Momentum: How Companies Become Unstoppable Market Forcesby Ron Ricci, John Volkmann
"In this book, marketing and communications experts Ron Ricci and John Volkmann argue that the unique features of digital products - and of consumer goods that contain digital components - force customers to consider the viability of the company behind the solution to their problems. Picking a losing company could mean getting stuck with products that can't be… See more details below
"In this book, marketing and communications experts Ron Ricci and John Volkmann argue that the unique features of digital products - and of consumer goods that contain digital components - force customers to consider the viability of the company behind the solution to their problems. Picking a losing company could mean getting stuck with products that can't be upgraded or services that can't be extended. So customers buy from the company that they believe will be the long-term - indeed, the inevitable - winner. They buy from the company that has what the authors call momentum." More than sheer motion, momentum is mass, speed, and direction, combined in a value proposition so compelling that all constituents in a given marketplace believe it - and want to go with it. Ricci and Volkmann provide a practical formula - borrowed from the world of physics and proven in the marketplace - for how companies build and sustain momentum. Drawing upon their intensive study of 20,000 consumer and corporate buyers, the authors also reveal the "six forces of digital differentiation" that characterize "inevitable" market winners in the customer's mind.
Digital products and services lose value if the company that provides them is no longer viable. Products cannot be upgraded and services cannot be extended if the company goes under. This is the nature of digital products and services, and because they are so important to customers, those who buy them want to make their purchases with companies that are on for the long haul. According to marketing and communications experts Ron Ricci and John Volkmann, these market winners have momentum.
The momentum the authors discuss is made up of mass, speed and direction. "Mass" is a product's value proposition and its role in the industry value chain. "Speed" is a company's ability to keep up with the pace of technology change. "Direction" is a customer's process of coming to trust a brand's ability to know and articulate where it and the market are headed in the future. The authors write that these elements must combine in a value proposition in which customers believe. To describe the market force of momentum and provide the keys that will help companies put it to use, the authors provide a practical formula that shows companies how they can build and sustain it.
Six Forces of Digital Differentiation
The authors' formula is rooted in the terminology of physics and draws on their study of 20,000 consumers and corporate buyers. After analyzing the numbers and trends, they reveal "the six forces of digital differentiation" that show customers who the market winners are in the digital domain. These six forces are:
- Relevance of Value Proposition. As part of the "mass" of a brand, this force can be found by asking the question, "How important is the brand's promise to the personal and professional success of its targets?"
- Ecosystem Potential. Also an element of a brand's mass, this force can be found by asking, "How do the product and its category help other companies make money in a customer solution?"
- Category Leadership. This element of a brand's mass is found by asking, "How dominant is the product's position in its given category?" and "How important is the category to solving important customer problems?"
- Market Agility. This component of a brand's speed can be found by asking, "Does the company successfully create or manage market transition to its advantage?"
- Brand Integrity. The direction of a brand can be found by asking, "Does the company practice what it promises to customers?" which leads to the question, "Can the company be trusted?"
- Management Vision. Also part of a brand's direction, management vision is found by asking, "In what way will markets be different because of the company and its products?" and "Are the company's leaders credible evangelists for the vision of the market?" Momentum offers Oracle's founder and CEO Larry Ellison as an example of a corporate leader who embodies this force.
Build a Competitive Position
The authors provide many ideas to help managers and marketers measure a brand's momentum against that of its competitors, diagnose a company's strength and weaknesses, and develop an action plan for building a competitive position. Their strategies encourage companies to add digital features to traditional products and services by showing how others have done so and profited from their work. By applying these tactics, the authors explain, companies can rise to industry dominance.
To round out their book with a closer look at the timely issues driving digital business, the authors take a stab at describing what went wrong with Enron and the dot-com bust. They offer this immutable wisdom: Trust is earned, and it is also demonstrated. They write that the importance of trust is even more apparent in the digital product model because customers who upgrade over and over will remain loyal to the same brand if the company is trusted by others, is moving quickly enough to keep up, and can be trusted to solve customers' problems in the future.
Why Soundview Likes This Book
By taking a close look at the interrelationships among product strategy, brand and a market's value chain structure, as well as the importance of digital technologies in these relationships, the authors are able to combine many disparate concepts that are crucial to survival and weave them into a coherent plan. Along with providing numerous examples of companies that were able to capitalize on creating and sustaining momentum, the authors also offer a clear vision of what a company must do to become an industry leader, and what others have done to lose that spot. Copyright (c) 2003 Soundview Executive Book Summaries
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Read an Excerpt
DifferentiationFrom the Digital Perspective
We began by auditing consulting assignments we had done with Fortune 500 companies, hot start-ups, and typical SiliconValley market challengers. One of these assignments involved pages and pages of transcribed qualitative interviews with CIOs and other top technology decision makers from businesses in the process of making large, million-dollar database purchases. The interviews had been conducted by an advertising agency on behalf of a high-flying database company that we'd been hired to position in its ongoing market struggle with Oracle. As we pored over these transcripts at the ad agency's Palo Alto offices, we came across a line that would resonate for us throughout the transcript review. "Well," one customer said, "Oracle just seems . . . inevitable."
It turned out that in many of the interviews, respondents referred, either directly or indirectly, to their belief in the inevitability of Oracle's success in the database market as a key factor in their decision making. Incredibly, this belief existed despite customers' own acknowledged views of Oracle as having a poor customer-satisfaction track record and a generally acknowledged follower position in technology. Yet Oracle seemed unstoppable in customers' minds. As evidence of Oracle's "inevitability," customers noted Ellison's appearances in the media, with partners, at industry conferences, and on Wall Street, in which he talked about his vision for the media server and the NC. Larry Ellison, the person, was clearly embedded in the Oracle brand as a core element of the company's differentiation.
