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Chaotics: The Business of Managing and Marketing in the Age of Turbulence

Chaotics: The Business of Managing and Marketing in the Age of Turbulence

by Philip Kotler, John A. Caslione


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Chaotics: The Business of Managing and Marketing in the Age of Turbulence

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.

Product Details

ISBN-13: 9780814415214
Publisher: AMACOM
Publication date: 05/15/2009
Edition description: New Edition
Pages: 224
Product dimensions: 5.90(w) x 9.10(h) x 1.00(d)
Age Range: 18 Years

About the Author

Philip Kotler (Evanston, IL) is one of the world’s foremost experts on the strategic practice of marketing, voted the first Leader in Marketing Thought by the American Marketing Association. He is the S. C. Johnson Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University, and the author of many influential books, including Marketing Management.

John A. Caslione (Lake Forest, IL) is a highly sought after expert who has executed global business development strategies in 87 countries on six continents. He is the founder, President, and CEO of the global mergers and acquisitions advisor GCS Business Capital LLC.

Read an Excerpt


Meeting the New Challenges

WHAT IS THIS book about? Those who manage businesses have a certain view of the world and a certain set of practices for dealing with expected changes in the marketplace. Their view, in the simplest terms, is that times are either normal as a precursor to runaway growth and sustained prosperity, or weak as a precursor to dwindling demand and possibly recession. Businesses use a different playbook for dealing with each of these market conditions.

In normal times, they compete with a mixture of offensive and defensive plays, but are not likely to win big. In runaway growth periods, they see new opportunities everywhere. They invest and spend freely to capture what they can. In recession times, businesses cut their costs and investment to ensure their survival.

This view of two underlying market conditions, and two playbooks to guide the firm, is, however, outmoded. There are market conditions beyond these two basic ones. And conditions can suddenly shift from one to another and yet another. One day there is a

9/11 terrorist attack; another day, a Katrina flood. One day there is a panic aboutmortgages and defections that lead to a collapse of the world’s financial system. Big shocks happen more frequently today as a result of an increasingly interconnected global economy supporting giant flows of trade and information.

The shocks come in all shapes and sizes. Inmany parts of theworld a acrossmany industries, important things are happening that are only dimly perceived if at all, and certainly their implications are notmeasured.

It could be two people in a garage building a new gadget called a personal computer. It could be a guy named Jeff Bezos starting an

Internet business called “Amazon.”Or another guy named Steve Jobs building an iPhone. It could be a guy who envisions high yield bonds or another who develops the idea of securitizing mortgages. Had the computer industry, the book industry, the music industry, or the financial industry noticed these visionaries, they would have acted earlier to protect their turf or grab new opportunities.

Business leaders need a new view of the world and a new framework for dealing with it. According to this new view, change is occurring all the time. It can come quickly from any corner of the world and affect any company with a major impact. This is the view to which Peter Drucker first called our attention in his book The Age of Discontinuity.1 This is the view that Andy Grove articulated in

Only the Paranoid Survive.2 This is the view that former U.S. Treasury head Alan Greenspan articulated in The Age of Turbulence.3 This is the view that Clayton Christensen wrote in his Business Innovation and Disruptive Technology.4

It is our view as well that there ismuchmore risk and uncertainty in business affairs today than ever before coming from disruptive innovations and big unexpected shocks. Business leaders have always lived with some risk and uncertainty, taking out insurance wherever possible to blunt the damage. But today, the speed of change and the magnitude of shocks are greater than ever. This is not what was normal in the past. This is the new normality. It goes beyond disruptive innovation to include major shocks.

And how are business leaders to deal with it? Because they must manage during times of greater turbulence, they need a system to make better decisions. They need amanagement framework and system to deal with chaos. They need a Chaotics Management System.

It seems everywhere in the world where we encounter business and government leaders, virtually everyone senses that this time is different, even if they cannot articulate precisely what makes it different.

But as you’ll see in Chapter 1, we often find an immediate acknowledgment and agreement when we explain to these leaders that they’ve entered into a new normality, one in which the days of the two cycles—one up and one down—are over for the foreseeable future. These leaders sense that we’ve entered an era of ongoing a continuous turbulence and heightened chaos. This realization is often accompanied by a sense of relief that they can now articulate what they’ve been sensing, coupled with dread that the traditional up cycle may not kick in to let the good times roll again—at least not like it did in the past.

It is for this reason that we wrote Chaotics.

In Chapter 1 we will identify themany factors creating this heightened turbulence demanding that business leaders need to reinvent their thinking to adopt new strategic behaviors tominimize their vulnerabilities and exploit their opportunities in the new normality.

In Chapter 2 we will explain why mistakes made by business leaders in past down cycles that, while they were not necessarily helpful to their businesses, in this new era they will be not only harmful but fatal to a business if it fails to adjust.

In Chapter 3,we will introduce the ChaoticsManagement System a which provides a roadmap for business leaders to transition their organizations, including adding new critical internal processes, to function successfully and better understand and deal with the events unfolding around them. By providing guidance in the development of early warning systems to detect turbulence in the environment a and constructing yet-foreseen scenarios and strategies, Chaotics will offer new and robust organizational muscle to handle the heightened levels of turbulence and chaos with decisiveness and speed.

In Chapter 4, we will describe new strategic behaviors necessary for each key management function in the organization to improve its short-term performance without jeopardizing its medium- and long-term performance.

In Chapter 5 we will provide a comprehensive roadmap to show how companies can sharpen and strengthen their marketing and sales strategies in turbulent times even when there’s pressure to cut budgets in these areas, and to lay the groundwork for a stronger and longer future with a bigger and more loyal customer base.

And finally in Chapter 6, we will outline what business leaders can do to properly balance short-termwithmedium- and long-term demands of their businesses to preserve and build successful companies to live and thrive for many years into the future.

We are confident that Chaotics will provide business leaders the critical new insights, new perspectives, and a new system—including a set of new strategic behaviors and tools—to successfully navigate the unpredictable and uncertain waters in this new era, The

Age of Turbulence.

Table of Contents


Preface VII

Introduction 1



What Is Market Turbulence? 12

Factors that Can Cause Chaos 18

Conclusion 41



Resource Allocation Decisions that

Undermine Core Strategy and Culture 51

Across-the-Board Spending Cuts versus

Focused and Measured Actions 53

Quick Fixes to Preserve Cash Flow,

Putting Key Stakeholders at Risk 56

Reducing Marketing, Brand, and

New Product Development Expenses 57

Declining Sales and Price Discounting 60

Decoupling from Customers by

Reducing Sales-Related Expenses 62

Cutting Back on Training and Development

Expenses in Economic Crises 63

Undervaluing Suppliers and Distributors 64

Conclusion 69


Constructing an Early-Warning System (EWS) 81

Construction of Key Scenarios 89

Scenario and Strategy Selection 98

Conclusion 102


The Chaotics Management System108

Finance and Information Technology 112

Manufacturing/Operations 122

Purchasing/Procurement 129

Human Resources 134

Conclusion 138


Common Marketing Reactions to Crises 145

Strategic Marketing Responses to Crises 150

Operational Issues Facing the Marketing Department 157

Operational Issues Facing the Sales Department 162

Conclusion 166



Business Enterprise Sustainability 172

Conclusion 190

Notes 193

Index 205

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