252018 Strategy, marketing, and technology are all intertwin.docx

2/5/2018 Strategy, marketing, and technology are all
intertwined - Chief Marketing Technologist
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intertwined/ 1/8
JANUARY 20, 2014BY SCOTT BRINKER
Strategy, marketing, and technology are all intertwined
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Joe Pulizzi and Robert Rose covered my latest marketing
technology landscape as part of their
PNR: This Old Marketing podcast this week. They start on this
segment around the 24:49 mark,
with a ri� on the Saturday Night Live The Rent Is Too Damn
High skit. “Digital marketing is too
damn complicated!”
It’s a terri�c discussion about the interplay between marketing,
technology, IT, strategy, and
process. These were some of the points raised in their chat:

“Technology is de�nitely outpacing our ability to consume it as
marketers.”
Buying technology is not a good way to �gure out your
strategy.
Most marketers aren’t using the technology they already have
very well.
These problems happen when marketers are in charge of
technology purchases.
Marketing and IT need to be better aligned and more
collaborative.
You should determine your strategy and process �rst, and then
�nd the right software to
execute that — �t the tool to the problem, not the problem to
the tool.
The only thing technology can do is make your processes more
e�cient.
I agree enthusiastically with about 75% of that. But there are
three points I’d make:
1. Marketing technology is not just about e�ciency — it’s about
experiences.
2. The relationship between strategy and technology is circular,
not linear.
3. Marketers cannot abdicate their responsibility to understand
technology.
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Marketing technology landscape (2016)

What will happen with marketing
technology in 2015?
What if 1,000+ marketing technology
vendors were the new normal?
Strategy, marketing, and technology are all
intertwined
Strategy, marketing, and technology are all intertwined. To
reference the How to Draw an Owl
post from Seth Godin that Joe and Robert mention later in their
podcast, the reality is more
complex than just drawing two circles.
Marketing technology is about both e�ciency and experiences
Here’s the one quote from the podcast that I really disagree with
(emphasis partly mine):
“Figure out your process �rst. And then get aligned with your
internal IT guys to �gure out
what it is you exactly need to facilitate. Because that’s the only
thing that technology will
ever, ever do. The only thing technology will ever do is
facilitate a process that you have
more e�ciently. That’s all it’s ever going to do.”
Um, no. That trivializes the role of technology in modern
marketing too much.
Marketing technology is not just about making existing
processes more e�cient. It’s the
interface by which marketing sees and touches the digital world.
Your choice of marketing

software — and how you use it — will shape the experiences
you deliver to prospects and
customers.
Examples include: web and mobile marketing apps, webinar and
virtual event software,
personalization, gami�cation, interactive ads, and so on. In
content marketing, Uber�ip is a
great example of marketing software that is more about
experience than e�ciency.
Other marketing technology is focused on e�ciency, but not
always by facilitating existing
processes. In many cases, it’s about creating entirely new kinds
of processes that weren’t even
possible before.
For instance, using marketing automation to simply schedule
batch-and-blast email is an
example of making an existing process slightly more e�cient.
But the bigger opportunity is to
create more personalized, behavior-driven nurturing processes
that weren’t conceivable with
manually operated email marketing. By the way, this doesn’t
just make lead nurturing more
e�cient — it can make it a much better nurturing experience for
your audience too.
I do agree with Joe and Robert that technology is not a magic
bullet. It won’t absolve you of the
need to produce brilliant content. But the interplay between
technology and strategy is more
complex than one merely being the handmaiden of the other.
The relationship between strategy and technology is circular

Joe and Robert make the excellent point that you shouldn’t buy
a bunch of technology and
then try to �gure out what strategy you can create with it —
Option B) in the sketch below. I
wholeheartedly agree. No technology is a strategy-in-a-box.
However, simply inverting that approach into Option A) —
de�ne your strategy, and then go
looking for technology to help implement it — isn’t quite right
either.
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The Marketing Technologist: Neo of the
Marketing Matrix
14 rules for data-driven marketing

Agile marketing for a world of change
The big data bubble in marketing
10 key principles of agile marketing
Everything is marketing, everyone must be
agile
Mktg tech: suite, platform, portfolio
Engineers are becoming marketers
Marketing software will never be ERP
Marketers should learn to program
7 laws of technology for marketers
5 strategies for business, life, and really
hard math problems
8 things every marketing technologist
should know
Marketers are the software they use
Data as a new marketing channel
Rise of the marketing technologist
Why? Because technological innovations change what kinds of
strategies are possible. If you
don’t let technology in�uence and inspire your strategy, you’re
missing the opportunity to
innovate your own business.

The right approach is Option C), more of a circular relationship.
You want to understand what
is technically possible — a frontier that is constantly advancing
— to inform your strategy
development. Your strategy then guides where you make greater
technology investments. And
what you learn from using that technology, especially as it
evolves, should feedback into the
re�nement of your strategy. Managed well, this can be a
virtuous cycle.
Keep in mind this Steve Jobs quote: “People don’t know what
they want until you show it to
them.” And Henry Ford, who said, “If I had asked people what
they wanted, they would have
said faster horses.” Innovation is often achieved through non-
linear leaps.
Continuously experimenting with new, emerging technologies
does not have to be the negative
“shiny object syndrome.” If it’s done in moderation, as part of
an intentional exploration of how
your business can harness new innovations, it can be an
evergreen source of competitive
advantage.
Marketers must take responsibility for their technology
Joe and Robert attribute a quote to Scott Stratten of
UnMarketing fame, “We suck at the
technology we have, much less buying anything new.”
(Although with a little bit of Googling, I
haven’t been able to �nd that quote.)
I don’t disagree with the diagnosis. After all, this explosion of

technology is a fairly new aspect
of marketing, so it’s not surprising that we collectively have
little professional intuition about
how to harness and manage it. However, the answer is not to
downplay technology. The
answer is to get better at using it well.
The reason why the CMO will spend more on technology than
the CIO is because it’s through
software-mediated channels that we’re engaging our audience.
Marketing is increasingly about
designing and delivering customer experiences, and software is
the digital clay we use to sculpt
them. The CMO is responsible for that outcome, so it makes
sense that the CMO should take a
leadership role in the technology strategy to achieve it.
Of course, marketing and IT should work together. Marketing
must adhere to IT governance as
much as it does �nancial governance. Security, regulatory
requirements, business continuity,
integration with the rest of a company’s IT systems, etc., are all
important facets of good
technology management. Marketing cannot be a rogue state.
But if marketing doesn’t really understand technology — and IT
doesn’t really understand
marketing — then their “collaboration” can all too easily look
like this: Marketing asks for faster
horses. IT gives them faster horses. The automobile passes both
of them by.
Other things being equal, IT will seek to minimize costs and
risks in technology purchases.
That’s a valuable perspective — but it’s not the only one that
matters. Customer experience

matters. Marketing performance matters. And the software that
is the cheapest or easiest to
buy may not be the most e�ective for marketing’s purpose.
Standardizing on everything from
GigantorSoft may optimize procurement — but that’s not as
important as optimizing customer
acquisition and delight.
Marketing must have a strong enough grasp of technology to
advocate for the software to
achieve its goals — and, more importantly, to be able to apply it
e�ectively when they get it.
But how do we get there from here, if marketing doesn’t have
those capabilities today?
The best path I’ve seen is for marketing and IT to embrace a
class of hybrid professionals called
marketing technologists. These are people with expertise in both
marketing and technology,
and they �uidly intermingle the two disciplines.
http://chiefmartec.com/2013/12/marketing-technologist-neo-
marketing-matrix/
http://chiefmartec.com/2013/09/14-rules-data-driven-marketing/
https://chiefmartec.com/2013/03/agile-marketing-for-a-world-
of-constant-change/
http://chiefmartec.com/2013/01/the-big-data-bubble-in-
marketing/
http://chiefmartec.com/2012/07/agile-marketing-in-a-single-
whiteboard-sketch/
http://chiefmartec.com/2012/06/everything-is-marketing-
everyone-must-be-agile/
http://chiefmartec.com/2012/05/marketing-technology-suite-
platform-or-portfolio/
http://chiefmartec.com/2012/05/engineers-are-becoming-a-lot-
like-marketers-too