From our point of view, we were observingwhat brand gurus such as David Aaker, David Ogilvy, and Trout and Pies predicted for decades: Purchase and loyalty are empirically linked to how people perceive differentiation. But differentiation, whether real or fabricated, exists only in the context of a person's expectations for a product or service. We were certain that two decades of using PCs, software, servers, cell phones, pagers, video games, personal digital assistants (PDAs), and, of course, the Internetamong the panoply of digital products and services pervading our lives todayhad influenced people's expectations for products. The sense of inevitability described by Oracle's customers appealed to us because it suggested a state of mind for the digital customer, rather than an attribute such as customer service. We decided at this point to attempt to model the purchase considerations that created this state of mind, as well as how those considerations influenced the sources of differentiation valued most by people when purchasing a digital product or service.
What's on People's Minds?
As the process for understanding these purchase considerations, we examined the general market experiences of leaders inside and outside technology markets, including companies such as GE, Cisco, Gillette, Merck, Charles Schwab, and Lexus. We also tried to understand the failure to hold market share leadership by looking at Apple (circa 1996), Cadillac, Memorex, Atari, and other companies that had fallen from grace or hadn't achieved much to begin with. Often we compared companies from completely different industries to see if the comparisons provided insights into the mind-set of the digital customer. In this process, two contrasting case studies stood out from the others in helping us to understand the purchase decision-making process every digital customer goes through, and the reason people's expectations for differentiation had fundamentally evolved, or were in the process of doing so.
1. Digital products are never finished. Consider the difference between buying a car, say, an Acura, and a PDA like the PalmPilot. The Acura follows a traditional consumption pattern. It is purchased or leased, driven for a number of years, serviced or repaired as necessary, and then replaced. The essential elements of the carthe engine and the chassisremain with the vehicle after the owner sells it. Memories, as well as nonessential items like add-on cup holders or music CDs, are the only aspects of the car that a person carries forward from one vehicle to another. In contrast, anyone buying a Palm sees today's unit as merely a temporary home for its most essential applicationthe ability to manage dates and addresses. The buyer knows the basic functionality of the product category is changing quickly; tomorrow's products will be better in some way than today's. The consumption pattern is the exact opposite of the Acura. Rather than memories or impressions, people carry forward the most important aspect of what they are actually doing from one product to anotherin the case of the Palm, the address and calendar information. Memories of using the old device matter only if the experience of using the latest device fails to live up to the previous Palm. The fundamental difference can best be described as the distinction between marketing the past and marketing the future. (However, more than a dozen major car brands now offer General Motors's OnStar services for select cars, potentially elevating the role of digital technologies in the purchase consideration of an automobile. With two million subscribers and a history of ten million individual customer experiences with its services, OnStar is introducing Palm-like considerations into the car buying experience. The plethora of OnStar's value-add driving services, from safety and security information to online diagnostics, is introducing personalized information that people may expect to carry forward with them when they upgrade their car, just like they do with a Palm. While OnStar is not the primary purchase consideration for a caryetits subscriber base increased by 250 percent in 2001, and it will be interesting to see how subscribers react the next time they purchase a car if the service isn't available. In other mass markets, companies like Sears, Panasonic, General Electric, and Sony are exploring digital services comparable to OnStar for entertainment products and household goods such as refrigerators and microwave ovens. As these services mature, we expect that the momentum strategies we discuss in the following chapters will apply to these markets even when the product's primary function is analog-powered, but the customer relationship is digital-centric. Over the horizon, GM is experimenting with a concept car called AUTOnomy, which envisions a Dell-like approach to building cars based on a common, scalable technology platform. It is not quite a Windows-based PC, but AUTOnomy and the many other "white-board" concepts in corporate research labs around the world are fundamentally enabled by digital technologies and will certainly introduce considerations particular to those technologies at some point in the future.)
2. Digital products never stand alone. When we compared Sun's Java software technology to Gillette's Mach3 razor, it became clear that our model also had to accommodate a second peculiarity specific to the digital product model. Consider the difference between these two technology and market share leaders. Gillette has maintained a 60 percent to 70 percent share of the razor market since the 1960s by introducing a new blade design every decade or so. The Mach3 razor continued this tradition with a new and innovative blade configuration. A conventional, stand-alone product, the Mach3 works on virtually any beard and with every kind of shaving cream. It is in Gillette's best interest, then, to keep the Mach3 technology proprietary and to build a distinct brand position for this razor that retains as much of its value proposition for Gillette, and Gillette alone, as possible. In contrast, java technology established Sun as a software leader on a scale that for several years threatened Microsoft. But before the company could leverage Java as a differentiator, Sun had to give Java away for virtually nothing to its fiercest competitors, some of whom were many times Sun's size with far greater customer clout. In Sun's marketand in virtually every digital product categoryproducts never stand alone. Every customer application of the digital technology is actually a collection of interdependent products working together to function and add value in some particular way. Java only had value as a differentiator for Sun if it became a marketplace opportunity for hundreds, if not thousands, of other companies selling something based on Java, not just an opportunity exclusive to Sun. Thus, it was in Sun's best interest to diffuse the promise of Java to as many companies as possible.
Reprinted by permission of Harvard Business School Press. Excerpted from Momentum: How Companies Become Unstoppable Market Forces by Ron Ricci and John Volkmann. Copyright (c) 2003 by Ron Ricci and John Volkmann.
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