Customers and Innovation at Eastman

I have not had a chance to listen to the lecture yet but feel that my last couple of days have played right into the topics we have been studying.   Tuesday on my way home from work I received a call from by boss inviting me to a company dinner with only the suggestion that I would not want to miss it.  It turned out to be dinner with the president of Eastman Chemical.  I was a great evening.   Eastman also has had a two day increase in stock price of 9% based off of 2 quarter performance.

I had the opportunity to ask questions and all the answers were in terms of costumers, markets, competitors and innovation.  I would say more than ever that Eastman is costumer focused.  Eastman actual has three primary focuses, customers, innovation, and operational excellence.  The president explained that one of the key metrics that he uses is a vitality index.  This is a measure of % contribution to margin of the company’s new offerings.  This measures both innovation and customer value. 

We also discussed our customer behaviors and importance of understanding the customer buying process.  It almost sounded like he had read Lehmann and Winer.  We have very few consumer offerings, only  aftermarket window films.  Most of our business is to other companies.  The president explained that one challenge that faces us is that our customers tend to only be interested in cost reductions.  We often have to go beyond our direct customer to the end user of their product to look for new value positions.  In some cases we will sell our customer’s customer on the new product and have them pressure our customer to use it.  I found the entire conversation about the customer relationships throughout the entire supply chain interesting. 

We also talked about ways to maintain market differentiation, quality and innovation are better than price.  Eastman focuses of innovation because there is significant competition in our markets.   In both China and South Korea there is excess chemical manufacturing capacity and the companies in those countries do not respect intellectual property.  Once our products are copied, they become commodities and if we have not innovated we lose our margin.   Eastman is using cross function teams to drive innovation.  These teams also cross business segments to create intersection as discussed in the decision making class’ read the Medici Affect . 

Putting analysis and planning to use

This week I spent a lot of time in the simulation.  I wanted to put what we had been talking about to use.  I took my time with each of the periods.  I had the vision of growing Allstar into the leading provider of OTC cold and allergy medication.  I planned to accomplish this by increasing market share through development of new customers, retention of current customers, and expending the product line in the allergy market.  I learned that the advertising mix and the promotional decision were critical.  I also learned that I needed to increase the price every period to ensure that net income increased to continue to support my marketing budget.  I studied the various reports to understand each period what the customers thought of my products as well as what they thought of the competitor’s products. 

I did a competitor analysis.   I started by determining which competitor to study.  I used the tradeoffs survey, manufacturer sale, brand formulation and operating statistics reports to help select competitor.  I then used the promotion, pricing, sales force reports to focus my promotion, advertising and sales force to gain market share.   I focused on direct competitors and did not worry about the indirect ones or potential future offerings from the other companies.  At the conclusion of the simulation, Allstar had a commanding position in both cold and allergy.  Allright (allergy) had a 48.5% market share while Allround and Allround+ had a combined 34.5% market share.    

Although I studied the competition, I spent more time figuring out what the customer wanted.  I study the customer through the shopping habits and purchase intentions reports.  I found these reports very helpful in targeting my sales force, promotional allowances, and advertising to the channels that were contributing most to my sales.  I can see that having a marketing plan made the decisions in each period very easy.  I did not go on auto pilot, adjustments had to be made to the plan because I am still learning some of the cause and effect relationships. 

I had a few metrics that I was looking at each period.   I was definitively looking for growth.  I like the dashboard as quick tool for seeing if the choices from the previous period kept Allstar on track.  The portfolio graph was not as useful.  If you have the wrong view selected, you might discontinue a product that still has potential.  I was tempted to kill the Allround+ line because in the standard view it was a dog but in the narrow view it is slitting the line with cash cow.   I looked at the income statement every period and I could see that if I had not been targeting growth, I could have maximized profits and really brought in some cash.  In the end, Allstar had over $1112 million in retail sales.  Another indication of the growth that I saw was the increase of production capacity twice during the simulations 10 periods.

Expanding on both Megan's blogs

I have read many of the class’ blogs for week two.  I found that both Megan’s listed the 8 things most effective Leaders must do.   I liked the list because it is very true from purely a leadership prospective.  I think that it does not matter if you are talking about marketing leaders, manufacturing leaders, supply chain leaders, or military leaders.  I like Megan M. stated Drucker reads like mean self help books.  I believe it reads like many business leadership books, like Good to Great for example.  Cohen took a leader in management, Drucker, and transformed his work into a marketing book.  It could easily be a business management book. 

The specific points on Leadership and my views:

Maintaining absolute integrity:  When you are leading any group, they are always watching to ensure that your actions match your words or the words of the organization.  One point many people new to leadership miss is that you cannot openly disagree with company policy in front of your employees and then attempt to enforce it.  This many seem like common sense but how many times do your hear managers saying “I know this is silly (stupid) but you have to do it anyway.”  This destroys their credibility.   You must disagree before the policy is announced and it must be in private, but when it is announced you have to be onboard.

