I got in on the ground floor of the positioning concept when in 1963 I became the second doctoral fellow at the Marketing Science Institute in Philadelphia. Shortly after my arrival at MSI Paul Green began to work with Joe Kruskal at Bell Labs to translate his multidimensional scaling method into what would become one of the most powerful marketing technologies in the world. As a point of reference see “Nonmetric Multidimensional Scaling: A Numerical Method,” Joseph B. Kruskal, Psychometrika, 29:2 (June 1964), pp. 115-129.
THE BATTLE FOR YOUR MIND
Since MSI was then a small organization I often found myself in a conference room with Paul and his colleagues as they hammered out their first applications of this new psychological scaling technology to marketing. What began as a break-through scientific paper in Psychometrika took the marketing world by storm with the publication in 1982 of Positioning: The Battle for your Mind by Al Ries and Jack Trout.
Beginning in 1982 I worked for ten years as a consultant to the board of a European computer manufacturer. Our mission was to get marketing and sales to work together to challenge IBM. I put nearly 2,000 middle and senior managers around the world through several two-and-one-half day programs, including four with the board of directors.
You can get a sense of what we were up against if you view my audio slide show on the The Rule of Maximum Earnings. That European engagement was at once a huge corporate success and professional disappointment. It was a huge corporate success because we changed the way marketing and sales worked together. This change was in some degree responsible for turning the company around. It was a professional disappointment because the finance director really never believed my numbers. Why? I wasn’t able to link profits (and losses) in market segments to the company's financial statements and stock price.
IS MAXIMIZING PROFITS ENOUGH?
If you maximize profits at the segment level (in that consulting engagement we worked with hundreds of market segments in about eighty countries around the world), then you maximize the company's earnings. Right? Maybe so. But the question remained, how did that affect stock price? In 1986 I resolved to find an answer to this question. At the time the only thing I knew for sure was this: I had to understand stock valuation models and the financial accounting data on which they relied. The problem was I was trained in marketing and microeconomics. I didn't really understand finance or accounting. These were my blinders. If you're a CMO these may be your blinders too.
PENETRATING THE MIST
You don't need to have an accounting degree, but it’s probably an advantage if you do. In either event, it takes is an open mind, dedication and hard work. And it's critical that you penetrate the mist of financial accounting because for the first time you have a doorway into a financial system of measurements that allows you to demonstrate the value-creating capability of enterprise marketing in terms that a CEO (or CFO) will appreciate. Stay tuned. The price of value is some where down the line.
I neither own positions in nor trade any of the financial instruments mentioned in this web log. Findings and opinions expressed in my articles must not be taken as either a recommendation to buy, sell or hold a stock, or a reliable forecast of a company's future performance.