http://chiefmartec.com/2012/03/why-marketing-software-will-
never-be-like-erp/
http://chiefmartec.com/2011/12/why-marketers-should-learn-
how-to-program/
http://chiefmartec.com/2011/08/7-laws-of-technology-for-
marketers/
http://chiefmartec.com/2011/05/5-strategies-for-business-life-
and-really-hard-math-problems/
http://chiefmartec.com/2011/01/8-things-every-marketing-
technologist-should-know/
http://chiefmartec.com/2010/08/marketers-you-are-the-software-
you-use/
http://chiefmartec.com/2010/07/data-as-a-new-marketing-
channel/
http://chiefmartec.com/2010/04/rise-of-the-marketing-
technologist/
http://en.wikipedia.org/wiki/Virtuous_circle_and_vicious_circle
https://twitter.com/unmarketing
http://www.unmarketing.com/
https://chiefmartec.com/2009/01/why-it-and-marketing-are-
diametrically-opposed/
https://chiefmartec.com/2013/12/marketing-technologist-neo-
marketing-matrix/
intertwined/ 4/8
Marketing Technology Landscape
Supergraphic (2014)
81% of big �rms now have a chief
marketing technologist

Comments
ROBERT ROSEROBERT ROSE SAYS:SAYS:
JANUARY 20, 2014 AT 3:57 PMJANUARY 20, 2014 AT 3:57
PM
Scott….Scott….
This is such a wonderful post…. Your subtle (but very
important) nuanced change in theThis is such a wonderful
post…. Your subtle (but very important) nuanced change in the
intertwining of the two is right on the money in my book… and
you’ll get no argumentintertwining of the two is right on the
money in my book… and you’ll get no argument
from me there…. I would agree – even if I didn’t elucidate it as
well in the podcast…from me there…. I would agree – even if I
didn’t elucidate it as well in the podcast…
I guess the only point I’ll take at all is where you disagree with
my assessment ofI guess the only point I’ll take at all is where
you disagree with my assessment of
technology…technology…
They may come from a predominantly IT background or a
marketing one, but they are credible
on both dimensions. They may directly report into IT or
marketing — I’ve seen both work, but
the latter is more common — but they serve the mission of
smartly applying technology in the
pursuit of brilliantly e�ective marketing.
Whether you love or hate the term “growth hacker,” that’s an
apt phrase for some of the best
work that marketing technologists do.

Not everyone in marketing needs to be a marketing technologist.
But having that capability
within marketing’s team changes marketing’s relationship with
technology. It’s no longer the
way a Neanderthal might look at �re, “Oooh, pretty! Ouch!
Ouch! Ouch!” It’s more like how a
blacksmith harnesses �re to forge objects of great strength and
beauty.
Tweet reddit
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If i’m “trivializing” it… you may be romanticizing it a bit… If
i’m “trivializing” it… you may be romanticizing it a bit… � �
Any company can invest in –Any company can invest in –
and too many over invest – the promise of “experience” creating
technology. and too many over invest – the promise of
“experience” creating technology. TheThe

challenge is that capability alone does not actually compel a
consumer to become a lead,challenge is that capability alone
does not actually compel a consumer to become a lead,
to purchase or to evangelize the brand… Only we (as humans)
can actually create theto purchase or to evangelize the brand…
Only we (as humans) can actually create the
experiences that, facilitated by great technology, can produce
the value that consumersexperiences that, facilitated by great
technology, can produce the value that consumers
�nd attractive enough to engage with.�nd attractive enough to
engage with.
And that’s really my point about marketers stepping up and
making sure that they �rstAnd that’s really my point about
marketers stepping up and making sure that they �rst
understand what they’re trying to do. A chainsaw in my hands is
nothing but a uselessunderstand what they’re trying to do. A
chainsaw in my hands is nothing but a useless
and dangerous weapon – whereas in an artist’s hands it becomes
a thing that createsand dangerous weapon – whereas in an
artist’s hands it becomes a thing that creates
beautiful ice sculpture and in a lumberjack’s hands becomes an
e�cient means tobeautiful ice sculpture and in a lumberjack’s
hands becomes an e�cient means to
produce lumber… Technology, by its very de�nition, is but the
application of tools to solveproduce lumber… Technology, by
its very de�nition, is but the application of tools to solve
a problem.a problem.
Of course I agree with you and think that marketers should be
aligned with technologistsOf course I agree with you and think
that marketers should be aligned with technologists
who can inspire the marketer with the capabilities that new
innovations bring…. But toowho can inspire the marketer with
the capabilities that new innovations bring…. But too
often that “shiny object syndrome” can blind the marketer into

thinking that the giantoften that “shiny object syndrome” can
blind the marketer into thinking that the giant
shiny new platform (or capability) is important – when it’s
actually not. shiny new platform (or capability) is important –
when it’s actually not. So – IMHO –So – IMHO –
strategy �rst (inspired by the capabilities that innovative
technology *might bring*) andstrategy �rst (inspired by the
capabilities that innovative technology *might bring*) and
then application of the technology to solve the challenge.then
application of the technology to solve the challenge.
Keep burning my friend… This was a really good one!!Keep
burning my friend… This was a really good one!!
Cheers,Cheers,
~rr~rr
REPLYREPLY
SCOTT BRINKERSCOTT BRINKER SAYS:SAYS:
PM
Thanks, Robert — �rst for covering this topic in your podcast
with JoeThanks, Robert — �rst for covering this topic in your
podcast with Joe
(including the very kind compliment at the start of that
segment) and for(including the very kind compliment at the
start of that segment) and for
taking the time to chime in on this post. And, while I’m at it,
for all the greattaking the time to chime in on this post. And,
while I’m at it, for all the great
support you’ve given me and my blog for quite some time. I
really appreciatesupport you’ve given me and my blog for quite
some time. I really appreciate

it.it.
I had a feeling that we actually did agree on many of these
points — I almostI had a feeling that we actually did agree on
many of these points — I almost
wrote that at the end of the post, but I didn’t want to presume.
However, sincewrote that at the end of the post, but I didn’t
want to presume. However, since
some of the remarks in your podcast did re�ect concerns that I
know otherssome of the remarks in your podcast did re�ect
concerns that I know others
have had with the often awkward collision of marketing and
technology, ithave had with the often awkward collision of
marketing and technology, it
seemed like a good context for engaging in a little
debate.seemed like a good context for engaging in a little
debate.
And to emphasize: I completely agree with you that it’s humans
who mustAnd to emphasize: I completely agree with you that
it’s humans who must
drive the creation of great customer experiences with
technology as theirdrive the creation of great customer
experiences with technology as their
brushes, paint, and canvas.brushes, paint, and canvas.
Indeed, I have romanticized the marketing technology ideal
above. TechnologyIndeed, I have romanticized the marketing
technology ideal above. Technology
strategy and management is hard and often messy. And I think
we both agreestrategy and management is hard and often messy.
And I think we both agree
that it’s better for marketers to take small steps that they can
handle wellthat it’s better for marketers to take small steps that
they can handle well
rather than letting dreams of technology nirvana get too far

