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F u n d a m e n t a l C h a n g e s i n M a r k e t i n g

O rg a n i za tio n : T h e M o v e m e n t

T o w a rd a C u s to m e r F o c u s e d

O r gan iza t iona l S t r uc t ur e

Christ ian Homburg

University o f Mannheim

John P. W orkman Jr .

Creighton University

O va Jan sen

University o f Mannheim

There has been growing interest in the future of marketing

and changes in marketing s organization an d role within

the irm. However, there has not been research that holisti-

cally explores key changes in marketing organization. The

authors draw on qualitative interviews with 50 m anagers

in the United States and G ermany a nd argue that changes

in ma rketing organization that have been discuss ed in

isolation are part of a more general shift toward customer-

focused organizational structures. They initially discuss

two specific changes related to the overall shift: changes

concerning pr imary marketing coordinators an d increas-

ing dispersion o f marke ting activities. The y then introduce

the concept of a customer-focused organizational struc-

ture that uses groups o f customers as the prima ry basis fo r

structuring the organization. They identify typical orga-

nizational transitions as firm s mo ve toward a customer-

focused organizational structure and discuss the chal-

lenges firm s fac e in making this transition. They conclude

with implications fo r acad emic researc h, managerial

practice, and business school curriculum.

Journal of the Academy of Market ing Science.

Volume 28, N o. 4 , pages 459.478.

Copyright 9 2000 by Academ y of Market ing Science.

There i s g rowi ng ev i dence i n t he bus i ness p ress t ha t t he

way f i rms a re o rgan i z i ng t he i r marke t i ng a c t i v it i es i s sub -

j e c t t o m a j o r c h a n g e s. A s a n e x a m p l e , m a n y c o m p a n i e s

have changed t he i r o rgan i za t i ona l s t ruc t u res t o become

more r espons i ve t o cus t omer needs (G eorge , F ree l i ng , and

Cour t 1994) . In t h i s ve i n , t here have been some vo i ces

q u e s t i o n i n g t h e a d e q u a c y o f c l a s s i c a l o r g a n i z a t i o n a l

fo rms i n marke t i ng , espec i a l l y p roduct o r b rand m anage -

me n t ( e .g . , Dea t h o f t he Brand Manag er 1994 ; She t h and

Si sod i a 1995 ; Thom as 1994) . Add i t i ona l l y , as f i nns focus

on r eeng i neer i ng t he i r o rgan i za t i ona l s t ruc t u re a round

core p rocesses , t he ques t i on has been r a i sed whet her a

marke t i ng depar t men t shou l d ex i s t a t a l l i n t he f i rm

(Hul ber t and P i t t 1995 ; Mo n t gom ery and W ebs t er 1997).

There have r ecen t l y been a num ber o f a r ti c l es tha t con -

s i der i nnovat i ve ways o f o rgan i z i ng m arke t i ng ac t i v i t ies .

Achro l (1991), fo cus i ng on t he e f f ec t o f i ncreas i ng env i-

ronmen t a l t u rbu l ence on marke t i ng o rgan i za t i on , a rgues

t ha t a h i ghe r l eve l o f o rgan i za t i ona l f l ex i b il i t y i s neede d

and sugg es t s t wo i dea l fo rms t ha t he r e f e r s t o as t he mar -

k e t i n g e x c h a n g e c o m p a n y a n d t h e m a r k e t i n g c o a l i t i o n

company . Webs t er (1992) d i scusses changes i n marke t -

i ng ' s ro le wi t h i n the f i rm and argues t ha t ma nag i ng s t ra t e -

g i c par t ner sh i ps and pos i t i on i ng t he f i rm be t we en ven dor s

and cus t omers i n t he va l ue cha i n (p . 1 ) wi l l becom e t he

focus o f marke t i ng . Day (1997) c l a i ms t ha t f i rms wi l l

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460 JOURNALOF THE ACADEMYOF MARKETINGSCIENCE FALL 2000

increasingly evolve toward a hybrid or hypertext form of

organization---combining the best features of horizontal

process and vertical funct ional for m s--i n o rder to get

closer to their custom ers (p . 93).

W hile these studies provid e important insights, we

obse rve that this research is primarily conceptual w ith a

focus on innovative ways of organizing but with little

attempt to stud y the extent to which the changes described

are broad based. G iven the interrelated nature of many o f the

changes occurring, there is a need for systematic research

looking at comm on them es and relationships underlying the

changes in organization. Additionally, prior research has

not provided propositions that can be tested.

