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Lee Kong Chian School of Business

1999

Marketing, Business Processes, and Shareholder

Value: An Organizationally Embedded View of
Marketing Activities and the Discipline of
Marketing
Rajendra Kumar SRIVASTAVA
Singapore Management University, rajs@smu.edu.sg

Tasadduq A. Shervani
Liam Fahey

Follow this and additional works at: http://ink.library.smu.edu.sg/lkcsb_research

Part of the Marketing Commons
Citation
SRIVASTAVA, Rajendra Kumar; Shervani, Tasadduq A.; and Fahey, Liam. Marketing, Business Processes, and Shareholder Value: An
Organizationally Embedded View of Marketing Activities and the Discipline of Marketing. (1999). Journal of Marketing. , 63 , 168.
Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4137

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Marketing, Business Processes, and Shareholder Value: An Organizationally Embedded View of

Marketing Activities and the Discipline of Marketing
Author(s): Rajendra K. Srivastava, Tasadduq A. Shervani and Liam Fahey
Source: Journal of Marketing, Vol. 63, Fundamental Issues and Directions for Marketing
(1999), pp. 168-179
Published by: American Marketing Association
Stable URL: http://www.jstor.org/stable/1252110 .
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RajendraK. Srivastava,Tasadduq A. Shervani, & Liam Fahey

Processes,
Marketing,Business
Value:
Shareholder
and
Embedded
An
Organizationally
of Marketing Activities and
View
Discipline of Marketing
the
The authors develop a framework for understanding the integration of marketing with business processes and
shareholder value. The framework redefines marketing phenomena as embedded in three core business processes
that generate value for customers-product development management, supply chain management, and customer
relationship management-which in turn creates shareholder value. Such a conceptualization of marketing has the
potential to introduce dramatic shifts in the scope, content, and influence of marketing in the organization. The authors highlight the implications of an organizationally embedded view of marketing for the future of marketing theory and practice.

arketers committed to enhancing both theory and

practice must confront directly two widely noted
but largely neglected challenges in the marketing
literature:connecting marketingto cross-functionalbusiness
processes (Webster 1992) and to its cash flow consequences
(Anderson 1982). As Day (1997*, p. 89) so pointedly notes,
the contributionand statusof marketingwithin an organization will be determinedpartlyby its answerto the following
question:
M

What are the core processes, and what is the contribution

of the marketingfunction to the direction and integration
of these processes?

There is also a growing recognitionthat, if marketingis

to help ensure business renewaland growth,winningand retaining customers also must result in superiorcash flows, a
critical prerequisiteto augmentingshareholdervalue (Day
and Fahey 1988). Others have arguedthat the influence of
marketing,as both a discipline and a function, has been diminished because of the absence of conceptuallinkages and
a language that would enable it to engage in a meaningful
dialogue with financial and top management (Anderson
1982; Barwise, Marsh, and Wensley 1989*; Srivastava,
Shervani,and Fahey 1998).
*Authorswere limited in the numberof referencesused in text,
therefore, those references marked with an * are available at
www.ama.org/pubs/jmand at www.msi.org.
RajendraK. Srivastavais SeniorAssociateDean and DanielJ. Jordan
Professorof Marketing,GoizuetaBusiness School, EmoryUniversity.

ofMarketing,
is anassistant
A.Shervani
Department
professor,
Tasadduq
Babson
LiamFaheyis anadjunct
ofTexasatAustin.
professor,
University
(U.K.).
University
CollegeandCranfield

168/ Journalof Marketing,Special Issue 1999

The purpose of this article is to develop a conceptual

frameworkthatfacilitatesa broadeningof our understanding
of the role thatmarketingcan play within business processes
thatcreatecustomervalue and, in turn,shareholdervalue.The
intentof the frameworkis to highlighthow marketingmustbe
infusedas an inputto businessprocessesand how it resultsin
outputs that create and sustain customer and shareholder
value. More specifically,the goals of this articlearethreefold:
1. To articulatethe role of marketingas the primarygenerator
and integratorof marketor customerinputs in core business
processes;
2. To illustrate how marketing,through its influence on core
business processes, can affect cash flows positively and reduce risk; and
3. To indicate broadly the implications of the relationship
among marketing,business processes, and cash flows for
the theory and practiceof marketing.

The rest of this article is structuredas follows: First, we

examine the natureand scope of business processes and explicate the role of marketing in these business processes.
Second, we provide a framework that links business
processes to the driversof shareholdervalue and highlights
the informationaland integratingrole of marketingactivities
within inherently cross-functional processes. Third, we
close with a discussion of the theoretical,practical,and pedagogical contributionsof the article.

Business Processes: The Role of

Marketing
Whether viewed as a discipline, function, or set of specific
activities, marketingscholars long have held that the core
objective of marketingis to attractand retaincustomers.To
Journal of Marketing
Vol. 63 (Special Issue 1999), 168-179

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do so requiresthat the organizationprovide superiorvalue

to customers compared with current and potential rivals.
But to achieve this goal, the organizationmust design and
execute many work practices, most commonly referredto
as "business or operating processes" (Davenport 1993;
Hammer 1996*), that go considerably beyond those practices traditionallyviewed as falling within the domain or
control of the marketingfunction. These processes demand
an integrationof a sequence of related work tasks to accomplish organizational goals. Execution of these
processes requires assets such as personnel, knowledge,
and a physical plant that commingle and "come alive" as
organizationalcapabilities(Grant 1991*). A resource-based
view (RBV) of the firm provides a conceptual framework
to connect marketingand business processes and supports
the recognition of customer and distributornetworks, as
well as marketinformation,as assets and marketingexpertise as a valuable capability.
If marketingis to instill a customer or, more broadly,a
marketperspectiveinto organizations,it must directlyinfluence the business processes thatexplicitly contributeto generating and sustaining customer value. But what might be
relevantprocesses within which we might examine marketing contributions?
Three Core Business

Processes

Four criteriaguided our choice of core business processes.

