Case Study- Chapter 15 Microsoft Acquires Skype In 2011, Microsoft purchased the online telecom company, Skype, to improve the video and voice communication capabilities of its Office products. In addition to gaining access to Skype's 107 million users, who were, on average, connected for over 100 minutes per month, the deal kept the platform away from rivals Google and Facebook. Microsoft knew that its business clients would benefit from Skype's friendly userinterface and sophisticated tools and features. However, the company currently had the homegrown Lync product in its portfolio, which was designed to integrate with Outlook and serve as clients' primary communications platform. Because of the redundancy of the two brands, Microsoft ultimately decided to eliminate the Lync brand and rebrand the tool's properties as Skype for Business. This allowed them to take advantage of the Skype brand's familiarity among consumers. Lync users could enjoy the same features they were used to but with the sleeker Skype interface and additional Skype features. Since many Lync users were already users of Skype's consumer product, the transition was fairly seamless. Microsoft initially managed the transition by giving IT companies two different Skype for Business options, with varying levels of departure from the Lync interface. Also, by maintaining core Lync features with which its customers were familiar, the transition did not interfere with one of Microsoft's core brand attributes—productivity. Overall, eliminating the Lync brand helped Microsoft make the most out of its Skype acquisition. Questions: 1. Make an argument for Microsoft to retain both Skype and Lync. 2. Consider how Microsoft's decision might have been affected if they had owned Skype and acquired Lync. Sources: “See what's New in Skype for Business,” https://support.office.com/en-us/article/Lync-isnow-Skype-for-Business—see-what-s-new-aba02d7e-c801-4a82-bccd-e7207240f612 Andrew Ross Sorkin and Steve Lohr, “Microsoft to Buy Skype for $8.5 Billion,” The New York Times, May 10, 2011, http://dealbook.nytimes.com/2011/05/10/microsoft-to-buyskype-for-8-5-billion/?_r=0 Case Study Chapter 16 The Phillips Journey to Customer Centricity In early 2000, Philips Electronics, the multinational company based in the Netherlands, was widely seen as a trusted but dull global company. With a history of technology leadership, it had a well-entrenched culture with a “factory mind-set” that focused on reducing costs while improving current product performance. The company was underperforming relative to its potential—sales had flat-lined and net income was negative. One analyst criticized, “Philips is a company that consistently destroys shareholder value.” This occurred for several key reasons. First, the company was organized into six loosely related product divisions (including lighting, consumer electronics, appliances, and medical systems) with a legacy of entrepreneurial country operations that impeded global coordination. Second, there was a costly muddle of hundreds of different brand names that lacked both ties to Philips and a meaningful umbrella positioning theme. Third, there was no unifying thrust to what strategic marketing should or should not do. Fourth, the marketing capabilities at the corporate and business levels were weak—even though each product division had its own CMO. The transformation to a customer-centric organization was orchestrated by the CEO, Gerald Kleisterlee. A key first step was to establish a corporate CMO function. Following a worldwide search, the position of group-wide CMO was awarded to Andrea Ragnetti, a former P&G manager who was heading Telecom Italia’s efforts to become more market-driven. Kleisterlee charged Ragnetti with turning Philips into the “P&G of its space,” which meant new growth driven by customer insights. Ragnetti’s first move was to constitute a strong and committed marketing board made up of the CMOs from each product division to share best practices and coordinate activities. The second move was to start a Philips Marketing Academy to enhance marketing capabilities throughout the organization. These two moves were designed to work in tandem to help nurture common projects, showcase best practices, and facilitate networking across divisions. A third move was to form the “Simplicity Advisory Board” comprised of health care, fashion, design, and architecture specialists from outside Philips that would ensure the company was focused on the customer and also innovative. Meanwhile, the existing Global Brand Management group that reported to Ragnetti was investing heavily in gathering customer insights. The research program engaged over 1,650 consumers and 180 customers in 120 in-depth interviews, 24 focus groups, and 1,439 quantitative interviews. That work revealed deep customer frustration with the difficulty of using technology and with the complexity of buying from Phillips. Instead, customers wanted simplicity in their lives and technology that got the job done. They also wanted an easier way of doing business with Philips. Phillips’ current umbrella positioning of “Let’s Make Things Better” lacked coherence and clearly did not signal a focus on the customer. After much debate, a new umbrella positioning called “Sense and Simplicity“ was chosen. It was based on three brand pillars: • • • Designed around you: “This means all our activities must be driven by