Against th is background, our s tudy has f ive primary

object ives . First , w e seek to ident ify fundamental changes

tak ing p lace in marke t ing o rgan iza t ion . Second , we

explore the in terrelatedness of these changes in search o f

com mon them es underlying the changes. Third, w e seek to

provide in-depth descript ion of specific organizat ional

changes. Fourth, w e seek to understand implementation

issues related to the ma jor organizational changes. A rti-

c les on changes in marke t ing o rgan iza t ion have no t

emphasized implementation challenges, and it is impor-

tant to realize that eac h fundamental chan ge in an organi-

zation may create additional problems that are new to the

organization. Finally, we aim to deve lop testable hypothe-

ses related to the issues under investigation. Our study is

based on qual i tat ive research across a broad range of

industries and tw o countries (U nited States and G ermany).

We fee l that a nalyzing different industries and different

countries is espec ial ly important in th is con text s ince they

are subjec t to different environmental demand s that ma y

affe ct the w ay that firms organize their marketing activities

(cf. Workman, Hom burg, and Gruner 1998).

Our art icle is organized as fol lows. In our l i terature

review section, we first identify organizational design

dimensions and then summarize the key changes in mar-

keting organization disc usse d in recent articles. In the fol-

lowing two sec t ions , we descr ibe the methodo logy o f ou r

s tudy and ident ify tw o specific changes in m arketing orga-

nization. W e then introduce o ur holistic them e that a shift

towa rd cus tom er- foc use d organizational structures is the

majo r deve lopm en t under ly ing the changes w e observed .

We discus s the nature of th is shift and prov ide a discussion

of organizational transitions taking plac e in this change

process . W e then discuss chal lenges fi rms face in imple-

menting cu stome r-focuse d organizational s t ructures. We

conclud e by providing research and managerial implica-

t ions as w ell as implicat ions for ma nagem ent education.

L I TE R T U R E R E V I E W

In this sectio n, w e initially d raw on resea rch in organi-

z a t i o n t h e o ry t o d e v e l o p a s t r u c t u r e d a p p ro a c h fo r

system atically examining a spec ts of marketing organiza-

t ion. ] We then consider so me o f the m ore widely discu ssed

changes taking p lace in marketing and sales organization.

Dimens ions of

Organizat ional Design

Fol lowing the work o f the As ton Group (Blau and

Schoenherr 1971 ; Pugh, Hickso n, Hinings, and Turner

1968), writers on organizational design (e.g., Galbraith

1973; Pfe ffer 1978) and marke ting organization (Work-

man et al . 1998) have describe d a range o f d imensions that

al low comparisons of organizat ions. Fol low ing Scott ' s

(1992) review o f organizat ion theory, w e con sider s t ruc-

ture, coordination, culture, and pow er as the most impor-

tant comparative dimensions. These dimensions are not

part of a single theo ry of organizational structuring and are

not exhaust ive of al l possible design dec is ions. How ever,

we b elieve that decis ions abo ut structure, coordination,

cul ture, and pow er encom pass mo st of the major dec is ions

abo ut how firms organize.

One of the most widely s tudied organizational vari-

ables is that of organizational structure (cf. Pfeff er 1982;

Scott 1992). Earl ier m arketing research on th is topic w as

descript ive, focused on the extent to which fi rms had

adopted or implemented the marketing concept , and con-

sidered the type s of organizational arrangements used

(e.g . , Carson 1968; W ebster 1981). The earl ier work also

tended to focus on the product man ager (A mes 1971; Buel l

1975). There have also bee n efforts to understand and

explain the extent of involvement and respo nsibi l i ty of

marketing groups fo r various marketing activities (Hu tt

and Speh 198 4; Pierc y 1985; Tull, Coo ley, Phillips, and

Watkins 1991). More recently, interest has shifted beyond

the boundary o f the fi rm to consider the organizat ion and

structuring of activities in interfirm n etw orks (A chrol

1991; Doyle 1995; Webster 1992).

A second fundamental design issue revolves around

coord ina t ion o f ac t iv i t i es . Such coord ina t ion can be

achieved through a range of mechanism s including hierar-

ch ica l repor t ing re la t ionsh ips , in fo rmat ion sy s tems ,

cross-functional teams, matrix structures, an d coor dinato r

posi t ions (Galbrai th 1977; Law rence and L orsch 1967;

Na dler and Tushman 1988). Within marketing, the produ ct

manager often performs a key role of coordinat ing act iv i-

t ies related to specific products and has b een wide ly s tud-

ied (see Low and Fullerton 1994 for a l ist of 31 s tudies on

the b rand managemen t sys tem) . There has a l so been

extensive research on coordinat ion between market ing

and R& D dur ing the new p roduct deve lopmen t p rocess

(cf. Griffin and Hauser 1996).