First, in view of the largely exploratorynatureof this article, we sought to identify a small set of processes that addresses fundamentalbut common business tasks that are
critical to achievementof the organization'sgoals. Second,
because our explicit purposeis to demonstratethe relevance
of marketing,each process should manifest a prima facie
case thatit contributesto customervalue creation.Third,because we want to explicate the linkages between individual
marketing activities and business processes, each process
should be more macro- than microlevel. Fourth, because
every process connects to otherprocesses, the set of selected
processes should manifest clear (macro and micro) interactions and interrelationships.
At a macrolevel, customer value creation necessitates
the accomplishmentof three centralorganizationaltasks:
*Thedevelopment
of new customersolutionsand/orthe reinvigorationof existingsolutions;
enhancement
*Continual
of the acquisitionof inputsandtheir
intodesiredcustomeroutputs;and
transformation
*Thecreationandleveraging
toexof linkagesandrelationships
ternalmarketplace
entities,especiallychannelsandendusers.
To execute these tasks, an organization must design,
foster, and leverage three core business processes. The
first task is accomplished through a product development
management (PDM) process that aims to create solutions
that customers need and want. The second task is implemented through a supply chain management (SCM)
process that incorporates acquisition of all physical (and
increasingly informational) inputs, as well as the efficiency and effectiveness with which they are transformed
into customer solutions. The third task is executed

through a customer relationship management (CRM)

process that addresses all aspects of identifying customers, creating customer knowledge, building customer
relationships, and shaping their perceptions of the organization and its products.
Defined as highly macrolevel processes, each core business process subsumes a large numberof subprocesses(see
Table 1). For example, the SCM process involves subprocesses as distinct as identifying and qualifying potential
vendors;managingproductassembly; acquiring, installing,
and maintaining process technologies; and orchestrating
outbound logistics, distribution,and customer service networks, as well managingcosts, pricing, and order processing and fulfillment. Many of these subprocesses can be refined furtherinto more microlevel processes. For example,
order processing and fulfillment might be segmented into a
sequence of more fine-grainedsubprocessesaroundspecific
work task clusters, including order taking, internal order
transmission, order completion, order shipment, and payment completion (cf. Day 1994*).
These processes are consistent with three of the four
processes (new products, customer management, and
value/supply chain management) suggested by Lehmann
(1997*) in his projection of the future of core marketing
courses. Lehmann's fourth, information use and research
process, plays a critical role in the formulationand execution of the three business processes examined here. Other
importantprocesses, such as human resource, technology,
and finance management,do not meet the criteriapreviously
noted for choice of core business processes and, for our purposes, can be consideredsupportprocesses to the threecore
business processes here. Finally, it is importantto note that
the threecore business processes thatwe focus on are not independent.Exploitingtheir interdependenciesis more likely
to lead to marketplacesuccess than a focus on just one. For
example, if a company's marketstrategy calls for made-toorderSCM processes, modularproductdesigns and product
platformsshould be partof their PDM process. In addition,
it is importantto recognize that some elements of core business processes can be outsourced. For example, Nike focuses on PDM and CRM processes and outsources most of
its SCM process. However, outsourcinga process does not
mean thatmanagementcan avoid its responsibilities.Nike is
still responsiblefor SCM outcomes and thereforemaintains
an active presence in managing productquality.
Infusing Marketing into Core Business Processes
If marketingas an intellectualand operatingdiscipline is to
be institutionalizedin organizations,it must not only pervade the minds of managers within the organization, but
also infuse and energize their actions. In short, it must influence the processes by which work gets done. Only in this
way can marketingas a discipline and, more narrowly,individual marketingactivities be linked directly to central operating tasks within an organizationand, as a consequence,
to both marketplaceand financial returns.
Central to the core proposition of this article is that, if
marketing is to realize its potential contributionto the organization's marketplace and financial performance, it

ShareholderValue/ 169

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Sample Subprocesses
Product Development
Management Process

TABLE 1
Within the Three Core Business
Supply Chain Management
Process

Ascertainingnew customerneeds
Designing tentativenew product
solutions
Developingnew solutionprototypes
Identifyingand managinginternal
functional/departmental
relationships
Developingand sustainingnetworks
of linkages withexternal
organizations
Coordinatingproductdesign activities
tospeed up business processes.

Processes
Customer Relationship
Management Process

Identifyingpotentialnew customers
Selecting and qualifyingdesired
suppliers
Determiningthe needs of existing
and potentialnew customers
Establishingand managinginbound
logistics
Learningabout productusage and
application
Designingand managinginternal
logistics
Developing/executingadvertising
programs
Establishingand managingoutbound
logistics
Developing/executingpromotion
programs
Designingworkflow in
product/solutionassemblyDeveloping/executing
service
programs
Runningbatch manufacturing
Developing/executingsales programs
Acquiring,installing,and maintaining
process technology
information
Acquiring/leveraging
Orderprocessing, pricing,billing,
technology/systemfor customer
contact
rebates, and terms
Managing(multiple)channels
Managingcustomerservices such as
to
installationand maintenence
enable productuse

must connect to the three core business processes previously noted in at least two (highly interrelatedand reinforcing) ways. First, it must do so as a discipline. Second,
individual marketing tasks must be connected to specific
subprocesses within each core business process and to coordinating, integrating,and streamliningthe work inherent
in subprocesses across the core business processes. We
briefly outline each way.
Marketing as a discipline. Processes are meaningless
when viewed in isolation of those people chargedwith implementing them. Typically, a team of individuals creates,
manages, and drives each process, irrespective of the
process's level. Thus, teams guiding each core process must
be infused with marketingcapability,that is, the means to
bring a marketingperspectiveto every subprocess.Unfortunately, in the case of many firms, attainingthis goal will necessitate a significant transitionand transformationfrom a
product-dominatedto a market-drivenview of each core
business process.
Although PDM, SCM, and CRM processes can be
viewed as prime drivers of both customer and shareholder
value, their design depends on the macroenvironmentaland
competitive factors within which they exist. Changes in this
environmentaffect the role of marketingand necessitatealterations in process design. Such change has become continuous and disruptive and has dramatic implications for
marketingtheory and practice.Although others have noted
many of the same marketplaceshifts (for example, see the
compilation of essays in Lehmannand Jocz 1997), we emphasize five that we believe broadlycharacterizethe com-

Managingcustomer site visit teams

Enhancingtrustand customer loyalty
Cross-sellingand upsellingof product
service offerings

petitive context in which marketerswill need to navigate as

we move into the new millennium:
1.A productfocus is givingway to the needto addresscustomerfunctionality.
is evolvingintosolutioncustomiza2. Productdifferentiation
tion.
3. Transaction-based
exchangesare being replacedby relacustomerintimacy.
tionship-based
4. Stand-alonecompetitionis frequentlygiving way to networkedrivalry
5. Economiesof scopeandincreasingreturnsarebeingadded
to economiesof scale.
Some key elements in the requiredchange in business
process perspectives given marketplaceshifts are summarized in Table 2. The change to a market-drivenPDM
process entails shifting from an emphasis on designing the
most technically superiorproductto creating a solution that
enables customers to experience the maximum value and
benefit from its use. It emphasizes the design and development of solutions that can be customized to create and satisfy individual customers' needs. Often, physical products
are only a part, sometimes only a small part, of the overall
solution. Rather than largely unrelated relationships with
disparateinternaland externalentities, the organizationdevelops and leads some networks and participatesin others
with the intent of spawning, nurturing,and devising solutions that otherwise would not be possible.
The change to a market-drivenSCM process entails
shifting from a focus on obtaining the functionally best inputs at the cheapest possible prices to designing, managing,

170 / Journalof Marketing,

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TABLE 2
Marketplace Shifts: Impact on Business

