Creating a Market-Driven Organization

As companies aspire to become market-driven, they exhort employees to get closer to customers, stay ahead of competitors, and make decisions based on their markets. Yet, even the best-intentioned senior managers find it difficult to translate those aspirations into action. Failed or flawed change programs have many symptoms, most of which are traceable to a lack of commitment to the deep-seated changes needed. The organization hasn’t fully grasped what it means to be market-driven — or why it matters — and lacks a clear path to that end.1 Further problems occur if the change program is unsuited to the task of orienting the business to its present and prospective markets. While the underlying principles and prescription of generic change programs offer valuable guidance, the organization must sensitively tailor the design of a change program to become market-driven to the particular challenges of understanding, attracting, and keeping valuable customers. My purpose in this article is to establish the six conditions that ensure change process success. I use the experiences of four different change programs — Fidelity Investments, Sears Roebuck, Eurotunnel, and Owens Corning — and post-audits of some failed change initiatives to validate the change model and explain the necessary conditions for a durable shift to a market orientation.

What Triggers the Change Process?

A firm’s orientation to its present and prospective markets is subject to two pressures. On one side are the centripetal influences that induce the company to look inward for guidance on decisions and become remote from customers and unresponsive to competitive challenges. This influence is accentuated by a “liability of success” where good financial performance leads to arrogance, overconfidence, and a technology orientation that condones the belief that “we know better than the market.” Compounding the problems are the centrifugal effects of market, technology, and competitive change that continually pull the business out of alignment with its markets and erode its advantages. The interplay of these forces leads to one or more of the following triggers for change:

  • Market disruptions that threaten the business model.
  • Continuing erosion of alignment with the market that puts the firm at a disadvantage with market-driven competitors.
  • Strategic necessity.
  • Intolerable opportunity costs.

Each of these triggers started at least one of the four change programs described in this article.

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References

1. Representative investigations of what it means to be market-driven are:

R. Deshpande, J.U. Farley, and F. Webster, Jr., “Corporate Culture, Customer Orientation, and Innovativeness in Japanese Firms: A Quadrad Analysis,” Journal of Marketing, volume 57, January 1993, pp. 23–37;

B. Jaworski and A.K. Kohli, “Marketing Orientation: Antecedents and Consequences,” Journal of Marketing, volume 57, July 1993, pp. 53–70;

J.C. Narver and S.F. Slater, “The Effect of Market Orientation on Business Profitability,” Journal of Marketing, volume 56, October 1992, pp. 20–35; and

D.W. Cravens, G. Greenley, N. Piercy, and S. Slater, “Mapping the Path to Market Leadership,” Marketing Management, volume 7, Fall 1998, pp. 29–39.

2. This change initiative was described by: S. Mirchandani, “Creating a Customer-Focused Organization” (Boston: Marketing Science Institute Trustees meeting, presentation on 30 April 1999).

3. See:

P. Sellers, “Sears: The Turnaround Is Ending, The Revolution Has Begun,” Fortune, 28 April 1997, pp. 106–118; and

A.J. Rucci, S.P. Kirn, and R.T. Quinn, “The Employee-Customer Profit Chain at Sears,” Harvard Business Review, volume 76, January–February 1998, pp. 82–98.

4. Sellers (1997).

5. Just as demonstrable progress was made and a ¥100 million cost savings achieved, a tragic fire in November 1996 closed the tunnel and caused ¥200 million of damage. Fortunately, a resilient organization was in place that was able to reopen the tunnel and recapture the lost market share.

6. This description draws heavily from: T.A. Stewart, “Owens Corning: Back from the Dead,” Fortune, 26 May 1997, pp. 118–126.

7. This change model is adapted from one used extensively within General Electric, as described by one of the developers. See:

D. Ulrich, “A New Mandate for Human Resources,”

Harvard Business Review, volume 76, January–February 1998, pp. 124–135.

Similar steps are found in the change process developed in:

J.P. Kotter, Leading Change (Boston: Harvard Business School Press, 1996).

8. In this respect, this change program is a composite of the “programmatic” and “market-back” approaches of:

J.C. Narver, S.F. Slater, and B. Tietje, “Creating a Market Orientation,” Journal of Market-Focused Management, volume 2, number 3, 1998, pp. 241–255; or the “activities-centered” and “results-driven” programs of:

R.H. Schaffer and D.P. Norton, “Successful Change Programs Begin with Results,” Harvard Business Review, volume 70, January–February 1992, pp. 80–91.

9. “Interview with John Kotter,” Strategy and Leadership, volume 25, January–February 1997, pp. 18–23.

10. “Larry Bossiday Won’t Stop Pushing” (Fortune 500 Forum, 1996, speech).

11. The Dow Chemical change program was described by:

D. Fischer and A. Kohli, “Enhancing Market Orientation: Lessons from Recent Efforts” (Boston: Marketing Science Institute Trustees meeting, presentation in April 1995).

The survey was based on an empirical model developed in:

A.K. Kohli, B.J. Jaworski, and V. Kumar, “MARKOR: A Measure of Marketing Orientation,” Journal of Marketing Research, volume 30, November 1993, pp. 467–477.

12. For a description of learning maps, see:

Rucci et al. (1998), pp. 92–93.

13. According to Nitin Nohria, only 30 percent of all change programs implemented by a sample of Fortune 100 companies since 1980 produced an improvement in bottom-line results that exceeded the company’s cost of capital. See:

N. Nohria, “The M-Form to the N-Form: Taking Stock of Changes in the Large Industrial Corporation” (Boston: Harvard Business School, working paper, 96-054).

14. See:

J.P. Workman, Jr., C. Homburg, and K. Gruner, “Marketing Organization: An Integrative Framework of Dimensions and Determinants,” Journal of Marketing, volume 62, July 1998, pp. 21–42;

R. Boehm and C. Phipps, “Flatness Forays,” McKinsey Quarterly, volume 3, 1996, pp. 128–143; and

G.S. Day, “Aligning the Organization to the Market,” in D. Lehmann and K. Jocz, eds., Reflections on the Futures of Marketing (Cambridge, Massachusetts: Marketing Science Institute, 1997).

15. M. Hammer, Beyond Reengineering: How the Process-Centered Organization Is Changing Our Work and Our Lives (New York: HarperBusiness, 1996).

16. D. Carmichael, “IBM’s Journey Towards a Market-Driven Process-Managed Business Model,” Journal of Market-Focused Management, volume 2, number 1, 1997, pp. 99–103.

17. Jaworski and Kohli (1993).

18. R. Pascale, M. Millemann, and L. Goija, “Change the Way We Change,” Harvard Business Review, volume 75, November–December 1997, pp. 127–138; and

Schaffer and Norton (1992).

19. J.P. Kotter, “Leading Change: Why Transformation Efforts Fail,” Harvard Business Review, volume 73, March–April 1995, pp. 59–67.

20. M.A.J. Menezes and J.D. Serbin,“Xerox Corporation: The Customer Satisfaction Program” (Boston: Harvard Business School, case 9-591-055, 12 January 1993).