Know your stuff:  This too seems like common sense, but I have just taken over a manufacturing supervisor and have had to put in long hours to learn the process.  Nothing destroys credibility as a leader like giving bad direction because you don’t understand the process. 

Declare your expectations:  Setting expectations is very important.  Most people can accept change better if they understand the end state.  Clearly communicating the expected outcome of the change or even the amount of work to be accomplished on a shift sets a more productive tone.

Show uncommon commitment:  If you do not believe in the direction you are leading the group how will your followers.  As a leader, I often worked longer hours to ensure that everything was ready for my guys when they got to work and that obstacles had been removed to make their job easier.

Expect positive results:  I believe we had a class discussion on this.  I have found that in the last month that my department has become more productive and our quality has improved and a major factor in this is the fact that I expect the union workers to operate to the best of their ability as opposed to my predecessor who was constantly expecting the union works to be “playing games” , using loop holes and tricks to avoid work.

Take care of your people:  If you ensure that your people get recognition for their work and are treated fairly, they will achieve more and it will put you in a positive light with senior management.  If you take credit for their successes, they will stop producing and you will fail in the long run.

Put duty before self:  Do the best job at whatever you are asked to do for the organization. This is a very military concept but if your employees see you doing it, it will inspire the same in them.  The key is you cannot complain about it.

Get out in front:  Again a very military concept.  The first one into the line of fire is the leader. If you want to understand read about Colonel Moore or rent We Were Soldiers.  This is not just a combat thing.  When we had to clean up the ship, a task that was not liked or fun, I would be the first one in the bildge ( the bottom of the ship where the nasty stuff collects) cleaning and the last on out.  In a business setting these is translated into embracing change and leading by example.

Discussion Question

Demographics: Drucker felt that there was a common agreement to assume that any change in demographics occurs too slowly to worry about….to simply assume constancy or continued growth, and plans, marketing and otherwise, incorporate data that are certain to be growth in error.  Yet decision makers continue to repeat this error over and over.  Is this a sign of complacency, and being a process or product related company, rather than a market focused one?

I personally feel that Drucker may have been right when he made that statement, but over the last several years the demographics in the US have shifted dramatically.  Additionally, the preferences of these different groups is also changing rapidly.  I think that a company that fails to understand the demographics and their change is failing to understand the potential market.  I don’t think I would go as far as labeling it complacency unless they had the data and chose to ignore it.

Simulation Reports

I looked at the costs of the reports for period 11 see screen capture below.  The total cost is $741,422 which is 1.3% of my budget allocation.

I went through the trouble of adding them all up before looking at the budget allocation report and discovering that the silumation already did that.

Marketing Management is Simply Management

This week one of the tasks given us was to widen the scope of our blog posts to encompass the entire volume of information presented this week.

As I was trying to assimilate all the information I realized that I naturally compare each new concept to what I currently do here at Eastman or what I did while serving in the Navy.  That is how I wrote my blog last week and I think that works best for me.

This week I would like to honor Vice Admiral Wilkinson who died this week at age 94.  He was the first commanding officer of the first nuclear powered ship, USS Nautilus, a submarine.  I heard his famous massage repeated many time “Underway on nuclear power” (Wilkinson, Jan 17, 1955).  So I will be comparing what I learned this week to the many lessons I learned serving in the nuclear navy.

I guess I will try to put this in a logical order.  Starting this analogy in the engine room of a nuclear powered aircraft carrier the product being produced is steam.  There are two of these engine rooms producing steam to satisfy the needs of the customers.  The customers are the air department which needs steam to launch planes, the navigation department which needs steam to push the ship through the water, the supply department which needs steam for hotel services (cooking food, washing laundry, heating showers, etc).  The department making the steam had goals associated with supplying their customers with the quality (dry superheated) and quantity (always available) steam.  From these goals the department developed a strategy and then started planning.  We created a long range plan and short range plan based on this strategy.  We also use forecasting to determine at what power level we would have to run in order to ensure we could meet our market demand.  We did this forecasting for long range be ships underway schedule ( how fast we would go to get on station) and for short term by the weekly and daily flight schedules.  We had a seasonal component driven by multiple internal and external factors.  Those factors included training or combat missions and actual time of the year (winter in Afghanistan is cold and combat slows).  Our forecast levels were also dictated by regulatory issues, we had required maintenance and training times that we would require us to have one production facility (engine room) shut down.  We also had regulatory rules which limited certain operations based on distance from land.  All of these factors had to be understood in order to forecast and then plan production to meet market need. 

We had metrics as well which measured customer satisfaction.  These metrics were both in-process and results oriented.  The results metrics tracked numbers of air craft launches missed compared to total number of launches.  We also tracked number of miles steamed.  In-process metrics tracked steam quality and amount of reactor life used.  The amount of reactor life use was the margin measurement for us.

