc. is the leading online research company in the Philippines. The OR-TRACK team of Acre, Inc. crafted a roadmap to 2020.

The first attempt is through Makilahok, an online survey covering four modules – halalan, isyu, pinuno and pangarap. There will be more in 2010. Watch out for other online research products.

acreinc@20: 2nd Phase of the Corporate Journey

As I write this article, stockholders of SPSS, Inc. are preparing to decide on IBM’s offer to acquire SPSS, Inc. With the concurrence of management and an attractive premium for all common stocks, the acquisition is almost like a done deal. I believe that IBM will greatly benefit from this acquisition. First, it will fortify its consulting portfolio with downstream software applications. Second, it will acquire the capability to provide predictive analytics to growth-driven sectors. Third, SPSS is the leading analytics company and offers unique products and experience.

Acreinc has been SPSS’ partner in the Philippines for most of its corporate life. We share and are committed to SPSS’ mission of driving the widespread use of data-driven decision making. The time and resources Acreinc has invested to carry out this mission is I believe disproportionate to the predictive analytics’ current market size which. We call it advocacy and our social contribution towards improving the competitiveness of local companies.

We are not certain how IBM would restructure the distribution system in the Philippines. As an advocate of data-driven analytics and decision making, Acreinc will continue to invest on people, resources and marketing in the areas of predictive analytics and statistics. We are too deep into this advocacy to retreat. Hopefully, we will be given the same opportunity by IBM to provide decision makers with a powerful tool for analysis and decision making.

Predictive analytics in fact underscores the very essence of the second phase of our corporate journey. It is in this phase from 1995 to 1999 when we re-engineered Acreinc’s corporate business – from a research company providing IT solutions to an IT Solutions company providing research. There is a world of difference between these two major corporate strategies.

Acreinc Reengineered

In research, we were more focused on the implementation of a contract and less focused on marketing to get the contracts. In analytics, we were more focused on sales and marketing to get the contracts and less focused on the implementation. That difference alone needed a major shift in our corporate resources and methodologies.

Going though the second phase of our corporate journey, we had mostly technical persons and had little resources in marketing and market development. Re-engineering our human resource was probably the most challenging task. We needed to change the orientation of our programmers, data analysts and statisticians. We had to make them more customer-centric and sales oriented.

In the beginning, most of our people avoided answering the phone afraid that the caller was a sales prospect and would be asking questions about products and services. Slowly, they got the essence of customer service and how analytics could value add to the customers’ business. It took all of three years to re-invent our human resource from a strictly technical orientation to a customer-driven orientation. There were some Acreinc employees who responded to the shift in orientation with flying colors. They became the backbone of our new operations.

We activated a sales team whose members had the competence to not only provide the technical part of a consulting engagement but to also attend to very demanding pre-sales activities. The sales cycle for analytics products at that time was about eight to 16 months. Sales funneling and client management systems had to be customized because none were available.

That phase was an important learning experience. It provided us with the competence in sales and marketing layered on top of our technical competencies. Our sales profile reversed. In the beginning, research revenues accounted for 70% of total. Towards the middle part of this phase, software revenues accounted for 50% of total even if the volume of research continued to grow. It was this combination that enabled us to venture into other downstream software applications.

New Solutions

It was during this phase when we decided to expand our product mix to include other downstream applications, that is, software products that were used for decision making and analysis.

First on the block was a German product whose objective was to optimize production in heat-generated power plants. In this type of operation, efficiency (higher production) was inversely related to plant integrity (plant maintenance and sustainability). Performance of executives with responsibilities in efficiency was based on total production. Conversely, performance of executives in plant maintenance was based on the upkeep and continuing operation of the plant.

In this environment, the higher the heat level in the plant, the bigger the production volume. However, the higher the heat level maintained in the plant, the higher the chances of breakdown. There was a mismatch in the objectives. To make decisions, executives were using primarily experience and gut feel. The product that we sold provided an optimal solution based on linear programming. It defined optimal levels of production and plant maintenance.

Second on the block was a U.S. product whose objective was to trace and mitigate system losses in the transmission of electricity from the power generating plant to users and clients. At that time, government allowed distribution and production companies to incur system losses of up to nine percent. Companies absorbed system losses over and above the nine percent hurdle rate. The majority of distribution companies were in fact incurring losses that were more than the cutoff rate of nine percent.

Third on the block was a U.K. product on performance management, Balanced Scorecard in particular. We later supplement this with a U.S. product that included other performance management frameworks such as activity based costing and activity based management. This became acreinc’s third division. We continue to maintain this division and provide software and consulting services to many companies in the Philippines.


(This is Part 3 of a series of articles on the history of acreinc@20. It is about organizational and corporate transformation from 1995 to 1999. There is usually a time in the life of an enterprise where management challenges the business and the concepts that gave the enterprise its corporate life. Should we continue to be a player in the industry where we now operate? How can we leverage the resources and experience that we have to expand or venture into other businesses? How do we create an enterprise that grows faster and earns more? This is one of the most challenging moments of Acre, Inc. It was at that time when the environment was changing and business was growing fast. The speed by which technology was changing was also very evident, putting pressure on capital investments and process improvement. For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

acreinc@20: growing pains (Software Division)

A Pain is a Pain

A pain is a pain no matter how you put it and in whatever context it comes up. I wrote this article in the first class section of a Philippine Airlines flight (PR811) to Davao on 19 September 2009. As a first class passenger, I was entitled to all first class amenities from boarding to the in-flight services. PAL customer relations upgraded me to First Class because I was bumped off from the first flight of that same day.

But enjoying all these privileges (including a free round-trip ticket to any local destination) did not ease up a bit the pain of being bumped off and of missing my scheduled meeting for the day. It also did not erase from memory how I thought I was callously bumped off.

