آشفتگی‌ها: کسب‌وکار مدیریت و بازاریابی در عصر تلاطم

We have entered into an entirely new era, an age of increasingly frequent and intense periods of turbulence in the global economy. Unlike past recessions, today's crises have precipitated a need for businesses to develop a new mindset, one that takes into account intermittent periods of disturbance, allowing them to thrive while under the constant threat of chaos. Chaotics presents a revolutionary set of guidelines designed to help businesses: • detect sources of turbulence • prepare scenarios • predict resulting vulnerabilities and opportunities • develop responses to ensure long-term resilience and success • avoid risk while advancing the interests of the company • build flexibility into the balance sheet • price strategically • adjust products to meet new customer values • and more. Complete with metrics and measurements, Chaotics outlines a powerful new system for managing waves of uncertainty affecting customers, employees, and other stakeholders. In this climate of increased turbulence, no organization can survive with less.

Chapter One

The World Has Entered a New Economic Stage

From Normality to Turbulence

Prosperity is a great teacher; adversity a greater.

—William Hazlitt (1778–1830)

THE WORLD HAS entered a new economic stage. National economies are intimately linked and interdependent. Commerce is conducted with information flows moving at the speed of light over the Internet and mobile phones. This new stage confers wonderful benefits in bringing down costs and speeding up the production and delivery of goods and services. But it also comes with a dark side, one that substantially raises the level of risk and uncertainty facing producers and consumers. An event or change in the circumstances of one country—whether a bank failure, a stock market or real estate crash, a political assassination, or a currency default—can spread to many other countries and create massive turbulence, spinning the whole system toward completely unforeseen outcomes.

Deliveries don't arrive in time, banks stop making loans and start demanding repayment, employers lay off workers, and economies begin a downward spiral. Companies make more cautious decisions. They put new product development on hold; they reduce their marketing and advertising budgets. Prudence dictates slimming down, surviving in the short run and disinvesting as far as the long run is concerned. The great economist John Maynard Keynes remarked that in the long run, we are all dead.

Conditions eventually hit rock bottom, after a multitude of bankruptcies, foreclosures, lost jobs, and lost income. Somehow basic needs and government action may put a floor on the losses and things start looking a little better. Turbulence and pessimism are replaced by a measure of stability and renewed confidence. Betting on a recovery, some companies seek increased opportunities and investments. It all sounds like the classic business cycle with its ups and downs, where overexpansion is followed by subsequent underinvestment before returning to normal.

But even when normalcy returns to the economy, it doesn't return to every industry or market or individual company. Hypercompetition operates continuously and relentlessly in normal times. The U.S. auto industry today is experiencing a perfect storm of high health care costs and enormous pension obligations converging with falling demand for its products, which for decades have been seen as less attractive than foreign competitors' products. The airline industry is marked by too much capacity and further consolidation is likely. Even without a global financial meltdown, times can be turbulent for specific industries and organizations.

Turbulence always means an increase in risk and uncertainty. Risk is used to describe uncertainty that can be estimated and for which insurance can be purchased. But there is always uninsurable risk, real uncertainty that company decision makers face. Instead of companies seeking to maximize their returns in the face of high uncertainty, they might instead make decisions that minimize risk so that if the worst happens, the companies will still survive.

The National Intelligence Council released a 2008 report entitled Global Trends 2025: A Transformed World. Its purpose was to stimulate strategic thinking about the future by identifying key trends, the factors that drive them, where they seem to be headed, and how they may interact. It used a number of scenarios to illustrate some of the many ways in which the drivers examined in the report (e.g., globalization, demography, the rise of new powers, the decay of international institutions, climate change, and the geopolitics of energy) may interact to generate challenges and opportunities for future decision makers and business leaders. Global Trends 2025 isn't a prediction of what is to come in the next decade and beyond, but a description of the drivers and developments likely to shape world events.

Reading the report further reinforces the point that for the foreseeable future, the world will be facing ongoing disruptions, turbulence, chaos, and violence. These factors will impact business around the globe directly and indirectly, creating an environment that business leaders will have to deal with if their companies are to remain viable over the long term.