Processes

Business Processes
Product
Development
Management Process

Supply Chain
Management
Process

Customer
Relationship
Management Process

Fromproductfocus

Design, develop, and

engineer the functionally
best possible product

Design and mange the

supply chain to obtainand
use the functionallybest
rawmaterialsand supplies

Manage relationshipswith
customers solely as a
means to sell, deliver,and
service the product

To customer functionality
focus

Create the productthat

enables the customerto
experience the maximum
value and benefitsfromits
use

Design, manage, and

integrateown supply chain
withthat of both suppliers
and customers

Manage relationshipswith
customers as a means to
learn about theirneeds
and how best to satisfy
them

Fromproductdifferentiation

Design and develop products Procure,move, and use raw

that can be massmaterials,components,
marketedto convey and
and so forth,so that the
deliversuperiorvalue
productis more
differentiatedagainst
comparedwithcurrentand
currentand potentialrivals
anticipatedrivals

Customersas the
focus/recipientsof products
and relatedadvertising,
service, sales activities,
and so forthto establish
productvalue superiority

To solutioncustomization

Design and develop

solutionsthat can be
customizedto create and
satisfy customers'needs

Workingwith individual
customers so that the total
solutionis tailoredto their
individualneeds

MarketplaceShifts

Manage and integrateall

supply chain elements to
facilitatethe design,
development,production,
and delivery of solutions

Fromtransactions

A set of one-off arm's-length A set of independent

interactionswithother
contractswithexternal
unitswithinthe
suppliersand disconnected
organizationand entities
arrangementswithinternal
externalto it
units

Identifying,targeting,selling,
delivering,and servicing
customers as independent
transactions

To relationship-based
intimacy

A set of ongoing, tightly

bonded relationships
internaland externalto the
organization

Developingrelationshipswith
externalsuppliersfor next
generationof supplies

Developing,fostering,and
leveragingrelationships
withindividualsand sets
of customers

Fromstand-alone
competition

Completedependency on
own knowledge,expertise,
skills, capabilities,and so
on

A tendency to emphasize
ownershipand controlof
each supply chain element

Managingall facets of all

interactionswithall
customers

To networkedrivalry

Leadingand participatingin
multiplenetworksto
spawn, nurture,and
integratethe development
of productsthat otherwise
wouldbe impossible

Leadingand participatingin
multiplesupply chain
networksto create
supplies that otherwise
would not be possible,
enhance supply chain
efficiencies, and so on

Developingand managing
a networkof relationships
withother entities (such
as rivals,channels, end
users, and market
professionals)to identify,
reach, and satisfy
customers in ways that
otherwisewould be
impossible

Fromeconomies of scale

An emphasis on resource
use efficiencies in
designing and developing
products

An emphasis on efficiencies
in vendor relationships,
inventorycontrol,logistics,
production,and so on

An emphasis on efficiencies
in all phases of marketing
activities

To economies of scope and

increasing return

Leveragingresources to
create productsthat serve
interrelatedcustomer

Leveragingall facets of the

supply chain to facilitate
greater product/customer

Leveragingall marketing
resources to create the
types of customer

segments/markets and

scope and increasing

relationships that facilitate

providethe basis for

increasingreturns

returns

multipleforms of product
and marketlinkage

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and integratingthe firm'sown supply chain with thatof both

suppliersand customers.The value and benefitsexperienced
by end customersis the drivingobsession, not internalgoals
such as supplierdelivery cycles, productionschedules, and
operatingcosts. It emphasizesthe coordinationand integration of supply chain tasks and activities to facilitate design,
development, and delivery of solutions ratherthanjust the
procurementand transmissionof materials,supplies, components, and finished products.As a criticalmeans to do so,
it partnerswith externalentities to develop the next generations of materials,components, and supplies and often develops and avails of networks.
The change to a market-drivenCRM process entails
shifting from a modus operandithat views customer relationshipsas solely means to sell, deliver, and service a product to one that regardsthem as means to learn about customers' needs and wants and how best to create, satisfy, and
sustain them. Customer transactionsgive way to intimate
and sustainedrelationships.Customerintimacyand partnering are prerequisitesnot only to tailorsolutions thatenhance
customer functionality,but also to the collective and cooperative determinationof new customer functionalities.Networks of customer relationships involving channel members, end users, and other marketplace entities such as
advertisingagencies and consulting organizationsfacilitate
the developmentof scope economies and increasingreturns
that otherwise would be impossible.
These marketplaceshifts thus result in business process
redesign and realignment.For example, a shift away from
vertical integration to horizontal alliances reinforces the
need to move from stand-alonecompetitionto networkedrivalry.The "best"productsdo not necessarily win. The best
networked firms usually do. Thus, marketing strategy requires that a firm be in the rightproductsystem and then ensure mechanismsto get a fair shareof the alliance (network)
value created. Furthermore,horizontal alliances require a
focus on greater collaboration, information sharing, and
trustacross supply/valuechains.
Marketingtasks. Marketingas a discipline infuses a customer orientation into the subprocesses noted in Table I
throughthe medium of individualmarketingtasks. Marketing tasks can be defined broadly as the specific items of
work thatmarketingprofessionalstypically do; that is, what
they are expected to accomplish in their day-to-dayassignments. With specific focus on customers,some critical marketing tasks include identifying and categorizing customer
segments; determining a customer's current and potential
needs; visiting customersto learn about the uses and applications of individualproducts;developing and executing the
individualcomponentsof sales, advertising,promotion,and
service programs;assessing customers' price sensitivities;
and determiningcustomers'responses to rivals' currentand
potential offerings. Each CRM subprocess (Table 1) involves many marketingtasks.
Infusing a market-or customer-drivenperspective and
inputs into subprocessescan be accomplishedin two related
but distinct ways. First, CRM subprocesses often must be
reinvigoratedwith a genuine customer or market orientation. This tendency long has been exemplified in the dis-

tinction between a marketingand a sales orientation(Kotler

1977*). Sometimes, execution of these subprocessesdegenerates into mere work or task routines-that is, people become accustomed to doing theirjobs in only one way-or
into easy-to-accomplishtask procedures-that is, people allocate among themselves the work involved in a specific
task. To cite one example, in executing the subprocesslearning about customers'productuse and application,the experience of some firms indicates that members of customer
site visit teams often merely "go through the motions" of
asking predeterminedquestions, asking rudimentaryfollowup questions, completing detailed questionnaires, and describing observations of customers' behaviors in a largely
perfunctorymanner.
Second, the marketing-specifictasks inherent in CRM
subprocesses can be linked directly and indirectly to individual subprocesses in both the PDM and SCM processes.
For example, many of the tasks noted in the precedingparagraph that pertain to the subprocess learning about customers' productuse and applicationcan generate data and
informationthat should serve to inform design and execution of several subprocesses in the other two core business
processes.

