I was digging through some boxes that were still closed up from when we moved to Florida almost 19 years ago. I was hoping to find some things to pass on to others, donate, or throw away. Instead, I ran across some old notes from a marketing class I took when I was going for my MBA.
This was back in the days before getting an MBA with your engineering degree was cool. I was one of only a handful of engineering graduates going for an MBA amongst a swarm of business majors. When we found out that the marketing class would involve a computer simulation of a competitive market, we quickly signed up for the class just to play with the computer simulation.
On the first day of class the instructor split the class into 6 groups of 4 people each. Each group would represent a company and each company would produce 4 products. Of course, each company produced the same 4 products. We would budget our money (play money) by quarter into major areas such as product research, manufacturing, cost of goods sold (reflecting the quality of the materials), salaries and benefits of workers and administration, marketing/advertising, and after sale customer support. We could budget the money by product as well. That means we could spend more on research for one product while spending less on another product. The details of the data we had to supply each week goes beyond the point of this blog. As a general example through, we could allocate different amounts of the marketing/advertising budget to different media types. We were also supplied with ‘historical’ statistics on how effective different marketing methods were for different demographic groups and which groups tended to buy which types of products.
Each week at the start of class we would submit our ‘budget plan’ for the next quarter on how we were going to spend our company’s money. During class (a 3 hour evening class) a student assistant for the professor would take the data from each group, go over to the data center, enter the data onto punch cards (yes, it was a long time ago) and run the program. After the program ran, he would bring back the printed reports to show how each company did. It would specify how much of each product each of the six companies sold, your company’s costs, and your company’s profit or loss.
Before I go on, I need to mention that each ‘company’ had to create 3 objectives or goals at the start of the semester for their company. A goal could be to become the top seller of Product A, or to become the seller with the best total profit returned on Product B, or perhaps even to be the company with the best overall profit margin or the greatest cash reserves. One group composed entirely of business majors had the goal to the top seller of each of the four products. An aggressive goal to be sure, but potentially possible.
As each week passed (representing another quarter year of the simulation), most groups made progress toward achieving at least one or two of their goals. The team that had the goal of being the top seller of all four products however was not doing well. In fact, they seemed to be consistently in the lower half of the results each period. We all assumed that with five other teams competing to be the best in only one or two products, that this team was just spreading their resources too thin to be successful with all four products.
Finally, the last day of the class simulation arrived. We all worked hard to try to meet at least two of our stated goals by coming up with the best allocation of our company resources. After all, how well we did in the simulation to reach our goals would determine a major portion of our grade.
All during class we hardly listened to the professor drone on about how he did this study or how he devised that successful marketing plan. So when the student assistant arrived back from the computer center with the final set of results, we could hardly wait to see how well we did. As we were looking over our results and wondering how we had lost market lead in Product A, we heard from across the room four shouts of joy coming from the business team with the improbable goal of being the market leader in all four products. Sure enough, looking at the total sales by company showed that they had succeeded in getting the highest market share in each of the product lines. But class was over for the night and we would have to wait until the next week to find out how they did it.
The following week we had to present a report to the entire class on how we did and what strategies we used. One by one, each of the other groups presented their results and tried to explain why no one achieved market leadership in any of the products even after showing so much promise earlier in the simulation quarters. When the last team got up to make their presentation, we soon learned how they had done achieved market leadership in each of the products. Did they win by science (skill) or art (luck)?
Unfortunately, after hearing what they did, we all felt cheated. They succeeded in pushing ahead of everyone one else by having a ‘fire’ sale or a ‘going-out-of-business’ sale. They cut quality, eliminated market research, slashed salaries, fired half their staff, lowered their prices to break even with costs and threw all of the company’s cash into marketing and advertising. As a result, the program simulated the typically consumer response when looking for a bargain and granted them a huge market share for each product.
Of course, they had no company left at the end. They had no inventory left, no cash to speak of, and product quality, never better than average, fell to dead last. So what did our professor of marketing do? Did he criticize them for bankrupting the company and putting hundreds of virtual employees out of virtual work? No. Rather he praised their brilliance in manipulating the simulation factors that allowed them to reach their goals and gave them A’s for the class. Even the other business majors in our class praised this team for their success even through it was at the expense of their own success (and grade). The rest of us engineers with B’s and C’s were immediately convinced that it was all voodoo.
In recent years, we have seen an increasing number of executives act the same way in the real world. Between the crisis in the savings and loan and investment industries, I sometimes wonder where ethics and morality have gone. Everyone seems to be thinking about the bottom line for the current quarter only so they can use their current success to get their next big job before their last company falls apart and takes them down with it. No one seems to care about the decimated companies and lives left behind.
I’m not saying that watching the bottom line for the current period is not important. It is, but not at the exclusion of the long term health of the company and its employees. Somewhere many business people have lost that perspective. Yet even today, there are companies that are succeeding while still acting responsibly and serving not just their companies with great products and services, but also providing a great environment for employees. They nurture a level of loyalty toward their employee’s long term well being and growth. At the same time, they receive without asking, their employee’s loyalty to do everything they can to make the company great.
Who are these companies? A few years ago, Jim Collins wrote a book called, ‘Good to Great’ which highlighted a few of them. In fact, Jim Collins has authored or co-authored several books that attempt to explore why some companies achieve success while others just manage to survive or perhaps don’t. Jim takes that high road.
If you work for one of the great companies and want to add a note here about your organization and perhaps what makes it great, please do. On the other hand, if you just want to rant about your company, don’t bother. I won’t publish your comment.