Such was the case in India over three terrifying days in late November 2008, when armed Islamist militants mounted a multi-pronged overnight attack in Mumbai, India's sprawling business capital of more than 18 million people. The sheer scale and audacity of the assault were staggering. Gangs of well-armed youths attacked two luxury hotels, a restaurant, a railway station, a Jewish center, and at least one hospital. Gunfire and explosions rang through Mumbai with 179 people killed and more than 300 wounded, including several foreigners from America, Japan, and Britain, as well as Mumbai's chief counterterrorism officer. Up to 100 hostages, including selected American and British guests, were held hostage inside a hotel.

The attacks appeared to ratchet up tensions in an already volatile region. As one of the BRIC countries (Brazil, Russia, India, and China, a term coined in 2001 by Goldman Sachs head of global research, Jim O'Neill), India was on the fast track to pull itself out of decades of economic stagnation before the terrorists hit. India, no stranger to terrorist attacks in recent years, had recovered from most of them to stay on its economic fast track. But regrettably, as the globalized world is now characterized by an interlocking fragility that spreads the news of chaos virally and instantaneously throughout a global news network, India, and possibly that entire region of Asia, may backslide. After all, foreign businesses are reluctant to put their people and their investments in harm's way.

As summarized in Figure 1–1 and Figure 1–2, there are a multitude of reasons for the rising uncertainty that will bring new and increasing challenges to business leaders in the next two decades.

In the next decade and beyond, according to Global Trends 2025, we can anticipate increasing turbulence around the world: rapid political leadership change in emerging markets; major policy shifts; increasing armed conflicts; local and national government budget cuts and the spillover effect on business. We are living in uncertain times. That means there is greater risk for businesses of all sizes everywhere in the world. They need new strategies to protect themselves and to capitalize on the opportunities that will undoubtedly arise.

While companies are gearing up for the greater turbulence and chaos that lie ahead, they will not soon forget the pain and the lessons of the 2008 financial meltdown. Companies will proceed more cautiously and adopt a risk-oriented mindset. Governments will try to pass regulations that will prevent a repeat of this kind of housing and mortgage bubble. Banks and companies will be less prone to sell their goods and services "with no money down." Credit practices will be monitored more carefully to avoid another "house of cards" economy.

Intel's former chairman, Andy Grove, wrote in his best-selling book, Only the Paranoid Survive, that "strategic inflection points" occur in all businesses as a direct result of specific forces affecting particular businesses. A business has arrived at a strategic inflection point when its old strategy no longer works and must be replaced by a new one if the business is to ascend to new heights. If a company's leaders fail to successfully navigate their way through the inflection point, the business declines.

Your instincts—or maybe your paranoia—will tell you to remain ever vigilant because you don't know when a strong and sudden wind will hurl your company or your whole industry into unwanted chaos. Sometimes the turbulence is minor. Other times it is more dramatic, such as when the great global financial meltdown of 2008 had nearly everyone gasping for breath as the markets experienced unpredictable and uncontrollable free fall from one day to the next.

Even more unsettling is the harsh recognition that whenever chaos arrives, you'll have little more than a fig leaf to hide behind—unless you can anticipate it and react fast enough to lead your company, your business unit, your region, or your department through it safely.

There's one more matter that makes leaders squirm: the increasing level of transparency that's now going to be demanded of you and your management team. Even if you and your company were merely victims of the global financial meltdown in 2008 that cost world shareholders in the real economy trillions of dollars of lost market value, your world and your company's world has now changed forever. The many institutional and private investor portfolios that lost up to half of their value in a matter of weeks—some of which include employees' pensions and savings plans—will now begin to demand a higher level of transparency from the companies in which they are invested. Scrutiny from all company stakeholders is already becoming increasingly intense. Going forward, more of your company's customers, employees, board directors, banks, suppliers, distributors, and the business and financial media overall will be watching your and other companies' actions a lot more closely to see how management runs their businesses at many levels.

What Is Market Turbulence?

To understand market turbulence and its effect on business, it may be helpful to review concepts of turbulence in nature as well as in science and physics. Turbulence in the natural world is characterized by violent or agitated behavior. Think of hurricanes, windstorms, tornados, cyclones, and tsunamis. Their defining characteristics are violence, randomness, and unpredictability.