Marketing, Business Processes,

and Shareholder Value
The previous section focused on the impact of marketplace
shifts on the core business processes and how a market-driven orientationshould influence each process. The role of
marketing activities in these cross-functional business
processes varies greatly (Deshpande, Farley, and Webster
1993*; Kohli and Jaworski 1990*; Narver and Slater
1990*). Marketingis likely to emerge as a lead function in
managingcustomerrelationships.It plays an importantrole
in the articulation(i.e., by defining the value propositionand
positioning in the market),navigation (i.e., throughmarket
sensing and informationdissemination), and orchestration
(i.e., process management and coordination) of the CRM
process (Day 1997*). However, the role of marketingactivities in the PDM and SCM processes is likely to be in the domain of articulationand navigation. When these processes
are dominatedby technology- and engineering-drivencultures, marketing often is reduced to a subordinate selling
role.
Investments Required to Develop Business
Process Capabilities
Investment in researchand development (R&D), engineering and development of new technology platforms, networks, and alliances can be viewed as enabling PDM
processes thatresultin both tangible assets, such as superior
products,and intangibleones, such as intellectual property.
Similarly, infrastructureinvestments in SCM, such as electronic channels and plants and equipment,can be viewed as
leading to largely tangible assets that support the supply
chain infrastructure.However, intangibleassets, such as relationships with suppliers and distributors,are also invaluable. And, CRM process investmentsthat nurturebrandde-

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velopment and customer supportand that enhance the size

and quality of the customer-installedbase result in marketbased assets. These are typically intangible assets such as
brands,customers,and distributionnetworks(Aaker 1991*;
Lane and Jacobsen 1995*; Srivastava,Shervani,and Fahey
1998).
Because CRM investments lead to less tangible assets
(e.g., brands, customers, distributors),they are typically
harder to justify. But assets resulting from investment in
business processes create sustainable competitive advantages and capabilities. Therefore, they representresources
thatfirms can tap in drivingshareholdervalue. For example,
differentiatedbrandsare more responsiveto advertisingand
promotions(Keller 1993*), and brandloyalty can be tapped
to reduce marketing expenditures in times of cash flow
crunch (Srivastava,Shervani,and Fahey 1998).
The recognitionof customers,distributors,and brandsas
market-basedassets raises the question of whether marketing expendituresshould be treatedas operatingexpenses or
capital investments(Srivastava,Shervani,and Fahey 1998).
For managementpurposes, the treatmentof marketingexpendituresas capital investmentscould provide brandswith
a defensible claim when competing for resourceswith other
capital expenditures, especially in industries in which
off-balance-sheet assets are a large proportionof market
value for firms (Huntand Morgan 1995*;Lusch and Harvey
1994*).
Financial Valuation Methods for Assessing
Impact of Business Processes

the

There is considerabledebateregardinghow economic value

is createdby strategicinitiatives and how it should be measured(Day and Fahey 1988;Pessemierand Root 1973*; Srivastava, Shervani, and Fahey 1998). Although valuation
methods include multiple approaches,such as price/earnings multiples, market-to-bookvalue ratio, economic value
added (EVA), cash flow returnon investment(CFROI)beyond cost of capital, marketvalue added(MVA), and shareholder value (SHV), approachesbased on cash flow (EVA,
CFROI, SHV) have received greatersupport.In particular,
EVA, combinedwith attendantvalue-basedmanagementapproaches that link compensation and incentive systems to
factorsthathelp createEVA, has gainedpopularityin recent
years.
Unfortunately,thoughEVAis relativelyeasy to measure
from currentperformanceinformation(it is equal to net operating profits after taxes [NOPAT]less the cost of capital
employed in creatingNOPAT),it has been criticized for its
short-termfocus and undervaluationof growthpotentialand
intangible assets (Elliott 1997*; Luehrman1997*). In contrast, SHV is createdby a business process and is based on
the net present value (NPV) of futureprojectedcash flows
duringthe period.This is a dauntingand subjectivetask that
requiresdifficult projections.
On balance, the dominant financial perspective is that
marketvalue createdby strategicinitiativesis best reflected
by the NPV of all futurecash flows expected to accrueto the
firm (Martin 1998*). The importanceof this perspective is
underscoredby the large proportionof the value of firms

that is based on perceived growth potential and associated

risks. More often than not, value is based on growth expectations as opposed to a mere continuation of past performance. The challenge, therefore,is to demonstrateand measure the value created by resources devoted to marketing
activities in terms of their impact on currentoutcomes and
on perceptionsof futurefinancial performance.
Although measurementdifficulties abound, the principles of SHV creation are simple. Because of the time value
of money (discountingfor risk), earliercash flows are more
highly valued, and certainly higher levels are preferredto
lower ones. Reduced risk is valued as well. As we (1998)
previously have discussed, the SHV-based planning approach proposed by Rappaport(1986) is based on four
"valuedrivers":
1. Accelerationof cash flows; earlier cash flows are preferred
because risk and time adjustmentsreduce the value of later
cash flows;
2. Enhancementof cash flows by increasingrevenues and reducing costs, workingcapital, and fixed investments;
3. Reductionin the risk associated with cash flows by decreasing both their volatility and vulnerabilityand, indirectly,the
firm's cost of capital;and
4. Augmentationof the long-termvalue of the business (at the
end of the planning horizon) through investments in
processes that result in both tangible and intangibleassets.

Typically,the last value driver is simply an outcome of

a finite planninghorizon.If we define a finite planninghorizon over which to projectcash flows, the long-termvalue at
the end of the horizon should be discountedback to the present. But, if we adoptan infinitely long time horizon,the last
of the fourdriversis incorporatedautomaticallyinto the valuationand is an outcome of the first three.Therefore,in this
article, we focus on the first three to illustrate,ratherthan
provide an exhaustive assessmentof, how marketingactivities infuse business processes and drive shareholdervalue.
Examples of these relationshipsare summarizedin Table 3.
We turnnow to a discussion of how marketingmind-set
and activities provide a link among the three core business
processes and the three drivers of shareholdervalue. Although each business process potentially can influence
every driverof shareholdervalue, for reasonsof brevity,we
discuss a subset of all the possible linkages. The goal is to
illustrate ratherthan provide an exhaustive assessment of
how marketing activities influence and link business
processes to the driversof shareholdervalue.
Accelerating Cash Flows
Cash flows are accelerated by developing products faster,
moving them faster throughthe supply chain, and reducing
the time for market acceptance. Inculcating the marketing
discipline into the mind-setof those thatlead and participate
in each core business process and integratingspecific marketing tasks into the work of each subprocess play central
roles in deciding more quickly both to do the right things
and to do them faster and better.
Getting the right market inputs, such as customer requirements,assistance in ensuring appropriateproductuse,
and an assessment of competitors' potential productoffer-