On a bigger scale operating this ship played into the navy’s marketing strategy to maintain budgetary dollars from congress.  There are only so many military missions (markets).   For example surveillance,    air support, troop delivery, etc and each service competes for market share to justify their budget.  We had to know are competitors (other services).  I cannot say that we tracked Net Marketing Contribution, but we did track the total number of missions and the percent share of those missions that the navy received.   Understanding this relationship drives innovation, for example look at the navy’s latest news release.

http://www.foxnews.com/tech/2013/07/10/in-historic-first-navy-lands-unmanned-drone-on-aircraft-carrier/

I understand that we are studying marketing management but my take away thus far is that we just studying management through the marketing lens and that the same fundamentals of management I have used for twenty plus years still apply.   

Simulation 101

I played the simulation to completion twice this week.   Here is what I learned.

1. It is easier to run a brand into the ground than it is to keep it growing

2. Watch the projected inflation rate to ensure that you don’t fall behind on pricing.  Most of the time a price increase was in order.

3. I got to launch two new products during the second run.  I also got to reformulate.   When using the special options, look at the symptoms report to know what the market wants.

4. Keep checking market share to ensure you are comparing to the right competitor in advertising.

5. Don’t ignore the market summary, if you do your profit margin and share price will suffer.

6. Check out the graphs, I was able to get the new product into the cash cow category and cut most of the advertising and promotion expense.

7.  The hardest part is to figure out which reports are the important ones to look at.  At different times different reports had the information needed.  Each period required a different set of decisions.  You cannot just let it ride.  

Sustainability is driving Innovation

HBR.pdf

I found this interesting slide on sustainability on the Eastman wibesite and then found the Havard Business Review article that was the source (link above). For the last year, I thought that only MBA students read HBR cases.

Market Planning

Market Planning

As I read the planning process in figure 1.4 (Lehmann & Winer, 2008, p.11) I was struck by how similar the steps were to the capital project planning that I currently do.  In planning a capital project the first thing I do is historical research.  I look to see if the project has been done before and collect data from those past projects.  This is like the update historical data step of market planning.  Looking at past market reports and market plans and updating data if new data is available.  The second step of collect current situation data, for a capital project this would be the current needs, for marketing this would be identify the current environment in which the plan is going to be executed.  Again the next step seemed very similar, analyze the data.  In both types of planning this can be the hardest part.  The volume of data available is incredible.  Choosing the right data to look at is critical.  Develop objectives, strategies, and action programs seemed very much like developing the scope of a project and layout the network diagram.  The marketing plan must define what the goal or objective is, layout the steps needed to achieve the objective, and provide the timing for execution of each of these steps.  Lehmann and Winer (2008) list develop financial documents as the next step.  This requires development of a budget and profit – loss figures.  This correlates to the project budget and return on investment analysis.  The negotiate stage in the market planning process would equate the project approval process.  Then to successfully manage anything you must monitor the process and have a planned feedback and control loop.  Finally when the time period covered by the market plan is up or for a project when it is finished, you audit the plan.  This is the one of the best ways to improve the process and capture key learning.   

I did look for the marketing plan for the business segment that my operating unit falls under.  I was able to find it on the company drive but my credentials would not allow me to open it.  I have found a lot of general customer focus, innovation, and sustainability information but the actual market plan still eludes me.  I have a request in to marketing to see it.

Administrative Post - Reference Page

Lehmann, D. R., & Winer, R. S. (2008). Analysis for Marketing Planning (7th ed.). New York, NY: McGraw-Hill.

Cohen, W. A. (2013). Drucker on Marketing . New York, NY: McGraw-Hill.

Mission Statement

Eatman Culture 

I have searched the Eastman literature for a company mission statement and I have not found one labeled “mission statement.”  I believe that the cultural values statement (link above) is what governs the company’s actions.  All business strategies for each of the SBU’s are aligned with these values.  These values permeate all the way down to the manufacturing unit level.  The metrics that are tracked and the score card generated reinforce these guiding principles. 

Week One - Introduction

My name is Randall Feher and I am currently a MSEM / MBA student at Western New England Univ.  I work for Eastman Chemical and just changed positions from Reliability Engineer to Manufacturing Supervisor.  Prior to Eastman, I served in the Navy for twenty three years.

I found the first weeks discussion of Market Orientation interesting.  Eastman has been a commodities company but over the last couple of years it has transformed into a specialty chemical company.  I can start to see that the focus is on innovation and creating unique product lines that the customer wants and needs.  In the quarterly and annual reports, it is clear that the concepts of customer and competitor focus are being followed.  Additionally,  Eastman uses "Innovation Teams" which are cross functional to bring new products to the market place.