Turbulence has always worried physicists because it is so difficult to model and predict, despite the sophistication and power of supercomputing today. Scientists have developed Chaos Theory to study how events may unfold given an initial condition and deterministic assumptions. They can show that a small initial effect can lead to an exponential growth of perturbations. The behavior of dynamic systems—systems whose state evolves with time—appears random even though no randomness was built into the systems.

On December 26, 2004, the great tsunami in the Indian Ocean that violently swirled in the air and the waters created tremendous turbulence and destruction in Asia. Although it wasn't physically felt by persons in San Francisco or in an airplane flying over Stuttgart, scientists have long postulated that, in fact, there is an effect in the atmosphere tens of thousands of miles away from the originating source. In 1972, Edward Lorenz, father of Chaos Theory, gave speeches in which he posed the question, "Does the flap of a butterfly's wings in Brazil set off a tornado in Texas?"

The phrase butterfly effect refers to the idea that a butterfly's wings create tiny changes in the atmosphere that may ultimately alter the path of a storm system like a tornado or delay, accelerate, or even prevent the occurrence of a tornado in a certain location. According to the theory, had the butterfly not flapped its wings, the trajectory of the tornado might have been vastly different. Scientists agree that the butterfly can influence certain details of weather events, including large-scale events like tornados.

Now, you may ask, what does all of this have to do with turbulence in business?

To begin, business turbulence is defined as the unpredictable and swift changes in an organization's external or internal environments that affect its performance. The "butterfly effect" occurs because ours is an increasingly interconnected, interdependent globalizing world that is accelerating in its "globalness." All people, all governments, all businesses—everyone and every entity in the world—are now connected and interconnected at some level, and the impact of the turbulence of each will be felt in some way by others in our globally connected environment.

To fully grasp the magnitude of the impact of turbulence—severe turbulence—and the resultant devastating chaos and wreckage that was left in its wake, we need look no further than the final four months of 2008, when several trillion dollars of market value in the real economy simply evaporated, leaving behind economic carnage for a newly elected U.S. president and the rest of the world to clean up and rebuild, globally.

In fact, the very public demise of investment bank Bear Stearns, dating back to March 2008, set the roller coaster in motion. After that, from September through October 2008, the world's stock exchanges were battered and torn. In early October, the S & P 500, the broad U.S. stock index, lost 22 percent of its value in just six trading sessions!

On September 24, 2008, U.S. Federal Reserve chief, Ben Bernanke, and then-Treasury Secretary Henry Paulson petitioned the U.S. Congress to support a $700 billion bailout plan (officially known as H.R. 1424: the Emergency Economic Stabilization Act of 2008). "Despite the efforts of the Federal Reserve, the Treasury, and other agencies," Bernanke told the lawmakers, "global financial markets remain under extraordinary stress."

Ten days later, in an emergency meeting called by the heads of the four largest European economies to deal with the looming crisis, Jean-Claude Trichet, head of the European Central Bank, stated, "Nothing in the past resembles what we are currently seeing. We are in the presence of events that we have not seen since World War II. This is a period of absolutely exceptional uncertainty [that] calls for responses that match the events from both the public and private sector."

The historic $700 billion bailout of the banking industry in the United States was matched by the European Central Bank's collective $1.3 trillion bailout of its banking industry, and followed by similar actions by central banks in Australia, Canada, Japan, Singapore, and many more countries. Hungary and Iceland lined up seeking rescue from the IMF, and others even sought direct help from cash-rich nations such as China and Russia.

But September 29, 2008, is the day that will live in financial infamy. That was when Wall Street ended a stunning session with a huge loss, with the Dow Jones industrials plunging more than 776 points in a matter of minutes—their largest point drop ever—after the U.S. House of Representatives failed to pass the bailout.

The credit markets remained close to frozen, as banks were afraid to lend, even to other banks. Eight consecutive days of losses erased an estimated $2.4 trillion in shareholder wealth. Conditions went from bad to worse. Borrowing costs for banks and companies jumped once again as investors sought safety in Treasury bills, despite earlier signs that the government might take equity stakes in troubled companies to try to halt the credit crisis. The cost of borrowing shot up for even blue-chip companies: IBM agreed to pay 8 percent interest on $4 billion of thirty-year bonds, twice the rate that the federal government borrows money. Then, on October 10, the roller-coaster ride abruptly ended when "the market made a U-turn, surging higher with the Dow climbing nearly 900 points in less than forty minutes."