ahead of theirrather than letting dreams of technology nirvana
get too far ahead of their
abilities. The important thing, I believe, is to keep making
forward progress:abilities. The important thing, I believe, is to
keep making forward progress:
marketing is unlikely to be less entwined with technology in the
years ahead.marketing is unlikely to be less entwined with
technology in the years ahead.
Funny enough, I actually �nd the situation somewhat analogous
to contentFunny enough, I actually �nd the situation somewhat
analogous to content
marketing and the mission of the CMI. Great content marketing
is incrediblymarketing and the mission of the CMI. Great
content marketing is incredibly
important. But it’s also actually hard to do well — and I’m sure
you’ve seenimportant. But it’s also actually hard to do well —
and I’m sure you’ve seen
many cases where people’s ambitions for trying to do too much,
too quicklymany cases where people’s ambitions for trying to
do too much, too quickly
results in a content quagmire. But even though it’s challenging,
marketersresults in a content quagmire. But even though it’s
challenging, marketers
can’t a�ord to ignore it or take too much of a “hands o�”
approach bycan’t a�ord to ignore it or take too much of a
“hands o�” approach by
outsourcing it wholesale to someone else. It’s a big part of what
modernoutsourcing it wholesale to someone else. It’s a big part
of what modern
marketing is all about.marketing is all about.
And so a little romance is probably good to inspire people to
embrace theseAnd so a little romance is probably good to
inspire people to embrace these
new opportunities. But like any romance, there’s more to it than

wine andnew opportunities. But like any romance, there’s more
to it than wine and
roses. �roses. �
Thank you again!Thank you again!
REPLYREPLY
technology-intertwined/?replytocom=90485#respond
intertwined/ 6/8
HENK VHENK V SAYS:SAYS:
PM
Scott,Scott,
As an enterprise architect, I �rst commend you for your
insights into technology andAs an enterprise architect, I �rst
commend you for your insights into technology and
marketing aspects . I have been working through a number of
reference architectures tomarketing aspects . I have been
working through a number of reference architectures to
support digital marketing and in most of these endeavours ran

into the same “traditionalsupport digital marketing and in most
of these endeavours ran into the same “traditional
IT architecture will not work here” wall each time.IT
architecture will not work here” wall each time.
This “awkward collision of marketing and technology” as you
stated is a serious challengeThis “awkward collision of
marketing and technology” as you stated is a serious challenge
for architects, because we are dealing with a new revolution,
rich and diversi�edfor architects, because we are dealing with a
new revolution, rich and diversi�ed
applications landscape and still very immature consolidated
suite of products. This ICTapplications landscape and still very
immature consolidated suite of products. This ICT
and marketing “language and cultural divide” makes it
extremely di�cult to put theand marketing “language and
cultural divide” makes it extremely di�cult to put the
marketing genie in the proverbial architectural box. I have
learned that I need need amarketing genie in the proverbial
architectural box. I have learned that I need need a
lamp instead of the box so to speak.lamp instead of the box so
to speak.
Your articles and references into the marketing
revolution/collision as it unfolds has beenYour articles and
references into the marketing revolution/collision as it unfolds
has been
invaluable for me to build a more acceptable reference
architecture that will support thisinvaluable for me to build a
more acceptable reference architecture that will support this
digital marketing and technology collision of two
galaxies.digital marketing and technology collision of two
galaxies.
Thank you for this very beautifully articulated debate and
information you bring to theThank you for this very beautifully

articulated debate and information you bring to the
table.table.
Cheers,Cheers,
HenkHenk
REPLYREPLY
SCOTT BRINKERSCOTT BRINKER SAYS:SAYS:
JANUARY 23, 2014 AT 6:55 AMJANUARY 23, 2014 AT 6:55
AM
Hi, Henk — thanks for the comment. I really appreciate you
sharing yourHi, Henk — thanks for the comment. I really
appreciate you sharing your
thoughts from an enterprise architecture perspective.thoughts
from an enterprise architecture perspective.
While this “collision” is unlike anything that marketing has had
to deal withWhile this “collision” is unlike anything that
marketing has had to deal with
before, it is good to note that it’s certainly not a standard
playbook from the ITbefore, it is good to note that it’s certainly
not a standard playbook from the IT
side either. There’s a tremendous amount of knowledge and
experience inside either. There’s a tremendous amount of
knowledge and experience in
technology management that IT professionals bring to bear on
this challengetechnology management that IT professionals
bring to bear on this challenge
— for instance, what “enterprise architecture” is and why it’s so
important. But— for instance, what “enterprise architecture” is
and why it’s so important. But
from that foundation, something new must be synthesized.from
that foundation, something new must be synthesized.

If ever you’d be comfortable sharing some of the “best
practices” that you’reIf ever you’d be comfortable sharing some
of the “best practices” that you’re
discovering in your work on this mission — what an acceptable
referencediscovering in your work on this mission — what an
acceptable reference
architecture looks like from your view — I’d love to do a Q&A
with you for thearchitecture looks like from your view — I’d
love to do a Q&A with you for the
blog about them. I’m sure many other readers would bene�t
from what you’veblog about them. I’m sure many other readers
would bene�t from what you’ve
learned.learned.
Godspeed!Godspeed!
REPLYREPLY
DON NANNEMAN (@DNANNEMAN)DON NANNEMAN
(@DNANNEMAN) SAYS:SAYS:
PM
I’d be very interested in that Enterprise Architecture best
practicesI’d be very interested in that Enterprise Architecture
best practices
discussion as well. discussion as well. We marketers have a vast
array of toolsWe marketers have a vast array of tools
available to us today, as highlighted in Scott’s latest chart.
available to us today, as highlighted in Scott’s latest chart. How
allHow all
these applications integrate and interoperate together in thethese
applications integrate and interoperate together in the
backo�ce, or cloud is a major stumbling block for
manybacko�ce, or cloud is a major stumbling block for many
organizations. organizations. Startups are often able to avoid

some of theStartups are often able to avoid some of the
challenges that more mature businesses with legacy on-premise
ITchallenges that more mature businesses with legacy on-
premise IT
infrastructures are faced with. infrastructures are faced with. So
yes, please let’s have thatSo yes, please let’s have that
discussion.discussion.
https://plus.google.com/111813740992465833487
http://twitter.com/dnanneman
intertwined/ 7/8
REPLYREPLY
JEREMY FLOYDJEREMY FLOYD SAYS:SAYS:
JANUARY 25, 2014 AT 9:00 AMJANUARY 25, 2014 AT 9:00
AM

Scott, thank you.Scott, thank you.
As a guy that has a history as a system administrator,
programmer, philosopher, lawyer,As a guy that has a history as
a system administrator, programmer, philosopher, lawyer,
marketing agency principal and chief marketing o�cer, this post
echoes ideas that I’vemarketing agency principal and chief
marketing o�cer, this post echoes ideas that I’ve
had since the early 2000s. Both technology and marketing are
(in their most basic forms)had since the early 2000s. Both
technology and marketing are (in their most basic forms)
communication vehicles…one being the vehicle the other, the
map.communication vehicles…one being the vehicle the other,
the map.
As you’ve described it, the convergence of these three crosses
the spectrum of the brain.As you’ve described it, the
convergence of these three crosses the spectrum of the brain.
From the logical linear processing of the left side and the
creative, processing side of theFrom the logical linear
processing of the left side and the creative, processing side of
the
right, the ability to multi-process does not lead to a dead end.
Rather determiningright, the ability to multi-process does not
lead to a dead end. Rather determining
destination, execution and tactics allows for continual
re�nement.destination, execution and tactics allows for
continual re�nement.
Years before Marissa Mayer stepped into the spotlight at Yahoo,
I was fascinated by herYears before Marissa Mayer stepped into
the spotlight at Yahoo, I was fascinated by her
undergraduate �eld of undergraduate �eld of study at
Stanfordstudy at Stanford linguistics, philosophy, cognitive
psychology, and linguistics, philosophy, cognitive psychology,