I thought that I was literally chosen to be bumped off, not randomly as the PAL staff claimed. I was ahead of three other passengers on the same flight to Davao to approach my counter. These three other passengers got the boarding pass. I was bumped off.

I was almost impressed with the effort made by the customer relationship group and the counter staff, but as they were about to hand over to me a ticket for the original flight I was booked, they decided to release that board pass in favor of another passenger. Somehow, so I thought, everyone decided that I was the chosen one, that is, I was chosen to be bumped off.

From this experience, three things about PAL’s operations come to mind – staff competency, revenue management, and customer relationship management. If there were elements that led to this pain, they were probably at the top of the list. They were what I thought significantly contributed to the scenario where I was bumped off. I am prefacing my third article of part 2 of this series precisely because of these three points.

Data Driven Decision Making

In the last 20 years, Acre, Inc. has invested a lot of its resources to promote data-driven analytics and decision making specifically SPSS. This has been a very painful and expensive advocacy. I cannot say that we have gotten back the resources that we put into promoting SPSS -- thus, the term advocacy rather than investment. Yet in other countries, my counterpart SPSS partners have moved forward and are now reaping the benefits of their investments in SPSS data-driven analytics.

There are some fundamental pains that are endemic to the Philippine analytics market. First, decision makers prefer to employ qualitative judgment (or gut feel) even in the absence of or without the benefit of analytics. I attribute this to the managers’ financial orientation, reliance on decision-making tools acquired in classrooms and seminars, and prevailing management practices.

Second, the Philippine market remains wedged in a system where the IT division makes the final and important decisions on IT-driven investments. In other countries where decision-making has been more incisive, investments in IT-driven processes had been more of a responsibility and decision of the users.

In one of the premier universities in the Philippines where I also teach, the IT literally made the decision on the scope and type of analytics software that the university acquired for its computer laboratories. The decision was made based primarily on financial considerations even if that decision breached the process and the recommendation of the users. It was as if IT had to approve and decide on the book to be used by the professor and students.

Staff Competency

Why staff competency? I had the luck of queuing in a counter where the counter clerk was less competent than the others. Even if I was first to the counter than three other passengers in other counters, the staff assigned in my counter was not as fast in typing and processing as those in the other counters. As a result and because of PAL’s practice to overbook, I lost my chance to get a seat and boarding pass. Different service skills translate to different service quality. The customer relation staff who attended to me admitted that indeed the competence of counter clerks differ.

There was an attempt to upgrade me and give me a boarding pass. As that boarding pass was to be handed to me, the supervisor over-ruled the decision and ordered my boarding pass cancelled and shredded. The supervisor’s decision was based on his assessment on who deserved to get the boarding pass. Unfortunately, that was not me. His judgment was most likely flawed, discriminatory and ill-advised.

His judgment was not aided by data-driven decision making tools which is a practice now common in other airlines in other countries. I can only guess, but I suppose that cost considerations prevented PAL from investing in the appropriate tools. I can say this because I know that PAL had been actively searching for such a tool. Somehow, they never made a decision or the investment was downgraded to something that cost less.

Revenue Management

Why revenue management? Revenue Management (RM) is a pricing and revenue optimization tool. It focuses on how a firm should set pricing and product availability given different scenarios and resources. It is also known as yield management the objective of which is to maximize the use of resources given certain capacity constraints and customer demand.

It is commonly used in the airline and hospitality sectors. Airlines practice price discrimination throughout the booking schedule based on several pre-defined conditions such as capacity, timing of booking, customer profile and type of service provided. Now, RM is tightly integrated in the supply chain management of many other industries.

Under this framework, there are customers who benefit from the application of RM and there are those who become victims of RM. The concomitant result is supposed to represent an optimal solution for the company, that which gives the company the most profit.

It is not meant to be an equitable solution for customers. As such, users of revenue management are expected to exercise due diligence and to exhaust all possible remedies and strategies to increase profit generated from the optimal solution and, at the same time, minimize customer dissatisfaction. This is where I thought PAL failed – to exercise due diligence and to exhaust all possible remedies.

In my recent encounter with PAL, I did not see any evidence of a data-driven decision making tool powered by a quantitative model that makes use of past data, consumer profiles, and analytics.

Customer Relationship Management

Why customer relationship management? PAL’s solution applied to my problem was a solution after the fact – an aftermath. What I believe PAL failed to do was to apply a solution before the fact – the beforemath.

Best practices in quality and performance management demand a solution that manages the beforemath and avoid the pitfalls of an aftermath. The highest level of ISO requires a system that manages the beforemath. Even the Computer Maturity Model (CMMI), a standard for defining capabilities of software development companies, has several grades the highest of which requires a methodology for predicting customer problems and requirements. The supply chain management system is heavy on such data-driven decision making tools.

These three elements are representative of the decision-making landscape (or lapses) in the Philippines – the lack of data-driven decision making tools and the absence of an organizational discipline that demands the application and implementation of such a framework to delight customers. What we in Acre, Inc. are proud of is that despite these pains, we have persevered and continued to advocate the mission of driving the widespread use of data-driven decision making analytics. We are committed to continue with this advocacy.

(This is Part 2 of a series of articles on the history of acreinc@20. Part 2 talks about the start-up years from1989 to 1994. What is the main purpose of the business? What are the secondary purposes of the business? What markets and customers will the enterprise aim to serve? In what processes should it excel in a business where systems, methods and technology are victims of obsolescence? In what way should the enterprise position itself in an industry dominated by multinational companies or companies that have been operating for many years? This part discusses the important decision-making days and documents the impact of these decisions on the future of the enterprise. Some are book-line strategies and decisions. Some are blue ocean scenarios. For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)