While the rebound momentarily allayed fears in the U.S., it set off a selling frenzy for the global financial community. Suddenly, previous boastful talk of nations decoupling from the U.S. economy seemed rather sardonic. Reports worldwide were grim. Global stocks had fallen sharply in one of the worst days of trading in thirty years, despite ongoing government efforts to stem the crisis.

On October 24, 2008, when the world's stock exchanges dropped around 10 percent in most indices, Bank of England deputy governor Charles Bean warned, "This is a once-in-a-lifetime crisis, and possibly the largest financial crisis of its kind in human history."

Between November 3 and 6, 2008, the U.S. Federal Reserve lowered interest rates to one percent; the Bank of England slashed its rate by 1.5 percent to 3 percent; and the European Central Bank cut rates to 3.25 percent, the lowest level since October 2006, and an aggressive response to the region's rapid plunge into recession.

Then, on November 24, 2008, the U.S. government bailed out Citigroup Inc., agreeing to shoulder most of the potential losses on $306 billion of high-risk assets and inject $20 billion of new capital, in its biggest rescue of a bank yet. And during the week of February 16th, 2009, U.S. President Obama signed his landmark $787 billion economic stimulus plan, in addition to his $75 billion housing stimulus package, in a bold effort to kickstart the U.S. economy and a key sector underpinning the stalled U.S. economy.

Since then, we continue to experience unpredictable, and also heightened turbulence in an increasingly globalizing world. Strategic inflection points will occur with increasing frequency, raising the stakes for all businesses to identify them more quickly and respond to the changed environment faster. The contrasts between normal business cycle times and turbulent economies are summarized in

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Excerpted from Chaotics by PHILIP KOTLER JOHN A. CASLIONE Copyright © 2009 by Philip Kotler and John A. Caslione. Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site. Contents......Page 8 Preface......Page 10 Introduction......Page 18 1 THE WORLD HAS ENTERED A NEW ECONOMIC STAGE: FROM NORMALITY TO TURBULENCE......Page 22 What Is Market Turbulence?......Page 29 Factors That Can Cause Chaos......Page 35 Conclusion......Page 58 2 MANAGEMENT’S WRONG RESPONSES TO TURBULENCE NOW BECOME DANGEROUS......Page 60 Resource Allocation Decisions That Undermine Core Strategy and Culture......Page 66 Across-the-Board Spending Cuts versus Focused and Measured Actions......Page 68 Quick Fixes to Preserve Cash Flow, Putting Key Stakeholders at Risk......Page 71 Reducing Marketing, Brand, and New Product Development Expenses......Page 72 Declining Sales and Price Discounting......Page 75 Decoupling from Customers by Reducing Sales-Related Expenses......Page 77 Cutting Back on Training and Development Expenses in Economic Crises......Page 78 Undervaluing Suppliers and Distributors......Page 79 Conclusion......Page 84 3 THE CHAOTICS MODEL: MANAGING VULNERABILITY AND OPPORTUNITY......Page 86 Constructing an Early-Warning System(EWS)......Page 96 Construction of Key Scenarios......Page 104 Scenario and Strategy Selection......Page 113 Conclusion......Page 117 4 DESIGNING MANAGEMENT SYSTEMS FOR RESILIENCE......Page 118 The Chaotics Management System......Page 123 Finance and Information Technology......Page 127 Manufacturing/Operations......Page 137 Purchasing/Procurement......Page 144 Human Resources......Page 149 Conclusion......Page 153 5 DESIGNING MARKETING SYSTEMS FOR RESILIENCE......Page 156 Common Marketing Reactions to Crises......Page 160 Strategic Marketing Responses to Crises......Page 165 Operational Issues Facing the Marketing Department......Page 172 Operational Issues Facing the Sales Department......Page 177 Conclusion......Page 182 6 THRIVING IN THE AGE OF TURBULENCE: ACHIEVING BUSINESS ENTERPRISE SUSTAINABILITY......Page 184 Business Enterprise Sustainability (BES)......Page 187 Conclusion......Page 205 Notes......Page 208 C......Page 218 E......Page 219 I......Page 220 M......Page 221 R......Page 222 Z......Page 223 About the Authors......Page 224