and
computer science classes. Merging these disparate �elds meant
understanding the toolscomputer science classes. Merging these
disparate �elds meant understanding the tools
and e�ects of technology.and e�ects of technology.
This is a very valuable skill, yet organizations do not have an
understanding for the rareThis is a very valuable skill, yet
organizations do not have an understanding for the rare
�nd of the humanities technologist. It will become increasingly
important.�nd of the humanities technologist. It will become
increasingly important.
REPLYREPLY
ADAMABIRDADAMABIRD SAYS:SAYS:
MARCH 18, 2014 AT 9:23 PMMARCH 18, 2014 AT 9:23 PM
Scott, Great post.Scott, Great post.
Fantastic insights and I love the concept of a Marketing
Technologist.Fantastic insights and I love the concept of a
Marketing Technologist.
I have been looking for a concise way of explaining my team’s
role within the largerI have been looking for a concise way of
explaining my team’s role within the larger
organisation. This title and mission �ts perfectly.organisation.
This title and mission �ts perfectly.
Keep up the great work on the blog and graphics.Keep up the
great work on the blog and graphics.
– Adam– Adam
REPLYREPLY

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mailto:?subject=Ivey%20Business%20Journal:%20WHAT%20IS
%20CORPORATE%20STRATEGY,%20REALLY?&body=An%
20article%20from%20the%20Ivey%20Business%20Journal%20i
s%20being%20shared%20with%20you:%0D%0A%0D%0AWHA
T%20IS%20CORPORATE%20STRATEGY,%20REALLY?%0D
%0A%0D%0AA%20perennial%20question%20for%20the%20co
rporate%20office%20is%20%E2%80%9CHow%20can%20we%2
0add%20value?%E2%80%9D%20For%20many%20senior%20ex
ecutives,%20the%20%E2%80%9CHippocratic%20oath%E2%80
%9D%20of%20corporate%20management%20seems%20to%20b
e%20the%20answer:%20First,%20do%20no%20harm.%20Divisi
onal%20autonomy%20has%20gone%20from%20managerial%20
principle%20to%20mantra.%20The%20corporate%20office%20i
s%20there%20simply%20to%20set%20and%20enforce%20perfo
rmance%20targets.%20But%20in:%20%0D%0A%0D%0ARead%
20the%20article%20at%20https%3A%2F%2Fiveybusinessjourna
l.com%2Fpublication%2Fwhat-is-corporate-strategy-really%2F
you:%0D%0A%0D%0AWHAT IS CORPORATE STRATEGY, R
EALLY?%0D%0A%0D%0AA perennial
question for the corporate office is “How can we add value?” Fo
r many senior executives, the “Hippocratic
oath” of corporate management seems to be the answer: First, d
o no harm. Divisional autonomy has gone
from managerial principle to mantra. The corporate office is the
re simply to set and enforce performance
targets. But in:%20%0D%0A%0D%0ARead the article at
https%3A%2F%2Fiveybusinessjournal.com%2Fpublication%2F
what-is-corporate-strategy-really%2F)
A perennial question for the corporate office is “How can we ad
d value?” For many senior executives, the

“Hippocratic oath” of corporate management seems to be the an
swer: First, do no harm. Divisional
autonomy has gone from managerial principle to mantra. The co
rporate office is there simply to set and
enforce performance targets. But in a world increasingly obsess
ed with private equity, the power of focus,
and the discipline of debt, is there really a role for even the mos
t mildly diversified firm and the corporate
layer of management that such diversification necessarily create
s?
I believe so, but only if we expand our horizons beyond merely
“adding value” to including the critically
important but typically overlooked problem of managing strateg
ic uncertainty.
Why this is important, and how to do it more effectively, is wha
t I hope to describe in this article.
Of strategies competitive and corporate
I’ve found it useful to define strategy as “how an organization c
reates and captures value in a specific
product market.” In my experience, this definition is both suffic
iently precise to have substantive content yet
inclusive enough to capture what most people feel should be par
t of so critical a concept. Reflect for moment
on what you think your organization’s strategy is in light of this
definition and see if you find it consistent with
your intuition.
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%20CORPORATE%20STRATEGY,%20REALLY?&body=An%
20article%20from%20the%20Ivey%20Business%20Journal%20i
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T%20IS%20CORPORATE%20STRATEGY,%20REALLY?%0D
%0A%0D%0AA%20perennial%20question%20for%20the%20co

rporate%20office%20is%20%E2%80%9CHow%20can%20we%2
0add%20value?%E2%80%9D%20For%20many%20senior%20ex
ecutives,%20the%20%E2%80%9CHippocratic%20oath%E2%80
%9D%20of%20corporate%20management%20seems%20to%20b
e%20the%20answer:%20First,%20do%20no%20harm.%20Divisi
onal%20autonomy%20has%20gone%20from%20managerial%20
principle%20to%20mantra.%20The%20corporate%20office%20i
s%20there%20simply%20to%20set%20and%20enforce%20perfo
rmance%20targets.%20But%20in:%20%0D%0A%0D%0ARead%
20the%20article%20at%20https%3A%2F%2Fiveybusinessjourna
l.com%2Fpublication%2Fwhat-is-corporate-strategy-really%2F
The most significant element of this definition lies in its most e
asily overlooked part: that strategy is about
how to create and capture value in a specific product market. Th
is highlights the importance of defining
clearly the organization and product market that are the focus of
strategy.
For example, this definition makes the question “What is Gener
al Motors’ strategy” incoherent, for embedded
in that question is the assumption that there is a single product
market in which General Motors competes,
which of course is not true: Chevy’s Corvette and GMC’s Monta
na mini-van are only the weakest of
substitutes. Few people, when they go shopping for a car, consi
der the possibility of getting one instead of
the other.
And so my proposed definition captures only competitive strate
gy, that is, the ways in which an organization
competes, since competition for revenue, and hence profits, take
s place ultimately at the product market
level.

What, then, is corporate strategy? The most widespread view is
that improving the competitive strategies of
the operating units is the essence of corporate strategy. The cor
porate office should be focused on, for
example, the identification and capture of synergies between op
erating units. There remains considerable
debate about how best to do this. But the underlying assumption
– that corporate strategy supplements
competitive strategy –
goes unchallenged, begging the question whether the corporate
office can make any
other kind of contribution.
This assumption blinds us to the other half of the value equation
: uncertainty. It is indisputable that
generating returns is critical, and an operating division’s compe
titive strategy is a description of how that unit
hopes to create and capture the value required to deliver those r
eturns. But as those familiar with financial
theory and practice will know, there can be no returns without ri
sk. Indeed, in a very real sense, accepting
risk is the price of those returns, and the hope of more of the lat
ter can only be purchased at the price of
more of the former.
And so we have the opportunity to see corporate strategy not as
merely a supplement to competitive
strategy but also as the overlooked complement. And so a defini
tion of corporate strategy consists of two
parts: (i) capturing inter-divisional synergies –
which is the extent of current thinking; and (ii) how the
organization identifies and manages strategic uncertainty. It is t
his under-development of this second part
that I hope to begin to redress.
Generating returns vs. managing uncertainty

