Chaotics

Chaotics

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Kotler, Philip | Caslione, John A. AMACOM, 2009 Audio summary available
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According to authors Philip Kotler and John A. Caslione in Chaotics, the world has entered the chaotic Age of Turbulence. To maneuver successfully through this, businesses need the Chaotics Management System - a framework that includes an early warning system, a scenario construction system, and a quick response system. Globalization and interconnectedness have both positive and negative impacts on the economic world as everything happens faster. Consequently, the traditional "normal" economic state consisting of broad upswings and narrower downswings is over. The "new normal" brings with it big shocks and painful disruptions at all economic levels, in other words - chaos. Initially, it is important to know what causes chaos. Technological advances, new disruptive technologies and innovations, the redistribution of wealth and power in resource-rich countries in Asia and the Middle East, hypercompetition (intense and rapid competitive moves that result in temporary advantages), Sovereign Wealth Funds (found largely in oligarchic or state-led capitalistic countries), the "green" movement, and customer empowerment are all causes. In turbulence, leaders must avoid eight common mistakes. Resource allocations must not undermine core strategies and values. Spending cuts should be focused and measured. Quick fixes to preserve cash flow are mistakes. Reducing marketing, brand, and new product development expenses is a mistake. Discounting prices, reducing sales-related expenses, and cutting back on training and development expenses are mistakes. Suppliers and distributors must not be undervalued. Traditional strategic planning leads to underestimating turbulence and chaos, which leaves the company vulnerable and prevents it from taking advantage of opportunities. Because turbulence cannot be predicted, it is imperative that it be detected quickly, which a proper early warning system (EWS) can do. After establishing an EWS, department leaders must construct scenarios the company could confront, as well as responses to each. In order to create responsive, robust, and resilient companies, each department must adopt strategic behaviors. Examples of these behaviors include CFOs maintaining lower leverage on their balance sheets and IT executives targeting investments to generate efficiencies and revenue growth. Identifying and remedying wasteful and inefficient practices in manufacturing and operations is also important, as is cutting workers who do not contribute critical value and reducing production levels in proportion to the drop in projected sales. Next, marketing systems must change as customers change. Adjustments should be made to the product line and services that will appeal to increasingly budget-minded customers and yet preserve the company's value proposition and appeal. To do this, leaders should keep a few things in mind, such as securing the company's mae from core customer segments, pushing for greater market share from competitors, researching customers more, seeking to increase the marketing budget, and avoiding discounting the best brands. A company's competitors today can also be customers, suppliers, distributors, or investors, which can be confusing. There are strategic actions that a company can undertake to combat this, such as shortening strategic-planning time cycles and increasing communication among key decision makers. Surviving turbulence is usually not the company's ultimate goal - most hope to sustain themselves for decades or even longer. To do this, focusing on the short term as well as the long term and balancing the two is necessary. Another critical factor is the company's reputation which can carry an organization through crises if it is strong, but which can also be easily damaged. Enthusiastic and supportive customers help prevent the latter. Implementing the Chaotics Management System will help companies not only survive turbulence, it will help them thrive in it.