A third organizational design issue that has received

increased attention since the early 1980s is organizational

cul ture. Part o f the reason for the increase d in terest w ere

claims that successful companies ha d s trong cul tures that

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Homburget al. / FUNDA MENTALCHANGES N MARKETINGORGANIZATION 461

s u p p o r t e d t h e i r b u s i n e s s m i s s i o n ( D e a l a n d K e n n e d y

1 9 8 2 ; P e t e r s a n d W a t e r m a n 1 9 8 2 ; W i l k i n s a n d O u c h i

1 9 8 3 ) . D e s h p a n d 6 a n d W e b s t e r ( 1 9 8 9 ) d e f i n e o r g a n i z a -

t i o n a l c u l t u r e a s t h e p a t t er n o f s h a r e d v a l u e s a n d b e l i e f s

th a t h e lp in d iv id u a l s u n d e r s t a n d o r g a n iz a t io n a l f u n c t io n -

i n g a n d t h u s p r o v i d e t h e m w i t h n o r m s f o r b e h a v i o r i n th e

o r g a n iz a t io n ( p . 4 ) . W i th in ma r k e t in g , th e ma jo r i ty o f th e

r e s e a r c h r e l a t e d t o o r g a n i z a ti o n a l c u l t u r e h a s f o c u s e d o n

m a r k e t o r i e n t a t i o n , w h i c h h a s b e e n s h o w n t o p o s i t i v e l y

a f f e c t b u s i n e s s p e r f o r m a n c e ( D e s h p a n d r , F a r l e y , a n d

W e b s t e r 1 9 9 3 ; J a w o r s k i a n d K o h l i 1 9 9 3 ; S l at e r an d N a r v e r

1 9 9 4 ) .

A f o u r t h a s p e c t o f o r g a n iz a t i o n a l d e s i g n c o n c e r n s t h e

d i s t ri b u t i o n o f p o w e r a n d i n f l u e n c e w i t h i n a n d b e t w e e n

o r g a n iz a t io n s ( P f e f f e r 1 9 8 1 ; P ie r c y t9 8 7 ) . P o l i t i c a l th e o -

r i e s o f o r g a n iz a t io n f o c u s o n p o w e r , c o n f l i c t , c o a l i t io n s ,

a n d t h e d y n a m i c i n t e r p l ay b e t w e e n g r o u p s w i t h i n t h e o r g a-

n i z a t io n ( A n d e r s o n 1 9 8 2 ). W h i l e m o s t r e s e ar c h i n m a r k e t-

i n g r e l a t e d t o t h e i s s u e o f p o w e r h a s s t u d i e d t h e c o n s t r u c t

in a c h a n n e l s ( c f . Ga s k i 1 9 8 7 ) o r o r g a n iz a t io n a l b u y in g

c o n t e x t ( e . g . , K o h l i 1 9 8 9 ) , r e c e n t w o r k b y H o m b u r g ,

W o r k m a n , a n d K r o h m e r ( 1 9 9 9 ) h a s c o n s i d e r e d p o w e r i n

t h e c o n t e x t o f s u b u n i t s w i t h i n t h e o r g a n i z a ti o n a n d h a s

e m p i r i c a l l y t e s t e d h y p o t h e s e s t h a t s y s t e m a t i c a l l y r e l a t e

ma r k e t in g in f lu e n c e to e x te r n a l , i n t e rn a l , a n d in s t i tu tio n a l

d e t e r m i n a n t s .

T h e f o u r o r g a n iz a t i o n a l d i m e n s i o n s a b o v e a r e a s p e c t s

o f o r g a n i z a ti o n d e s i g n t h a t c a n b e u s e d t o c o m p a r e v a r ia -

t io n s in ma r k e t in g o r g a n iz a t io n a n d r o le a c r o s s o r g a n iz a -

t io n a l s e t t in g s . As we wi l l s h o w la t e r , p r io r r e s e a r c h o n

m a r k e t i n g o r g a n i z a t io n h a s t e n d e d t o f o c u s o n i n d i v id u a l

d i m e n s i o n s i n - d e p t h w i t h o u t c o n s i d e r i n g r e l a t i o n s h i p s

a m o n g t h e m . H o w e v e r , o u r p o s i t i o n i s t h a t t h e s e f a c t o r s

a r e re l a t e d a n d c a n n o t b e s tu d ie d in i s o la t io n .