Many leaders justly resist placing too much faith in organizatio
nal design. However, the org chart matters,
because it defines how large, complex tasks are divided into ma
nageable chunks, thereby making
cooperative effort possible. After all, one cannot throw a group
of people into a room and shout “get on with
it.” The company’s work must be differentiated, that is, separate
d into sub-tasks, whilst simultaneously being
integrated, that is, coordinated such that the completion of the s
ub-tasks cumulates to the attainment of the
larger end. Organizational structure permits the achievement of
these competing, but complementary, goals.
In the realm of strategy-making, however, little attention has be
en paid to how this same principle should be
applied. In any corporation with multiple business units –
that is, in any diversified company – the
unquestioned dogma is that operating division managers must ha
ve the full measure of decision-making
freedom, given that they are to be held accountable for their res
ults.
(
g
u
m
t
https://www.ivey.uwo.ca/executive/our-programs/ivey-
executive-
program/?utm_source=IBJ&utm_medium=Display&utm_campai
gn=IBJ2017&utm_content=Executive-Program
General managers with full decision-making responsibility for a
specific operating division – that is, a unit

with a competitive strategy –
must perforce decide what that strategy should be. Highly diffe
rentiated
strategies, either low cost or product leadership, offer the promi
se of high returns, but only because they run
higher strategic risk. Staking a defensible claim to a unique com
petitive position demands bold commitments
over long periods of time to assets and capabilities that few oth
ers feel will be valuable in the future. In other
words, greatness requires that companies make a significant, an
d largely irreversible, strategic bet. And like
all bets, even when the odds are with you, you can end up losing
(nearly) everything.
Take, for example, Sony’s Betamax video cassette recorder. Thi
s iconic example of strategic failure is often
adduced to illustrate managerial incompetence or greed: Sony h
ad “too short” a recording time or refused
“reasonable” licensing terms to other potential manufacturers.
The full story is long and complex, but we will learn the wrong
lessons from Sony’s mistake if we insist on
looking at the company’s choices after the fact. The more releva
nt perspective is when Sony had to make its
choices. And what quickly becomes clear is that Sony’s decision
s were perfectly reasonable and in fact
entirely consistent with the desire to dominate the market utterl
y.
For example, the company could have licensed its designs widel
y, dumbing-down its proprietary technology
in the interests of acquiring greater market share faster. Howeve
r, this would have compromised Sony’s
ability to capture a greater share of the value it created. In other
words, Sony chose a bigger slice of a
smaller pie, concluding this would be more valuable than a smal

ler slice of a larger pie. In the event, Sony’s
choice was the wrong choice, but that only became clear long af
ter the fact. Who was to say that Sony’s
“value capture” strategy –
one pursued to such great effect with the Walkman or the PlayS
tation 2 – was
going to fail this time?
It is this kinship between success and failure that defines the “st
rategy paradox”: precisely the same
behaviors that maximize an organization’s possibility of great s
uccess also maximize its likelihood of total
catastrophe. Operating divisions, forced to chose and implement
a competitive strategy, face a dilemma: do
they pursue high-risk, but potentially high-return strategies, or
do they sacrifice any meaningful chance at
greatness in exchange for reduced risk?
Empirically, most businesses opt for the security of me-too, deri
vative strategies over the higher-risk, but
potentially higher-return strategies defined by more highly-diffe
rentiated positions. In other words, complete
divisional autonomy relegates firms either to accepting strategic
risk or avoiding it. What is missing is a
meaningful way actively to manage it.
Managing a complex task essentially means identifying the appr
opriate dimension of differentiation and
integration. Most organizations think of this differentiation in te
rms of geographic regions, functions,
processes, etc. and mechanisms of integration in terms of specia
list roles, cross-functional teams, etc.
These concepts are so familiar as to be almost banal to anyone s
teeped in organizational life. What is less
common, and hence less intuitive, is that to manage strategic un
certainty effectively we must similarly

differentiate roles based on the strategic uncertainty decision-m
akers face and integrate them by way of the
strategic commitments to be made. I call this organizational des
ign principle Requisite Uncertainty. And
unlike most organizational design principles, which operate esse
ntially horizontally, Requisite Uncertainty
speaks directly to the roles and responsibilities delegated to eac
h level of the vertical hierarchy.
Perhaps the most important insights into the attributes of an effe
ctive hierarchy come to us from the late
Elliott Jaques (pronounced “Jacks”), a Canadian organizational
psychologist. Jaques determined that
hierarchies function best when each level is separated from the
others by the time horizon associated with
the decisions made at that level. So, for example, the marketing
manager is responsible for getting a new
flavor of toothpaste into the market. He decides what the market
ing mix will be, the investment in co-op
advertising, which channels to focus on, and so on. Jaques’s res
earch demonstrates that this manager will
know whether or not he made good decisions within three month
s to a year.
The next level up in the hierarchy –
say, the general manager responsible for oral health care –
has a
number of functions reporting to her: our marketing manager, of
course, as well as product development,
R&D, HR, finance, etc. Her task is different: to decide what the
competitive strategy of this division will be.
This requires making a commitment, at the most generic level, t
o a low-cost or differentiated strategy. Such
commitments take time to implement and still longer for the env

ironment to provide the feedback needed to
determine their success. Jaques’ work suggests that a time horiz
on of three to five years is appropriate.
When coping with the tension between risk and return are assign
ed to the same management level, as
conventional management theory demands, general managers m
ust choose between temerity and timidity.
We should not be surprised: they have no mechanisms at their di
sposal to manage uncertainty. It is the
hierarchical equivalent of failing to separate finance from HR, a
nd then wondering why the cash
management system is breaking down and the benefits plan is a
shambles.
Requisite Uncertainty separates making strategic commitments f
rom managing the risk created by making
those commitments. Operating division managers must make co
mmitments if high achievement is to be
even a possibility. It falls to corporate management, the next lay
er up in the hierarchy, and so responsible for
a still longer time horizon, to create the strategic options neede
d so that divisions, if they happen to have
made the wrong (even if entirely reasonable) commitments, can
adapt their strategies as required.
We can see the outline of this structure at work at Microsoft ove
r the last several decades. In the late 1980s,
Microsoft had a corporate commitment to the computer software
industry. There was, however, material
uncertainty – strategic uncertainty –
surrounding how best to compete in that space. And so the com
pany
pursued a number of different trajectories simultaneously. MS-
DOS was their bread-and-butter product for
both personal and corporate computing customers. Yet Microsof

t was collaborating with IBM on the OS/2
graphical interface operating system, even as it was developing
its own graphical Windows systems, while
exploring a version of Unix targeted at commercial markets. An
d on the applications front, the company was
writing Excel and Word for the Apple OS.
This was not diversification in defense of ignorance –
the creation of a portfolio with uncorrelated fortunes
and cash flows. Rather, it was a carefully constructed set of hed
ges against different strategic paths, some of
which could prove enormously useful to each other. Some of the
se strategic options, like OS/2, never came
“into the money” and were abandoned. Others, in particular the
Windows OS and, most importantly, its
complementarity with Word, Excel, and other applications, beca
me the foundation of decades of profitability
and industry dominance.
Today, Microsoft continues to build and manage a portfolio of s
trategic options. The Windows OS platform
and Office applications suite are the company’s current bread an
d butter, but strategic uncertainties abound.
What will the next platform, or platforms, for personal computi
ng be? Mobile devices? Game players? What
about content, search, or online services? From the perspective
of the corporate office, Microsoft’s
investments in Windows Mobile, Xbox, MSNBC, and MSN are s
trategic options that create the ability, but not
the obligation, to morph the Windows division in a number of v
ery different ways, depending on how the
industry evolves over the long term –
say, five to seven years. Microsoft’s corporate strategy, then, c