ShareholderValue1173

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Business

Processes

TABLE 3
and Drivers of Shareholder Value
Business Processes

Product Development
Management Process

Supply Chain Management

Process

Customer Relationship
Management Process

Acceleratingcash flows

Speed up cycle time for

technologies
Speed up product
development,reduce time
to market

Speed up adoptionby
channels and original
equipmentmanufacturers
Speed up adoptionof
components and supplies
Reduce orderdeliverycycle
time
Reduce time to volume

Reduce time for market

acceptance (i.e., market
penetrationcycle time)
Minimizecustomer solution
developmentcycle time

Enhancingcash flows

Supplychain process
reengineeringto minimize
costs (e.g., by reducing
margins
Cannibalizeexisting
problemincidence rates)
Reduce workingcapital
productsby higher
throughjust-in-time
price/margininnovations
methodologies
Simplifieddesigns to reduce
Reduce capitalinvestments
costs
Customerinputsto eliminate
by outsourcinglow valueadding elements of the
unnecessary features and
costs
supply chain
Use marketinformationand
Sharingmodulardesigns
forecasts to reduce costs
across productsto reduce
and inventoriesand
costs; reusingdesigns
enhance capacity use for
Acquiring/licensing
higher-valueproducts
technology
Design for manufacturability
(e.g., dynamicpricing/yield
and assembly to reduce
management)
costs and time

Supporthigh marginswith
brandedproductsand
superiorservice
Cross-selling parts,
consumables, and
complementaryservices
Maximizecustomer value
(and revenues) by
assembling customer
solutions (including
competitiveproductsand
services)
Acquirecustomers;grow
installedbase
Refine the qualityof
customer base (to reduce
receivables and inventory);
customer management
Lowerproductlaunchcosts;
lower sales and service
costs

Reducingrisk(vulnerability
and volatilityof cash
flows)

Ramp rate of innovationto

keep ahead of competition
Technologyand strategic
alliances to establish
market-drivenstandards
Continuousfocus on
differentiation-designing
hardto copy products;
creatingunique
product/servicebundles
Market-driven
product
designs and configurations
Planned productline
migration(and product
obsolescence)
Maximizesynergies across
productportfolio(e.g.,
productswith
countercyclicaldemand
patternsbut common
resource requirements)

Increase switchingcosts for

distributorsby providing
service, incentive,and
loyalty("entanglement")
programs
Minimizeconflictwith
distributors;manage
competitionacross and
withindeliverychannels
Design hardto copy order
deliveryprocesses
Demand-drivenflexible
manufacturingand order
deliverysystems; integrate
manufacturingand
marketingusing everyday
low price, not high-low
pricingapproaches
Outsourceuncertaindemand
delivery;"insource"
supplies (e.g., vendor
managed inventory)

Customer retentionand
loyaltyversus acquisition
and attractionprograms;
loyaltyprograms
Increase customer switching
costs by bundlingproducts
and services
Excellence in deliveryof
intangibles,experiential
attributes,and services
Leverage market-based
assets (value networks)
Customereducation/training
programs
Leasing programs
Price concessions for longterm deliverycontracts
Cross-selling parts,
consumables, and
complementaryservices

Shareholder Value Drivers

to
Productdifferentiation
enable higherprices and

ings, to the teams involved in each PDM subprocess can

help eliminate or reduce false startsand delays in conceptualization, specification, and prototypingof customer solutions. Let us briefly consider two PDM subprocesses. Developing a solution concept, such as a new form of

integratedhardwareand software system architectureor a

new way of washing and drying clothes in the home, increasingly involves many forms of inputs from and interactions with differentcategoriesof customers.One systems integratororganizes a series of intensive exploratorysessions

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with a small set of its most demandingcustomersto generate potentialsystem architecturesthat may be radicallydifferent from prevailing designs. Such intense customer involvement is intended to avoid the animosity and
subsequenttime-consumingredesignsthatoften occur when
potential solution concepts first are developed by product
development personnel and then presented to customers
(Eisenhardtand Brown 1998*; House and Price 1991*). A
failure to manage time to marketresults in false starts,delays, and missed opportunities.These are sometimes extremely costly in terms of both time and money.
Reducing cycle times in each SCM subprocess contributessignificantly to customersgetting the rightproducts
in the desired form and getting them faster. Reducing time
to market, time required to commercialize products, and
time to volume are driving mantrasin most organizations.
Yet an absence of marketinputs and perspectiveall too often retardsthe speed of commercializationand thus the receipt of cash flows. To get productsto marketfaster, firms
increasingly select suppliers that are willing to develop
componentsand specialized inputsjointly and offer the suppliers inducements to speed up component development.
When viewed as transmittingdata and informationrather
thanmoving physical goods, even some SCM subprocesses,
which may not have evident or obvious connections to customers' needs, requirements,and interests,such as inbound
logistics, internal logistics, and assembling components,
contribute to speeding commercialization and sustaining
market penetration.Electronic data interchangeand Internet-based communications networks now instantaneously
connect marketdata, such as sales dataand locationof product sales by store outlet and geographicregion, to suppliers'
production schedules, logistics firms' delivery timetables,
and internalmaterialshandlingroutinesthrougha virtualintegrationof the supply chain (Magretta1998*). At the other
end of SCM, understandingchannel motivations enables
firms to createthe rightprogramsto educatedistributorsand
the right incentives to streamline and speed up outbound
distributionand, thereby,adoptionby channel partners.
Most companies understandthe importanceof time to
marketbecause of the time value of money and competitive
uncertaintiesalong productlife cycles. Yet many such companies fail to realize that inadequateattentionto barriersto
marketacceptancecan delay productadoptionand diffusion
and, thus, cash flows. Such CRM subprocessesas advertising and promotionbuild more rapidproductawareness,entice early product trials, and promote repeat purchases.In
addition, customers adopt and refer to branded products
more quickly (Zandan 1992*), market seeding facilitates
diffusion of innovations(Jain,Mahajan,and Muller 1995*),
and networkexternalitieslinked to the size of the customerinstalled base foster market acceptance (Arthur 1989*).
Each of these results supportscash flow accelerationbased
on CRM.
Unfortunately, companies often balk at spending
amountsfor channel and marketdevelopmentthatare an order of magnitude lower than product development costs.
Cooper (1993*, p. 26) finds that, in the case of industrial
new productdevelopment, 78% of total effort as measured
by person-dayswent to technological and productionactiv-