hanges in M arketing Organization

D u r i n g t h e 1 9 9 0 s , t h er e h a v e b e e n a n u m b e r o f a r t ic l e s

th a t r e f l e c t o n th e f u tu r e o f ma r k e t in g a n d id e n t i f y s ig n i f i -

c a n t c h a n g e s t a k i n g p l a c e ( e . g . , A c h r o l 1 9 9 1 ; B e r t h o n ,

H u l b e r t , a n d P i t t 1 9 9 7 ; C r a v e n s 1 9 9 5 ; D a y 1 9 9 7 ; D o y l e

1 9 9 5 ; Ge o r g e e t a l. 1 9 9 4 ; W e b s te r 1 9 9 2 , 1 9 9 7 ) . I n T a b le 1 ,

w e p r o v i d e s u m m a r i e s o f k e y s t u d i es a n d i n d i c a t e t h e

o r g a n i z a t i o n a l d i m e n s i o n s t h e y h a v e e m p h a s i z e d . I n t h e

r e m a i n d e r o f t h is s e c t i o n , w e c o n s i d e r k e y t h e m e s t h a t

a p p e a r in th i s wo r k .

T h e f i r s t g e n e r a l th e m e i s th a t f u n c t io n a l b o u n d a r ie s a r e

d e c l i n i n g a n d f i n n s a r e i n c r e a s i n g l y a c c o m p l i s h i n g t h e i r

w o r k th r o u g h c r o s s - f u n c t i o n a l t e a m s ( A c h r o l 1 9 91 ; D a y

1 9 9 7 ; G e o r g e e t a l . 1 9 9 4 ; M o n t g o m e r y a n d W e b s t e r

1 9 9 7 ) . Ac h r o l ( 1 9 9 1 ) a r g u e s th a t th e fi r m o f th e f u tu r e

w i l l n e e d t o b e v e r y p e r m e a b l e a c r o s s i t s d e p a rt m e n t s . I t s

d e p a r tme n t s a n d h ie r a r c h y wi l l b e f u z z i ly d e f in e d , h ie r a r -

c h y w i l l b e m i n i m a l a n d i n d i re c t , a n d i n d i v i d u a l s w i l l h a v e

m u c h m o r e a u t o n o m y ( p. 8 0) . T h e ri s e o f t e a m w o r k an d

d e c l i n e o f f u n c t io n a l b o u n d a r i e s h a s b e e n a t t r i b u t e d t o t h e

n e e d t o c r e a t e n e w k n o w l e d g e w i t h i n t h e f i r m ( S i n k u l a

1 9 9 4 ; S l at e r a n d N a r v e r 1 9 9 5 ) , to s h a r e i n f o r m a t i o n a c r o s s

f u n c t i o n a l b o u n d a r i e s ( J a w o r s k i a n d K o h l i 1 9 9 3 ; N a r v e r

a n d S l a t e r 1 9 9 0 ) , a n d t o r e s p o n d m o r e r a p i d l y t o c h a n g e s

in th e ma r k e t ( A c h r o l 1 9 9 7 ; Gr i f f in 1 9 9 7 ) .

A s e c o n d g e n e r a l th e me i s th a t r e l a t io n s h ip s a n d a l l i -

a n c e s w i t h e x t e r n al p a r t n e rs a r e m o r e i m p o r t a n t ( A c h r o l

1 9 9 7 ; D a y 1 9 9 7 ; W a l k e r 1 9 9 7 ) . T h e t y p e s o f r el a t i o n s h i p s

in c lu d e v e r t i c a l r e l a t io n s h ip s th r o u g h th e v a lu e c h a in ( e . g . ,

s u p p l i e r - ma n u f a c tu r e r , ma n u f a c tu r e r - r e t a i l e r ) a s we l l a s

c o - m a r k e t i n g a n d c o - b r a n d i n g a l l ia n c e s ( e . g ., B a r c l a y a n d

S m i t h 1 9 9 7 ; B u c k l i n a n d S e n g u p t a 1 9 9 3 ). O n e o f th e c o n -

s e q u e n c e s o f a g r ea t e r e m p h a s i s o n e x t e r n a l r e l at i o n s f o r

m a r k e t i n g o r g a n i z at i o n i s t h a t it is c o m m o n f o r p e o p l e i n

mo r e f u n c t io n a l a r e a s to in te r a c t w i th e x te r n a l p a r tn e r s .