an be
seen as designed to mitigate strategic risk in ways that the divis
ions, and shareholders, cannot replicate.
Consistent with the notion of Requisite Uncertainty, managers r
esponsible for each of these divisions
(Windows Mobile, Xbox, MSN, etc.) view the ventures they gui
de not as options but as commitments: each
manager must choose how best to make their division as success
ful as possible in the medium term – say,
three to five years. If these managers were forced to deal with t
he full flower of strategic uncertainty, they
would necessarily pull in their horns, since they would be invest
ing for both today and tomorrow, which would
dilute financial resources and, more importantly, management at
tention. As it is, they are able to apply
themselves fully to the challenges of the markets in which they
compete.
And at the functional level, managers must simply “make plan”:
delivering on the commitments that have
been made, often years ago.
Option. Commitment. Plan. The same operating assets create val
ue in at least three different ways
simultaneously and continuously through time. Strategic options
create value by reducing risk. Strategic
commitments create value by besting competitors, and deliverin
g on plan generates the cash that keeps any
organization going. And different layers of the hierarchy are res
ponsible for managing each value-generating
mechanism.
Johnson & Johnson: A case study
Microsoft has accomplished this remarkable feat for more than t
wo decades largely as a result of the very-

nearly unique skills and position of Bill Gates, the founder and
until recently CEO and chairman of the
company. Arguably one of the few business geniuses of our gen
eration, Gates had the insight and the
influence to grapple with uncertainty head-on. As much as we m
ight admire the substance of Microsoft’s
strategy and strategy-making, at a process level it is difficult to
generalize from its experience, as very few of
us are likely ever to find ourselves in Bill Gates’s position.
Johnson & Johnson (J&J) provides a more illuminating case stu
dy, revealing how mere mortals can achieve
results that have so far been the preserve of the admired few. A
remarkable corporate success story, J&J
has outperformed the general stock market for years, in part by
pioneering the next wave of cutting-edge
management practices. And they appear to be on the cusp of con
tinuing that enviable tradition.
Like many other large corporations, J&J maintains a “corporate
venture capital” group called Johnson &
Johnson Development Corporation (JJDC). Unlike most groups
of this kind, however, JJDC seems less
obsessed with measuring success solely in terms of the returns o
n their portfolio of investments. After all, if
shareholders want exposure to venture capital-like investments,
there are better and more efficient
mechanisms to create it —
by investing in VC funds, for example. And in a $55 billion cor
porate like J&J,
creating material returns would require a level of investment far
beyond the $500 million currently under
JJDC’s management –
a level that would almost certainty starve the existing businesse
s of the investment
they need to compete.

What is JJDC for, then? In short, it is the organ of the corporate
office that manages the strategic risk faced
by the operating companies (OpCos). Working carefully with th
e OpCos, JJDC determines what strategic
uncertainties cloud an OpCo’s competitive future, and which of
those uncertainties the OpCo is exposed to
as a result of its strategic commitments. JJDC then creates the n
ecessary strategic options so the OpCo can
continue to pursue its higher-risk, higher-return strategy…witho
ut the same level of risk.
A key part of this equation is driving the OpCos to pursue highe
r-risk strategies in the first place. Most
operating companies, whether divisions or stand-along going co
ncerns, systematically trade returns for lower
mortality rates. At J&J, however, the corporate office sets dema
nding performance targets. The specifics are
confidential, but for example, the OpCos are responsible for del
ivering specified returns (e.g., 15% ROA)
within specified time periods (e.g., a three-year average) with s
pecified resources (a capital expenditure and
operating budget approved by corporate). Without those targets,
the OpCos would do what the majority of
stand-alone business units do: drift into mediocrity.
But if all J&J were able to do with its demanding performance h
urdles were trade a portfolio of low-risk, low-
return OpCos for a portfolio of high-risk, high-return OpCos, it
would merely have purchased a dollar for 20
nickels –
creating the possibility of higher returns at the cost of higher ri
sk. It is JJDC’s involvement that

allows this portfolio to generate the returns associated with taki
ng on greater risk without taking on the risk.
JJDC, then, does not merely seek out new growth opportunities,
attempting to find “winners” that will
compensate for any “losers” in the existing portfolio. Rather, it
creates strategic options that make it possible
for OpCos to adjust their strategies in ways they could not –
at least, not without having to compromise their
ability to make and deliver on the strategic commitments necess
ary for extraordinary competitive success.
Consider how this has played out in the Ethicon Endosurgery (E
ES) OpCo. EES sells, among other medical
devices, a wide array of colonoscopes used for the interrogation
of the colon and lower gastrointestinal tract
in order to diagnose and treat a variety of pathologies, including
colon cancer.
For many years, the key to continued growth and profitability in
the colonoscope business has been making
the devices better able to access ever-smaller body cavities, incr
easing the accuracy of diagnosis, and
increasing the surgeon’s ability to remove ever-smaller patches
of diseased tissue. The sales force in EES –
the folks delivering on plan –
knocks on the doors of proctologists around the world to convi
nce them that
EES has the best devices.
At the OpCo level, however, a new strategic commitment is in t
he making: from “better scopes” to “less
discomfort.” Growth in the colonoscopy business is a function o
f getting more people to get colonoscopies,
and an important way to do that is to reduce the pain associated
with the procedure. There are at least two

ways to do this. One is to increase the “intelligence” in the devi
ce so that the skill of the surgeon is less a
factor that it has been historically. The kinds of investment requ
ired to deliver these improvements fall within
the money, time, and performance constraints of OpCo manage
ment, and so this is a trade-off between
short and medium term considerations that is rightly left in their
hands.
A second pain management strategy, however, involves pharmac
ological solutions and very sophisticated
drug/device combinations. EES has the budget to explore such s
olutions on its own; it is the complexity,
uncertainty, and the time horizon associated with drug-based sol
utions that create the challenge. Exploring
new drugs and new drug applications falls into the category of a
strategic uncertainty for an OpCo committed
to medical devices, and if EES were to get pulled in that directi
on, it would be violating the principle of
Requisite Uncertainty, with predictable and negative results. Sp
ecifically, EES would likely be less able to
execute effectively on its existing strategic commitments, there
by compromising its ability to deliver returns.
About the Author
Michael E. Raynor
(https://iveybusinessjournal.com/author/mraynor/)
Michael E. Raynor is a director at Deloitte Services LLP.
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Consequently, it falls to JJDC to work with EES to identify, ma
ke, and manage the seed investments needed
to manage this strategy uncertainty. EES can therefore focus on
the commitments it must in order to hit the
targets set for it by corporate without having merely to accept th
e strategic risk that would come from
ignoring the risks arising from a strategic shift from “better sco
pes” to “less pain.”
The strategy of humility
Competitive strategy is about commitment. But commitment nec
essarily exposes a business to strategic risk
–
the possibility that it has committed reasonably, but wrongly. If
corporate strategy is nothing more than the
attempt to decrease the frequency of such mistakes, then we are
sure to be disappointed: there’s no good
reason to think corporate managers have better crystal balls than
operating managers.
The new frontier in corporate strategy, I believe, is in thinking
more carefully and deliberately about how to
enable operating divisions to pursue outsized returns without ha
ving merely to accept the risk that has
historically accompanied such boldness. Greater returns at great

er risk is, frankly, meaningless. Greater
returns and the same or reduced risk? Now that’s a worthwhile g
oal.
Making progress in this direction will require the corporate offi
ce to adopt a fundamentally different mindset.
Rather than attempt to wrestle ambiguity to the ground, managin
g strategic uncertainty demands that we
embrace our ignorance of the future, and place critical strategic
unknowns at the center of the strategic
conversation.
Commitment still matters –
but commitments are not for corporate strategists to make. The
corporate role is
not to see over the horizon but rather to imagine what one might
find there, and begin preparations
accordingly. This frees the crew to focus its full attention on the
shoals and treasures that are already in
view.
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If you are working with a product portfolio you have a
range of tools at your disposal to determine how each
one or a group of the products are doing. You could
consider using the Product Life Cycle but if you need a
current “snap shot” of how the products are doing you
would benefit more from using the Boston Consulting
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Back in 1968 a clever chap from Boston Consulting
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The
matrix assess products on two dimensions. The first
dimension looks at the products general level of