ities, compared with only 16%for marketingactivities. As

Robertson(1993*) highlights,this can be an expensive mistake because many productshave failed to realize their potential because of inadequateattention to speeding up the
marketacceptance cycle for products.Such speeding up of
marketacceptanceis more likely to occur if companies measure (e.g., half-life or time requiredto reach 50% market
penetration;percentageof the available market that tries a
new product within a targetedtime period) and reward reduction in the productcommercializationcycle time. A better balance of resource allocation between time to market
and penetrationcan lead to fastertime to money (House and
Price 1991*).
Enhancing Cash Flows
Although the conceptual approaches to enhancing cash
flows vary across business processes, the reason for doing
so remains consistent: Augment revenues by increasing
sales volume and/orprices and enlarge margins (in part) by
reducing costs. The PDM subprocessescontributeuniquely
to enhancingcash flows when they collectively create solution platforms that facilitate further product design, customization of solutions, and adaptationof product use by
customers. Solution platforms include similar product design specifications and sharedcomponentsand supplies, as
well as shared productionprocesses. These enable firms to
eliminate significantcosts and manufactureproductsin high
volumes that can be tailored to meet the needs of distinct
customer groups and, in many cases, of individual customers (Robertsonand Ulrich 1998*).
In short, solution platformsoften enable firms to deliver
productvariety thatotherwiseeither is unattainableor could
be accomplished only with a disproportionateupsurge in
costs. Consider Kodak's response to Fuji's 1987 introduction of the QuickSnap35 millimetercamerain the U.S. market. Kodak did not have a comparablemodel of its own, designed a rival product, and then introduced three more
models. All four models shareda common platform,which
enabled Kodak to develop and produce its products faster,
resulting in considerably greater product variety than Fuji
and clear market domination by 1994 (Clark and Wheelwright 1996*).
The PDM subprocessesalso may contributeto controlling or even reducing costs. Productdesign simplifications
often significantly reduce costs. Astute use of alliance networks to access unique types of research and technical
knowledge serves to lower the costs associated with developing tentative solution designs and productprototypes.
Marketinputsalso can enhancecash flows throughtheir
influence on SCM subprocesses. Projectionsof customers'
productneeds aid in determininginputrequirements,establishing sufficient inbound logistics capability, determining
and acquiringappropriateproductprocess technologies, and
choosing the most effective distributionchannels. Companies such as Benetton, Amazon.com, and Dell have been
successful in using market informationto identify higherdemand colors, titles, and product configurations, respectively. By promoting these "best-sellers,"they drive the
market to enhance revenues and reduce costs simultaneously. Better marketinformationcan be used to reduce proShareholderValue/ 175

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curementcosts and inventorylevels. In addition,marketinformationenables companies to postpone actions until they

are needed. This allows for just-in-timecommitmentof resources and higher efficiency.
In managingcosts, marketingalso plays an importantinformationaland navigationalrole. For example, market information(e.g., customer orders) and forecasts are used to
drive down finished goods and component inventories at
Dell, for which inventory levels recently have averaged
eight days, or 40 inventoryturnsper year.Periodicforecasts
by American Airlines's vaunted Sabre System enable it to
release lower-priced seats contingent on demand forecasts
for higher-pricetickets. This dynamic pricing approachenables Americanto derive highereconomic value from fixed
capacity.
Many might argue that a fundamentalpurpose of CRM
is to augment sales revenues. Each CRM subprocess contributes to identifying customers needs; adapting solutions
as these needs change; and promoting,selling, and servicing
delivered or installed solutions. Research indicates that
brandedproducts lead to "imperfect"markets,and the monopolistic power they affordsupportshigherprices and margins (Boulding, Lee, and Staelin 1994*). Intimatecustomer
relationships provide a point of leverage to realize
economies of scope (Treacyand Wiersema 1995*). For example, the customer base can be leveraged to enhance revenues by cross-selling complementaryproductsand services
or upselling to higher-qualitysubstitutes.The cash flowenhancing potentialof customerrelationshipshas led to the
recognition that customersare market-basedassets (Srivastava, Shervani,and Fahey 1998). Finally,in recentyears, the
potential of CRM to contain and reduce costs has received
explicit attention. It has been shown that better customer
management results in lower sales and service costs and
higher buyer retention and, therefore, lower customer replacementexpenditures(Reichheld 1996).
Reducing the Vulnerability and Volatility of Cash
Flows
Projected cash flows can be vulnerableto competitive action and subject to volatility because of demand fluctuations. Therefore, marketingas a discipline and the execution of individual marketing tasks can contribute to the
reduction of the vulnerabilityand volatility of cash flows,
especially when the root causes of such risks are outside the
organization.

Marketingas a discipline infuses marketinputs, such as

changing customer needs, potential technological breakthroughs,and competitors'likely productintroductions,into
each PDM subprocess with the intent of keeping the firm's
stream of new products ahead of currentand emerging rivals' offerings. Intel, Merck, Motorola, IBM, and many
other firms endeavor to reduce product vulnerability by
committing extensive resources to subsequent generations
of product(s) while the next generation is under development. Moreover,thougha reputationfor excellence in product developmentcan be a driverfor performanceand differentiation(e.g., Intel can demandloyalty), success of product
platformsmay depend heavily on the successful execution
of marketingtasks that supportvalue networks(e.g., the In-

tel Inside campaign). In addition, firms can take advantage

of multipleproductlines by creatinguniqueproduct/service
bundles (e.g., Microsoft's Office Suite) that others cannot
duplicate. Or, they might manage migration of customers
across productlines duringtheir family life cycle. Thus, sustainablecompetitive advantagescan be developed by defining and renewing value propositionsand marketingstrategies that guide product development. Such advantages
mitigate risk.

Managing product innovation, and thus additions and

deletions to product portfolios, greatly aids in managing
volatility of cash flows. Maintaining products in markets
thatare countercyclicalreduces cash flow volatility because
negative correlation between cash flows from individual
productsleads to lower varianceand, therefore,lower risk.
Moreover,marketinputs that portendchange in the growth
rates of market segments guide the commitments of resources to development of products for emerging growth
segments. Such informed commitments reduce risk in the
future.
Cash flow vulnerability may be reduced by the SCM
process through process innovation. For example, Gillette
reduces risk by designing hard-to-copy manufacturing
processes, including the machine tools used for production.
Risk also may be reducedby managementof distributionrelationships.Manufacturerscan increase switching costs for
distributorswith "entanglementprograms,"such as incentives to distributorsales personnel,or with services.
The SCM process also may be managed to minimize
volatility in cash flows. Demand-drivenflexible manufacturing and order delivery systems reduce cash flow uncertainty. For example, Procter & Gamble is emphasizing
everyday low price instead of high-low price promotions
because the latter cause peaks and valleys in demand patterns that wreak havoc in manufacturingoperationsand increase the volatility of cash flows. Other firms seek to reduce potential susceptibility to volatility in demand by
buildingcapacityto cover projectionsof steady demandand
outsourcingproductionto cover uncertaindemand.
Strategistslong have understoodthe importanceof barriers to entry,such as investmentsin R&D and manufacturing systems. However, the emerging literaturesuggests that
the barrierto entrythat is hardestto overcome might be customer loyalty. Successful implementation of CRM subprocesses can contributeto greatercustomerswitching costs
and loyalty (Reichheld 1996), thus lowering cash flow vulnerability.To cite some examples, highercustomerretention
is fostered by loyalty programs (e.g., American Airlines
AAdvantage) and by increasing switching costs through
bundlingproducts/servicesand leasing programs(e.g., auto
leasing programsresult in substantially higher repurchase
rates).
Some firms now routinely coordinateand leverage promotion, advertising, selling, and service subprocesses to
cross-sell consumables(e.g., tonerand ink for printersin the
case of Hewlett-Packard)and services as one means to reduce volatility in cash flows. Other firms leverage their relationshipswith particularcustomersby grantingprice concessions in exchange for longer-term purchase contracts,
thus enhancingthe likelihood of stable cash flow for a spec-

