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September 15, 2004

Excerpts: Everything You Need to Know About Strategy - Part XII

By: Dylan Schleicher @ 1:31 PM – Filed under: Management & Workplace Culture

10. Do you serve and satisfy customers ... or go berserk attempting to provide every customer with an awesome experience that does nothing less than transform the way she or he sees the world? The M in IBM stands for machines. Except IBM doesnt make computers anymore. Its effectively the worlds largest consultancy. CEO Sam Palmisano aims to be no less than system architect of industry upheavals. Palmisanos strategy, claims Fortune, is to expand techs borders by pushing IT usersand entire industriestoward radically different business models. The payoff for IBM would be access to an ocean of potential revenuePalmisano estimates it at $500 billion a yearthat technology companies have never been able to touch. UPS is a collection of brown trucks. Except it wants us to forget the trucks ... and ask What Can Brown Do for Me? UPS, said ecompany.com, wants to take over the sweet spot in the endless loop of goods, information, and capital that all those packages [it moves] represent. BusinessWeek chimes in: Big Browns New Bag: UPS Aims To Be the Traffic Manager for Corporate America. The fastest growing element at IBM is IBM Global Services, the consultancy-industry rainmaker. The fastest growing element at UPS is SCS ... Supply Chain Solutions, now at $2 billion and featuring 750 locations; UPS's 24 recent acquisitions include a bank and other financial services assets that permit the company to be your one-stop-shop-consultancy-systems architect for all logistical and supply chain concerns and opportunities now and forever more. Omnicom is a professional services firm that makes ads. Well, sure, but ... But the ad bit is now the minority partner in the $8 billion firm. Omnicom would like, say, a Chevrolet or Frito-Lay to outsource all its marketing concernsmuch the same way that an EDS does 95 percent of the IS/IT work for its giant clients. That is, Omnicom is now in the integrated marketing services bizof which ads are an important but no longer dominant part. Club Med doesnt provide great rooms on a cool beach. Starbucks isnt about a cup of java ... and Harley-Davidson surely doesnt sell two-wheeled transportation machines. Try instead: Club Med is more than just a resort; its a means of rediscovering oneself, of inventing an entirely new me.Jean-Marie Dru, CEO TBWA/ChiatDay, Disruption We have identified a third place. And I really believe that sets us apart. The third place is that place thats not work or home. Its the place our customers come for refuge.Nancy Orsolini, Starbucks District Manager What we sell is the ability for a 43-year-old accountant to dress in black leather, ride through small towns and have people be afraid of him.Harley-Davidson exec on experiencing the rebel lifestyle At the heart of Re-imagine is my extensive tour of the economy, from consumer offerings (such as Club Med, Starbucks, Harley) to business-to-business services (such as IBM, UPS, Omnicom). The emergent story line is the same everywhere: As global competition heats up (and up and up), merely making a quality product or quality service is no longer enough, not nearly enough. We need to offer far more. One usefulcompelling, actuallyname for this new it that pre-occupies everyone from UPS to Starbucks is experiences. As in providing remarkable experiences instead of just products and services. The core logic is provided by Joe Pine and Jim Gilmore in their seminal The Experience Economy: Work Is Theatre & Every Business a Stage. Experiences, the authors write, are as distinct from services as services are from goods. Former Harley CEO Rich Teerlink translates this into CFO-speak. He told me it took him almost a decade of relentlessly pounding on Wall Street to convince analysts that We are a lifestyle company, not a machinery manufacturer. Teerlinks successful sale to the Street led to about a $10 billion leap in the former machinery manufacturers market cap! Its all easier said than done, of course. And as usual with true transformations, culture change (not concocting the right strategy) is the necessary aim and test. One premier strategy buff who took that lesson aboard, albeit reluctantly, was former IBM CEO Lou Gerstner. If I could have chosen not to tackle the IBM culture head-on, I probably wouldnt have, Gerstner wrote in Who Says Elephants Cant Dance. My bias coming in was toward strategy, analysis, and measurement. In comparison, changing the attitude and behavior of hundreds of thousands of people is very, very hard. Gerstners was a full-fledged conversion: I came to see, in my time at IBM, that culture isnt just one aspect of the gameit the game. In this case even culture change, daunting as it is, is not a fully adequate term. Requisite is a particular type of culture change that flies in the face of most traditional training and development practices of, say, the last hundred or more years. Most managers, says Danish marketing guru Jesper Kunde in Unique Now ... or Never, have no idea how to add value to a market in the metaphysical world. But that is what the market will cry out for in the future. There is no lack of physical products to choose between. What about a new degree, an MMM (Master of Metaphysical Management) to supplant the MBA? Another Dane, Rolf Jensen, head of the Copenhagen Institute for Future Studies, is poised to hop aboard this bandwagon. The sun is setting on the Information Society he writes in The Dream Society: How the Coming Shift from Information to Imagination Will Transform Your Business, even before we have fully adjusted to its demands as individuals and as companies. We have lived as hunters and as farmers, we have worked in factories, and now we live in an information-based society whose icon is the computer. We stand facing the fifth kind of society: the Dream Society. The Dream Society is emerging this very instantthe shape of the future is visible today. Right now is the time for decisionsbefore the major portion of consumer purchases are made for emotional, nonmaterialistic reasons. Future products will have to appeal to our hearts, not to our heads. Now is the time to add emotional value to products and services. Longtime premier brands executive Gian Luigi Longinotti-Buitoni takes this line of argument to the extreme, contending that winners will get into the dream marketing business. A dream, he says, is a complete moment in the life of a client. Important experiences that tempt the client to commit substantial resources. The essence of the desires of the consumer. The opportunity to help clients become what they want to be. Longinotti-Buitoni then shortens dream marketing to ... dreamketing: Dreamketing: Touching the clients dreams. Dreamketing: The art of telling stories and entertaining. Dreamketing: Promote the dream, not the product. Dreamketing: Build the brand around the main dream. Dreamketing: Build the buzz, the hype, the cult.
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We do not sell furniture at Domain. We sell dreams. This is accomplished by addressing the half-formed needs in our customers heads. By uncovering these needs, we, in essence, fill in the blanks. We convert needs into dreams. Sales are the inevitable result. Judy George, Domain Home Fashions No longer are we only an insurance provider. Today, we also offer our customers the products and services that help them achieve their dreams, whether its financial security, buying a car, paying for home repairs, or even taking a dream vacation.Martin Feinstein, CEO, Farmers Group
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You may or may not cotton to dreamketing per se. But I contend that the evidence Ive presented in this very truncated business tour dhorizon is compelling. And ubiquitous. Dreamketing at a home furnishings chain (Domain)? Sure. But isnt the Domain story at essence the same as What can Brown do for you? (UPS) story? I think the answer is clear as a bell, from financial services (Farmers Group) to logistics services (UPS) and enterprise re-imaginings (IBM) ... to vacations (Club Med) and a cuppa java (Starbucks). Feel free to choose your favorite term: experience economy, dream society, dreamketing, or some other. No matter what your choice is, the operative idea remains: NOT OPTIONAL.

About Dylan Schleicher


Dylan Schleicher has been a part of the 800-CEO-READ claque since 2003. Even though he's stayed on at the company, he has not stayed put. After beginning in shipping & receiving, he joined customer service and accounting before moving into his current, highly elliptical orbit of duties overseeing the ChangeThis and In the Books websites, the company's annual review of books and in-house design. He lives with his wife and two children in the Washington Heights neighborhood on Milwaukee's West Side.