MIT Sloan Management Review

Corporate Strategy

Use Strategic Market Models to Predict Customer Behavior

By David E. Schnedler

April 15, 1996

POSITIONING PRODUCTS IN A COMPLEX MARKET CAN BE ONE OF A COMPANY’S MOST DIFFICULT DECISIONS. IN DETERMINING WHETHER TO COMBINE OR MAINTAIN SEPARATE product lines, Hewlett-Packard used an approach it calls strategic market modeling (SMM) to design “what if” scenarios and run simulations to predict market behavior. SMM combines demographic, user needs, and competitive perception data into a database for testing alternative positioning strategies. The author describes HP’s development of SMM and the lessons learned.

In the late 1980s, the computer systems industry embarked on a perilous but thrilling white-water journey of change that left many previous giants upset or beached on the rocks, while young, unknown companies emerged from the chute as celebrities. In retrospect, the undercurrents of change seem clear, but, at the time, the level of confusion was tremendous. Hewlett-Packard’s successful navigation through this treacherous passage is attributable to many factors, including its new approach, called strategic market modeling (SMM), which HP’s computer systems organization used to generate and test alternative business strategies both for itself and for competitors.

The computer systems industry (traditional mini-computers and mainframes) in the late 1980s was already experiencing the impact of powerful desktop PCs and workstations when it was hit from a different direction by the growing acceptance of Unix and open systems. For HP, while the emergence of commercial Unix represented a tremendous opportunity, it was also a threat. Unix had been a popular computer operating system among scientists and engineers for many years, due to its portability across different platforms and its networking features. It began to penetrate the commercial market, as MIS managers introduced Unix into their departments for the same reasons. But Unix was only a small part of a larger technology shift to the “open systems” that have subsequently revolutionized the computer industry. Open systems have... To read the complete article, login or sign-up using the form below.

From The Magazine

Fall 2009

Special Report: Sustainability

8 Reasons That Sustainability Will Change Management

Michael S. Hopkins

Transparency, accidental innovation, trust, collaboration — as sustainability affects how the world works, so will it affect how business works in the world.

Intelligence: Management

Debunking Management Myths

Martha E. Mangelsdorf

In this interview, Henry Mintzberg questions some of the conventional wisdom about managerial work.