growth within its market. The second dimension then
measures the product’s market share relative to the
largest competitor in the industry. Analysing products
in this way provides a useful insight into the likely
opportunities and problems with a particular product.
Products are classified into four distinct groups, Stars,
Cash Cows, Problem Child and Dog. Lets have a look
at what each one means for the product and the
decision making process.
Stars (high share and high growth)
Star products all have rapid growth and dominant
market share. This means that star products can be
seen as market leading products. These products will
need a lot of investment to retain their position, to
support further growth as well as to maintain its lead
over competing products. This being said, star
products will also be generating a lot of income due to
the strength they have in the market. The main
problem for product portfolio managers it to judge
whether the market is going to continue to grow or
whether it will go down. Star product can become
Cash Cows as the market growth starts to decline if
they keep their high market share.
Cash Cows (high share, low growth)
Cash cows don’t need the same level of support as
before. This is due to less competitive pressures with a
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low growth market and they usually enjoy a dominant
position that has been generated from economies of
scale. Cash cows are still generating a significant level
of income but is not costing the organisation much to
maintain. These products can be “milked” to fund Star
products.
Dogs (low share, low growth)
Product classified as dogs always have a weak market
share in a low growth market. These products are very
likely making a loss or a very low profit at best. These
products can be a big drain on management time and
resources. The question for managers are whether the
investment currently being spent on keeping these
products alive, could be spent on making something
that would be more profitable. The answer to this
question is usually yes.

Problem Child (low share, high growth)
Also sometime referred to as Question Marks, these
products prove to be tricky ones for product
managers. These products are in a high growth
market but does not seem to have a high share of the
market. The could be reason for this such as a very
new product to the market. If this is not the case, then
some questions need to be asked. What is the
organisation doing wrong? What is competitors doing
right? It could be that these products just need more
investment behind them to become Stars.
A completed matrix can be used to assess the strenght
of your organisation and its product portfolio.
Organisations would ideally like to have a good mix of
cash cows and stars. There are four assumptions that
underpin the Boston Consulting Group Matrix:
1. If you want to gain market share you will need to
invest in a competitive package, especially through
investment in marketing
2. Market share gains have the potential to generate a
cash surplus due to the e�ect of economies of scale.
3. The maturity stage of the product life cycle is where
any cash surplus is most likely to be generated
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4. The best opportunities to build a strong market
position usually occur during a market’s growth
period.
We hope that you have found this information useful.
This theory forms part of the syllabus for some of the
CIM courses that we o�er. Please have a look at these
if you would like to further your marketing knowledge
and skills.
If you would like more information on our CIM

Marketing courses please download a copy of our
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2/5/2018 What a Trump Presidency Will Mean for Globalization
- [email protected]
http://knowledge.wharton.upenn.edu/article/globalization-and-a-
trump-
presidency/?utm_source=kw_newsletter&utm_medium=email&u
tm_campaign=2016-11-15 1/6
As President-elect Donald Trump “pivots from campaigning to
governing,” some realities at
home and abroad will become clear, said Wharton Dean
Geo�rey Garrett, who is also a
management professor at the school. For one, while Trump has
sharply criticized international
trade deals like the Trans-Paci�c Partnership (TPP) and
NAFTA, his best options may be to
rewrite the former and make peace with the latter, Garrett
noted. Another challenge is in
delivering on his promises to Americans who have su�ered
from growing inequality and
stagnant incomes in recent decades as globalization and
technological change drove economic
growth.
The way forward is to convince people that the U.S. does

bene�t from globalization, but make it
inclusive at the same time, Garrett said. At the same time, the
U.S. would see substantial
“positive impact” if it manages to achieve a sustainable annual
GDP growth rate of 3% or more,
-Paci�c,
North America
PUBLIC POLICY
What a Trump Presidency Will Mean for
Globalization
http://www.wharton.upenn.edu/
http://knowledge.wharton.upenn.edu/faculty/ggarrett/
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trump-
tm_campaign=2016-11-15 2/6
he added. He discussed some of the challenges and options
facing Trump on the
[email protected] show on Wharton Business Radio on
SiriusXM channel 111. (Listen to the
podcast at the top of this page.)
“There’s less certainty around what the core of the Trump
agenda will be internationally than
domestically,” said Garrett. He noted that much of Trump’s
domestic agenda, led by the
promise of tax cuts, is “conventional Republican” fare.
Garrett described Trump’s comments on international a�airs as
essentially “general
statements” that are critical of U.S. policies. Here, he referred
to Trump’s argument that the
U.S. is not getting “enough bang for its buck with allies” in the
Middle East and also that it is
“losing to China and losing on trade.”

“If your growth drivers also narrow the bene�ts,
that creates a big political and social challenge,
but that is also an economic challenge.”
Walking the Talk on TPP, NAFTA
Of the various international issues on Trump’s agenda, “the
more burning and the more
pressing issue is what to do with TPP,” according to Garrett.
“My preferred go-forward path
would not be to try to ink the TPP deal as it is currently written,
but go back closer to scratch.”
Putting the TPP in perspective, Garrett said the idea behind it
was important in that it espoused
a free trade agreement spanning both sides of the Paci�c,
uniting the U.S., Canada and Mexico
with the big East Asian countries. The TPP deal that Barack
Obama championed was not about
economics, but about geopolitics, he added. “It was an e�ort by
Obama to say to the world that
we write the rules of the road to the 21 century, not China.”st
However, Garrett said “the TPP is, in essence, dead on arrival
as written in Washington, D.C.”

He noted that unwinding the TPP as it stands “potentially
creates some real challenges in Asia,
because a lot of the Asian countries that signed up to the TPP
did so because the U.S. asked them
to do that.”
http://businessradio.wharton.upenn.edu/
- [email protected]
trump-
tm_campaign=2016-11-15 3/6
One crucial shortcoming of the TPP in its current form is that it
doesn’t include China, even
though it is the world’s largest trading nation and Asia’s largest
economy, said Garrett. He
argued that China should be a part of such a deal.
Trump will need to come up with some alternative to the TPP,
“and the alternative that I would
encourage is one that includes China,” said Garrett. “Mr. Trump

said he is good at negotiating
deals. The Chinese are deal makers. I’d encourage him to try to
strike a deal that’s win-win for
China and the U.S. on trade.”
Why Strike a Deal with China?
Garrett said there is a strong case for China to be included in
the TPP. “Obviously, Asia has
become an incredibly important growth engine for the world so
we should never forget that,”
he said. “But when it comes to China in particular, all
Americans are going to have to come to
terms with two very important realities. One is the centrality of
the Chinese market and Chinese
consumers to American �rms.” He noted that while Apple
assembles its devices in China, that
country accounts for a quarter of the company’s worldwide
market. “It’s a massive consumer
market, and American �rms bene�t enormously form that.”
The second reality Americans have to appreciate is Chinese
investments in U.S. companies, said
Garrett. Outbound Chinese investments in the last 20 years or so
have found their way into U.S.