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ified period. Typically, both the vulnerabilityand volatility

of cash flows are undervaluedwhen a short-termtransaction
perspective displaces a longer-termrelationshipmentality.
One irony is that customer retentionstrategiesand the role
of marketingare likely to gain greaterrecognition as their
implicationsfor the vulnerabilityand volatility of cash flow
gain wider appreciationand the long-termvalue of customer
purchasesis compounded over time (Srivastava,Shervani,
and Fahey 1997).

Discussion
The ability of marketersto influence marketplaceperformance will be increasinglydependenton the extent to which
core business processes are infused with a marketingperdata. The need
spective and shaped by marketing-generated
to adopt a cross-functionalperspectivewas underscoredby
a workshop sponsored by the MarketingScience Institute
thatfocused on managementof corporatefault zones (Montgomery and Webster 1997). Paperspresentedin this workshop emphasizedthatmarketingsuccess or failureno longer
can be denominatedonly in traditionalproductmarketperformancemetrics such as sales and marketshare.Marketing
investments and commitments must be assessed for their
impact on efficiency and effectiveness of business
processes, financial outcomes, and creation of shareholder
value. In the discussion that follows, we focus on the implications of this framework for marketing theory, practice,
and teaching.
Implications for Marketing Theory
Although marketingscholars long have issued innumerable
admonitions to stipulate, test, and accumulate marketing
theory, a recent plaintive cry manifest in the literaturehas
called consistently for new theories that embrace new concepts and variables that address how and why marketing
succeeds or fails (Lehmann 1997*; Webster 1997*). Extending existing theoretical frameworksmay no longer be
sufficient to reflect marketplaceshifts and guide marketing
practice in the fundamentallynew competitive context and
conditions that will characterizethe new millennium.
The frameworkpresentedhere offers a potentiallyfruitful approachto developing marketingtheory that expressly
responds to emerging change in both organizationaland
competitive contexts, with the intent of explaining success
and failure (Anderson 1982; Day 1992*). Although extensive conceptual and empirical work lies ahead, the framework presentedhere suggests that marketingscholars must
addressthe following more explicitly:
*Thespecificationof intraorganizational
conditions,specifically core businessprocesses,as a componentof marketing
theories;
of cause-and-effect
*Thepostulation
linkagesbetweenmarketing andthedesignandexecutionof corebusinessprocesses;
*Thepostulationandtestingof cause-and-effect
linkagesbetween core businessprocessesand both marketplaceand
valuevariables;and
shareholder
to the enterprise,
contribution
of marketing
*Thevalue-added
in termsof meetingorganizain whichvalueis denominated
tional prerequisites,marketplaceperformance,and shareholdervalue.

Fromtheory to practice. Marketingtasks do not exist in

a vacuum. They are subprocesses within broaderbusiness
processes. Marketing theory therefore must incorporate
these processes explicitly as an input to marketingstrategy
choices and decisions that affects both marketplaceand financial performance.Attention to core business processes
extends the domain and complexity of marketingtheory to
include organizationalfactors as determinantsof marketing
success and failure.Adding a cross-functionaldimension to
marketing practice raises the hurdle for marketers.Their
success would require functional (marketing) excellence
and depth,as well as cross-functionalprocess competence to
ensure the implementationof marketingideas. Unless other
functions appreciatethe value of what marketershave to offer, little progress can be expected in terms of businesses
embracingmarketingconcepts.
The frameworkalso suggests that marketingtheories no
longer can address only marketingoutcomes as the criteria
of success. They must connect marketplace performance
measures, such as brandloyalty, with financial dimensions,
such as reducing the vulnerability and volatility of cash
flows. Rich theoreticalinsights thus might be derived when
marketplace-financialperformancelinks are postulated.For
example, might companies with greatercustomerswitching
costs and retention rates face lower risks and, therefore,
lower costs of capital and higher price-earningsmultiples?
Theoriesof explorationand exploitation.At a somewhat
more fine-grainedlevel, the frameworkfacilitates developing and refining distinctions between market-focusedtheories of exploration and exploitation (cf. March 1991). Exploration theories focus on creating new business
opportunities.At their core, market-focusedtheories of explorationaddressthe developmentand testing of opportunities that will take the organization'smarketingstrategy in
new directions.They focus on creating truly new products
or solutions and changing the nature of competition by
changing the business processes that deliver them. Their
outcome might constitute a new theory of the business
(Drucker 1994*), fundamentallynew customer functionalities (Hamel and Prahalad1994*), or specific insights about
how to shape the futureratherthan be shaped by it (Fahey
and Randall 1998). Explorativeactivities on the partof businesses typically require insights regarding customers and
competitors,assumptionsabout future success criteria, and
investmentsthat are risky but that may result in majorpayoffs. Such investments in infrastructuresthat facilitate
PDM, SCM, and CRM processes typically provide strategic
options to participatein new product platforms, channels,
and marketsegments. Thus, an options theory approachto
assessing the value of projectedcash flows may be more appropriatethan traditionalmethods (Luehrman1998).
Exploitationtheories, in contrast,addressthe execution
and leveragingof existing marketingstrategies.The emphasis is on how core business processes contributeto implementing a given strategymore efficiently and how the strategy can be adjusted to create and avail of related
opportunitiesmore effectively. Thus, explorationaddresses
building competitive advantages, whereas exploitation focuses on leveraging these assets and capabilities in enhancing product market performance.A conceptualization of
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marketingas a subprocess,embedded in the core business

