Market, value, boundary spanners and power shift

Marketing is described in many ways including as a boundary spanning function. Marketing operates at a point where the boundary of a firm ends and market boundary begins. There is not guarantee that these two boundaries would automatically intersect with each other. It is the supreme job of marketing to make business and market meet and intersect.  Without an intersection there is unlikely to be any exchange and hence value creation.

In the old times of regulated economies and restricted supply the marketing equation was tilted in favor of suppliers. Back then consumers chased goods. Consider when brands like Bajaj, Hindustan Motors, DCM and Lifebuoy enjoyed unbridled power over their consumers. The markets/ consumer pushed themselves towards marketers. Marketing was an effortless game. Later with the adoption of pro-competition ideology industries were liberalized. This began to spoil the game for incumbent players. In competitive regime consumers don’t seek goods, rather marketers seek them. Consumers need to be pulled and attracted. Too much supply chases too few consumers. Competition strips marketers of their power. Market players win by reducing consumer’s choice set. But competition does the opposite, it expands it. The perceived similarity between Samsung, LF, Toshiba and Sony renders these companies powerless. Now the power to give sustenance stands shifted to consumers. The challenge is how to recapture it and achieve dominance of consumer.

The question arises, what are the sources of power? Power literally means ability to influence or direct behavior of others. In a marketing situation, every firm dreams of wielding power over its consumers so that they buy, buy more, buy regularly, and pay premium for its products. Alvin Toffler in his book Power Shift discusses three sources of power: violence (physical muscle based power), wealth (money-stored time and action) and knowledge (with this both other types of powers can be obtained). What source of power should a firm plug into to gain market power?

All the three sources of powers exist in a business system but it all depends upon the top management which source of power a firm plugs into. The source of muscle or violence power is likely to be production because it controls maximum number of people and physical resources. The wealth power rests with finance (money is power culture or money is most important resource and goal). It is because of their power these two departments often enjoy major sway in decision process. Firms differ in their orientations depending upon which department dominates or drives decision dynamics. Finance and production heads were once considered to be the most influential positions for their assumed significance. They derived their strength from their control over traditional sources of power that stemmed from muscle/violence/ wealth. This was in sync with the realities of agrarian and industrial economy. However environment over time has undergone subtle but profound change. The issue is can business survive by remaining plugged into same source of power in future?   

The businesses and products/ value prima facie appear same as before. But observe minutely, they are in reality not. Both supply and demand side of marketing equation have changed. The mass markets have transformed into smaller segments, niches and micro segments. Mass production with big factories, assembly lines and larger production runs are replaced by flexible and customized production. The concept of big large corporation with one production location have taken shape of hollow organization or networked systems. Unlike the past, the value is now co-created with consumer’s active involvement in product design and production processes. Have these developments altered the hierarchy of power sources in business or their effectiveness stands changed?

These changes on the demand and supply side have made the boundary spanning (information gathering and dissemination) the most important function. The stability of the environment has vanished. Present is usually not a linear extension of past. Things happen sudden and fast. Accordingly, businesses need to be as flexible and fast. This demands discovering and developing the core and shedding the non-core. Organizations therefore are now becoming ‘plug in-plug out systems’. They are coalitions of creators with one in lead role. Information is core to such system. Consider sports shoe companies like Nike and Reebok. Both of these names lead networks. They focus on the most critical value adding activity- design- and the rest is outsourced. Explore how much of a car is actually produced by the company whose badge it displays. A computer on your desktop is a fruit of collaboration.  

What value to create depends entirely upon knowledge & insights of consumer trends and micro movements in tastes and preferences? It is here the role of boundary spanners-marketing department- becomes critical. Marketing is the source of knowledge and if knowledge is the ultimate form of power then it must be brought to the centre of value creation edifice. Marketing (voice of consumer) in other words should dictate what business a business enterprise should be in. But this is not easy to achieve. It is not easy for a department which neither controls material/men nor wealth (traditional source of powers) to assume organization driving role.

Production and wealth is free floating resources. China has become the factory of the world and investment bankers chase good idea. Knowledge is the ultimate source of power-business power. So if a business is not performing well find out whether you are still plugged into old source of power. Instead of drawing more power from the old ineffective source, get plugged into new effective source of power. ‘Right’ is better than ‘more’.

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2 thoughts on “Market, value, boundary spanners and power shift

  1. True. In ever evolving world, businesses need to continuously redefine their strategies in order to be competitive.

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