companies that covet the Chinese domestic market, he added.
“Mr. Trump said he is good at negotiating deals.
The Chinese are deal makers. I’d encourage him
to try to strike a deal that’s win-win for China
and the U.S. on trade.”
“Going forward, we are going to be dealing with a lot of
outbound Chinese investments,” said
Garrett of what the Trump administration would need to factor
in. “Of course, we have seen that
movie before,” he added, citing Japanese investments into the
U.S. in the 1990s. “It took a while
for Americans to come to grips with that, but having a lot of
Toyotas — good cars made cheaply
in the U.S. — has ultimately been a great bene�t to the U.S. I
hope and expect that would be true
with Chinese investments; maybe not tomorrow, but if we
measured in 10-year chunks, that
would be an important new reality for this economy.”
- [email protected]

trump-
tm_campaign=2016-11-15 4/6
Compared with the TPP, Trump may have much less opportunity
to walk away from the North
American Free Trade Agreement, or NAFTA, between the U.S.,
Canada and Mexico. “It would be
… very di�cult to unwind NAFTA, and very unwise to do so,”
said Garrett.
Garrett referred to the “gravity model of trade” in international
economics that explains how
bilateral trade �ows work based on the economic sizes of
trading partners and the distance
between them. “It makes more sense to do more trade with
countries that are closer to you,” he
said. “The fact that the U.S. shares very large land borders with
both Canada and Mexico makes
trade among those three countries an absolute natural.” He
predicted that despite the anti-
NAFTA rhetoric in the campaign, that trade agreement will
probably endure.

GDP Growth Challenge
Many commentators have talked of a GDP growth rate of 4% in
Trump’s presidency. But Garrett
doesn’t think such a growth rate is sustainable. Historically,
GDP growth in the U.S. after World
War II has ranged between 3.25% and 3.5%, he noted. “If the
U.S. could get back to that … that
would have an enormous positive impact, not only economically
but also politically in the
country,” he said. “I wouldn’t be thinking of a sustainable 4%
[GDP growth rate]; you might be
able to juice it up to that with some short-term stimulus.”
Economic growth is the pot of gold the �nancial markets want
as they welcomed Trump’s
victory. The markets cheered him for two reasons, according to
Garrett. One is the prospect of
corporate tax cuts, and the other is his promise to invest in
infrastructure improvements. “Both
of those stimulate the economy in the short term,” he said. “But
the bigger issue is the longer-
term one: Can you keep the growth rate north of 3%?”
Those questions bring into focus the big drivers of growth,

according to Garrett. “The big
drivers in the past 20 years or so are technology and
globalization,” he said. “The challenge that
comes with both of them is that they have had a narrowing
e�ect — not a broadening e�ect —
when it comes to income distribution. If your growth drivers
also narrow the bene�ts, that
creates a big political and social challenge, but that is also an
economic challenge.”
What could Trump do to make sure everybody can bene�t from
globalization? “Using the bully
pulpit to begin with is important,” said Garrett. “To my mind,
the most important thing to say
is that everyone in America does bene�t from globalization. We
bene�t because the things that
we consume on a daily basis are just much cheaper. ‘Made in
America’ is a lovely slogan, but if
we sourced, produced and made everything in this country,
prices for the stu� we buy would be
much higher.”

- [email protected]
trump-
tm_campaign=2016-11-15 5/6
“‘Made in America’ is a lovely slogan, but if we
sourced, produced and made everything in this
country, prices for the stuff we buy would be
much higher.”
The similarities between the two growth drivers of
technological change and globalization form
one of Trump’s biggest challenges ahead. “One similarity is
[both have] reduced demand for
less skilled labor,” said Garrett. “We saw that in the Rust Belt
states swinging to Trump from
the Democrats. So now, President-elect Trump really has to take
that one on.”
What Helped Trump Win?
In drawing insights from Trump’s victory, “the big story is
economic, not social,” said Garrett.
“The temptation to focus on the uniqueness of Donald Trump as

a candidate is clear. But what
he was actually doing was riding a big structural wave of
change in the United States.”
That “structural wave” revolved around inequality and stagnant
incomes, and “Trump’s unique
personality probably catalyzed that,” Garrett explained. “Think
about inequality, for example:
We tend to associate that with post-2008, post-�nancial crisis,
but inequality in the U.S. started
increasing dramatically in the latter 1980s and went up a lot
under Bill Clinton in the 1990s.”
Similarly, many Americans have coped with stagnant incomes
over the past 15 years or so, he
continued.
Now, in taking forward his election pitch, Trump has to “pivot
from campaigning to
governing,” said Garrett. “It also creates the Trump agenda,
which should be to increase
growth, but to do so in a way that includes more people in it.”
The First 100 Days
Could one expect to see policy action on some of those issues in

Trump’s �rst 100 days as
president? “The ‘100 Days’ thing tends to be mostly about
symbolism,” said Garrett. “I would
expect a lot of symbolic chart-the-course kind of things. The
realities of governing tend to take
much longer than that. High-level political theater is bound to
be a core part of the game. And
of course Mr. Trump has proved incredibly adept at that.”
- [email protected]
trump-
tm_campaign=2016-11-15 6/6
All materials copyright of the Wharton School
(http://www.wharton.upenn.edu/) of the University of
Pennsylvania (http://www.upenn.edu/).
In addition to symbolic actions, Garrett predicted that Trump
will also send out some “big
international signals” in his �rst 100 days. Those would include

assertions that the U.S. is going
to get tough on terrorism and that it doesn’t like the nuclear
deal that the Obama
administration cut with Iran, he said. He also expected some
negative actions such as the
repudiation of the current TPP agreement, but hopes “there
would be some signaling of a
forward path as well” on that front.
http://www.wharton.upenn.edu/
http://www.upenn.edu/
2/5/2018 IESE Insight Globalization in Uncertain Times: 10
Key Takeaways
http://www.ieseinsight.com/doc.aspx?id=1871&ar=6&idioma=2
1/13
Economics
Globalization in Uncertain
Times: 10 Key Takeaways
Ghemawat, Pankaj; Altman, Steven

The backlash against globalization still has the
power to surprise. Confounding most polls
and expert opinions, the United States voted
in the presidential candidate promising to
build walls, kick out immigrants and otherwise
close U.S. borders.
As anti-globalization momentum grows, the
DHL Global Connectedness Index (GCI)
gathers 1.8 million data points to paint a clear
picture of international flows that is based on
facts. In the accompanying report, subtitled
"The State of Globalization in an Age of
Ambiguity," Pankaj Ghemawat and Steven A.
Altman of IESE and NYU Stern School of
Business argue that "flows that cross borders
are much too large to ignore but still far
smaller than many people think."
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=PG
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=SAL
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Key Takeaways

2/13
The 250-page report includes key takeaways
and tools for leaders thinking about
globalization strategies for the uncertain
future.
Here are 10 key takeaways from the report:
1. "Europe remains the world's most globally
connected region, with eight of the 10 most
connected countries -- which reminds us
what its disintegration might put at risk."
Europe is followed by North America, with
East Asia and the Pacific coming in third.
And here are the top 10 most globally
connected countries in 2015 (with change

from 2013 in parentheses):
Source: DHL Global Connectedness Index
2016
The top 10 are all among the world's most
prosperous countries. The United Arab
Emirates is the only one not classified as an
"advanced economy" by the International
Monetary Fund (IMF).
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to show you content related to your preferences. If you
continue browsing, we consider that you agree to their use.
Accept

Info
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Key Takeaways
3/13
2. "Singapore tops the rankings in terms of
depth and the United Kingdom in terms of
breadth."
Here, depth is defined as a country's
international flows relative to the size of its
domestic economy. The leaders on the depth
dimension of the index tend to be wealthy and
relatively small. The top three results were
unchanged from 2013 to 2015: (1)
Singapore, (2) Hong Kong SAR and (3)
Luxembourg.

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