processes and explicitly linked to cash flow consequences,
can facilitate the development of theory pertainingto the
role of marketingin organizationalefficiency and effectiveness. To the best of our knowledge, such a theory has not
been attempted.Our frameworkis a step in thatdirection.
Implications for Empirical Research
The theoreticalimplications previously noted suggest several interrelatedempirical researchdirections. Our particular interesthere is to identify researchissues and directions
thatlargelyhave been ignoredin the marketingliteraturebut
thatthe frameworkdeveloped here suggests will become increasingly central to marketing's emerging empirical research agenda. Propositionsof interestcan be linked to the
role marketingplays in business processes, as well as a vision of the future.In this sense, assertionsmade in Table 2
provide rich opportunitiesfor research.
For example, as we move from stand-alonecompetition
to networkedrivalry,it appearswe must learnto move from
a complete dependenceon our own capabilitiesto managing
a network of relationships.But, how a firm does so is debatableand thereforeworthyof investigation.
and
to managingteamwork
*Whatwill be thebestapproaches
in developacrossfunctionsandbusinesspartners
integration
ing newproducts?
in and virtualinte*Whatarebest practicesfor participation
networks?
chain/value
of
Why?
supply
gration
across
*Howshoulda firmmanagea networkof relationships
andcompetitors?
Why?
channelpartners,
customers,
partners,
in
*Whatarethe best ways to measuresuperiorperformance
networkmanagement(versus performanceof stand-alone
productsandservices)?
Although some of these issues, such as teamwork in
new product development, are under academic investigation, others, such as virtualintegrationacross suppliersand
channel members,are understoodbetterby marketingpractitioners employed by industryleaders (e.g., Dell). Similar
issues can be raised with respect to assertions related to
marketing'srole in business processes for each of the other
marketplace shifts in Table 2. Other questions worthy of
empirical investigation stem from the influence of marketplace shifts on core business processes, how core business
processes and marketing subprocesses relate to product
market performanceand shareholdervalue, and how a focus on shareholdervalue in turn influences the design and
management of core business processes and marketing
subprocesses.
*Whatis the influenceof corebusinessprocesseson product
marketperformance?
*Whatis the influenceof core businessprocesseson shareholdervalue?In whatwaysdo the threecoreprocessesindividuallyand collectivelyaffect the threedriversof shareholdervalue?
onshare*Whatis theinfluenceof productmarketperformance
resultssuchas
holdervalue?Howdo individualmarketplace
value
increasein brandloyaltyaffectmeasuresof shareholder
such as market-to-bookratiosand price earningsmultiples?
*Whatis the impact of shareholdervalue on productmarket
performance?For example, how does brandequity influence
brandperformance?

*Whatis the influence of shareholdervalue on core business

processes? How might shareholder value goals affect outsourcing,coordination,and integrationof business processes?

Implications for Marketing Practice

A centralimplicationof the frameworkpresentedhere is the
need for many practitionersto alter their mental model of
marketingradically.An understandingof the role of marketing within core business processes may requirea paradigm
shift in the way many marketingmanagers understandthe
scope and content of marketing,how it is executed, how its
results should be assessed, and, more important,how they
can communicate with and influence managers in the top
echelon.
An initial implicationis that unless marketingmanagers
understandthese central marketplaceshifts, the forces driving them, and their implicationsfor marketingaction, they
will be unable to craft and execute successful strategies. In
short, in view of the discontinuitiesevident in marketplace
shifts (again, say from stand-alone competition to networked rivalry), it seems safe to suggest that traditional
marketingperspectivesalmost certainlycontain within them
the seeds of marketplacefailure.
A pervasive implication is that if marketingis to be the
energizing source of creating and exciting customers, it
must infuse and integratethe activities that fall within the
organization'score organizationprocesses. Managerstherefore must understandthe domain, role, and contributionof
each core process, the connections among them, and their
broadconsequences for marketplaceand financial success.
More specifically, marketing managers must understand
how individualactivities within each core process-for example, product design within PDM and concurrentengineering within SCM-can create customer success, such as
ease of productuse and ability to adaptthe productto multiple uses.
In the interestof developing winning strategies,marketing managersalso must carefully analyze and identify how
marketingcan contributeto the design, development, execution, and integration of organizational processes. They
thereforemust assess which marketing-generateddata can
serve as inputs to specific activities within each core
process, to integrationwithin each process, and to coordination among them. Marketingmanagersshould be positioned
ideally to develop projectionsof change within and across
marketplaceshifts and to posit how these changes would affect productvariety within the PDM process, economies of
scale within the SCM process, and increasingreturnsin the
CRM process. Put bluntly,it is our contentionthat the articulation of these types of connections is a sine qua non of
marketingsuccess in the emerging marketingera.
A new and unavoidable challenge for marketingmanagers is the need to assess the cash flow consequences of
their decisions, commitments,and investments.Two implications immediately arise: Managers must learn both cash
flow analysis methodology and the underlying thought
process. Regrettably,the latter often is underappreciated.
However, as is evident in this section, it is essential to the
frameworkpresentedhere. Thus, cash flow measures must
become a centralcomponentof managers'mentalmodels of

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strategy evaluation. Dependence on product market measures is no longer sufficient.

Assessment of cash flow consequences also has feedback implications in strategy development and execution.
Managersmust use cash flow analysis as an input in determining core process configurationand execution and in the
developmentand choice of strategyalternatives.For example, the ability to projectthe cash flow consequences of alternativemarketingprogramsenables managersto question
the desirabilityand viability of individualstrategies.Thus, it
encourages them to consider how strategies might be
amendedto achieve results in the productmarketplacethat
would lead to superiorfinancial returnsrelative to internal
and externalperformancecriteria.
Performancemetrics can be benchmarkedagainst both
internal (say, against other divisions or product groups or
performance levels achieved in the past) and external
(against best practices or performancelevels achieved by
competitorsor "best in class" companiesin otherindustries)
standards.Of particularinterestis an emergingfocus on doing things faster and using fewer resources.Several leading
companies now focus on "velocity metrics"that track the
rate of change in measures they deem as central to their
source of sustainable advantages and marketplaceperformance. Ratherthan focus on the absolutelevel of measures,
such as marketshare, returnon assets, or cycle time for order delivery processes, they track continuous improvement
(either change or rate in change) on these dimensions. This
is based on the belief thatstock marketanalyststrackand rewardmomentum,or rateof positive changes in performance

measures(Meredith 1998*). In addition,the frameworkcan

be used to provide new normative benchmarks that are
linked to logic and process knowledge. For example, if a
made-to-orderdelivery process takes one day, then the components inventoryrequirementof (say) threedays should be
adequate.
Marketplace trends present additional measurement
challenges. What are appropriate performance metrics,
given market conditions and competitive environments?
How does the relative importanceof these metrics change
over the product life cycle, as management priorities
change, as new competitionemerges, as technology-enabled
process managementgets underway,as the pendulumshifts
from vertical integrationto virtual (horizontal) integration
and back to vertical?Should the balancedscorecardbe used
to control business processes, or should the scorecard purposely be unbalanced to ensure a focus on practices designed to create an uneven playing field and change the natureof the competitivegame? If marketerscan addressthese
questions successfully, they will be able to (1) influence
marketingactivities in every business process of the organization and (2) ably articulate,in the language and methodologies of finance and top management,the contributionsof
marketing(Buzzell and Sisodia 1997*). In affording direct
linkages to core processes and cash flows, the framework
presented here enables marketing scholars to develop and
test new marketingtheories and exhorts practitionersto reconsider established marketing practices. We would argue
that doing so must become the hallmarkof the marketing
profession as we enter the new millennium.

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