insights into how our customers experience technology.” Easy to use: “People should be able to enjoy the benefits of technology without any hassle or frustrations.” Advanced: “The central idea is progress … something is only truly advanced when it improves the lives of people.” The adoption and implementation of the new positioning theme was not smooth, however. Some opponents were worried about the fate of products that contradicted the brand promise, while others did not want to bear the €80 million cost of the initial campaign. At this point, the CEO stepped in and forcefully decided to proceed. The implementation of the new value proportion had a huge impact on the traditionally technology-driven company. All new product development projects had to go through a rigorous process called the “Value Proposition House and Marketing Funnel” that demonstrated how well the offering fit the three brand pillars. The process also ensured a clear connection between customer insights, what Phillips was offering in the value proposition, and how this was unique relative to the competition. The new customer-focused initiatives influenced hiring decisions and annual review criteria used by HR. This meant that employee criteria and the customer value proposition were now aligned. The brand pillars were also used to introduce improvements to the sales organizations within each of the product divisions. New, more collaborative sales models that focused on bringing simplicity to customers were piloted and rolled out. Results indicated that the new systems were working as Philips began to rack up awards in this area. One of Ragnetti’s key hires during this time was Geert van Kuyck as senior vice president of global marketing management in fall 2005. Van Kuyck, also a former P&Ger, was the vice president of marketing for Starbucks when hired. He was charged with, in his words, “bolting the brand promise to the company.” In 2006, van Kuyck began piloting a program that used the Net Promoter Score (NPS) measure to evaluate Philips’ performance with the customer in three product units: oral care, MRI, and TVs. NPS was chosen because it connected the customer and the product or service offerings, and it was simple enough to be used across all the units. The pilot study showed that it predicted customer behavior well. Specifically, a high NPS predicted Philips’ ability to drive revenue, retain margin, and improve share of wallet. Based on this success, the program was then rolled out to other units, using a variety of approaches such as digital strategies, warranty cards, and a survey of business partners. The company evaluated Philips’ NPS performance relative to competitors and relative to its goals. This singular focus helped drive attention toward the customer inside the board room. The CFO began thinking about investing in customers for whom high NPS could be achieved, and the chief strategy officer began thinking about product portfolio decisions from the customers’ point of view. Even R&D adopted a “beta NPS” in which it used NPS to evaluate customers’ response to early products. These types of changes inside the boardroom and throughout the company made it clear that managers understood, in van Kuyck’s words, that “Profits don’t get made in the factory anymore.” With a single-minded focus on the customer, Philips has seen improvement in the company’s consumer and professional businesses, from its power base in Europe to highly competitive emerging markets such as China and India. By 2007, revenue from new products introduced within the previous two years had increased from 25 percent to 53 percent of the company’s total. Interbrand estimated that the value of the Philips brand had risen from $4.4 billion in 2004 to $7.7 billion in 2008, mainly because of improved earnings. Apropos of Philips’ deep commitment to customer focus, in January 2008 Philips implemented a new organizational structure focused on market sectors—Philips Healthcare, Philips Lighting, and Philips Consumer Lifestyle. The product divisions disappeared. At that time, Ragnetti was appointed CEO of Consumer Lifestyle and Geert Van Kuyck was appointed CMO. Philips proved remarkably resilient throughout the recession. Brand value grew, NPS scores were the highest the company has ever seen, with 60 percent of revenue coming from markets where Philips is the NPS leader. Even in markets such as construction in Spain, where competitors have seen a 40 percent drop in business, Philips has held its performance levels for the year. Fast-forward to 2013 when Philips unveiled a new brand logo “Innovation and You,” which was cited by Philips to signify the company’s continued emphasis on ensuring that innovation is only meaningful if it is based on an understanding of people’s needs and desires. As noted by current Philips Chief Executive Officer Frans van Houten, “We believe that the new brand positioning much better reflects Philips’ mission to improve people’s lives through meaningful innovation.” Questions: 1. How did the new brand positioning guide the firm’s customer centricity? 2. Why was the Net Promoter Score an effective metric for Philips to adopt during its journey to customer centricity? Sources： https://www.philips.com/a-w/about/news/archive/standard/news/press/2013/20131113-Philipsunveils-new-brand-direction-centered-around-innovation-and-people.html
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