T h u s , i n m a n y c a s e s m a r k e t i n g i s n o l o n g e r t h e p r i m a r y

b o u n d a r y s p a n n e r r e s p o n s i b l e f o r i n t e rp r e t in g t h e m a r k e t

( A c h r o l 1 9 9 1 ; D a y 1 9 9 7 ) . W h i l e t h i s m a y l e a d t o a d i m i n -

i s h e d r o l e fo r m a r k e t i n g ( W o r k m a n 1 9 9 3 ) , i t o f t e n l e a d s t o

a g r e a te r f o c u s o n u n d e r s t a n d i n g t h e f i r m ' s c o r e c a p a b i l i -

t i e s a n d th e n s t r a t e g ic a l ly a l ig n in g th e f i r m in th e v a lu e

c h a i n ( D a y 1 9 9 4 ; W e b s t e r 1 9 9 2 ) .

A t h i rd g e n e r a l t h e m e r e v o l v e s a r o u n d t h e i m p o r t a n c e

o f d e v e l o p i n g i n t a n g ib l e o r g a n i z a ti o n a l f a c t o r s s u c h a s

m a r k e t o r i e n t a t i o n ( H u n t a n d M o r g a n 1 9 9 5 ) , o r g a n i z a -

t io n a l l e a r n in g ( S in k u la 1 9 9 4 ; S la te r a n d Na r v e r 1 9 9 5 ) ,

a n d m a r k e t - s e n s i n g c a p a b i l i t i e s ( D a y 1 9 9 4 ) , w h i c h m a y

p r o v i d e t h e b a s i s f o r a s u s t a i n a b l e c o m p e t i t i v e a d v a n t a g e .

H u n t a n d M o r g a n ( 1 9 9 5 ) d e f in e r e s o u r c e s a s t h e t a n g i b le

a n d in ta n g ib le e n t i t i e s a v a i l a b le to th e f i r m th a t e n a b le i t t o

p r o d u c e e f f i c i e n t l y a n d / o r e f f e c t i v e l y a m a r k e t o f f e r i n g

th a t h a s v a lu e f o r s o m e ma r k e t s e g m e n t o r s e g m e n ts ( p . 6 ) .

A n o r g a n i za t i o n a l i m p l i c a t io n o f t h is f o c u s o n i n t a n g ib l e

o r g a n i z a t i o n a l f a c t o r s is t h at s t r u c t u r e s, c o o r d i n a t i o n

m e c h a n i s m s , a n d c u l t u r e s n e e d t o b e d e v e l o p e d t h a t

e n c o u r a g e f l e x ib i l i ty , a d a p ta b i l i ty , a n d c r o s s - f u n c t io n a l

s h a r in g o f in f o r ma t io n .

W h i l e r e s e a r c h i n t h i s a re a h a s b e e n v e r y u s e f u l f o r f o s -

t e r in g d e b a t e s a b o u t t h e f u t u r e o f m a r k e t in g , t h e r e a r e s e v -

e r a l w a y s o f e x te n d i n g t h e s e s t u d i e s. F i r s t, w h i l e m a r k e t -

in g r e s e a r c h e r s h a v e lo n g a r g u e d th a t f i r ms s h o u ld g e t

c l o s e r t o th e i r c u s t o m e r s a n d b e c u s t o m e r o r i e n t e d , t h e r e

h a s b e e n l i t t l e i n q u i r y i n t o w h i c h o r g a n i z a t i o n a l d i m e n -

s i o n s c o m p a n i e s a r e c h a n g i n g t o b e m o r e c u s t o m e r o r i-

e n t e d . 2 S e c o n d , t o t h e b e s t o f o u r k n o w l e d g e , t h e r e a r e n o

h o l i st i c s t u d i e s o n m a j o r c h a n g e s i n m a r k e t i n g o r g a n i za -

t i on . R a t h e r , m u c h o f t h i s re s e a r c h h a s f o c u s e d o n s p e c i f i c

p e r s p e c t i v e s ( e . g . , A c h r o l ' s 1 9 9 7 n e t w o r k p e r s p e c t i v e )

a n d o r g a n i z a ti o n a l d i m e n s i o n s o r h a s a d v o c a t e d a c e rt a i n

o r g a n i z a t i o n f o r m t h a t m a y b e i n n o v a t i v e ( e . g . , D a y ' s

1 9 9 7 h y p e r t e x t f o r m ) b u t m a y n o t b e r e p r e s e n t a t i v e o f

w i d e s p r e a d c h a n g e s . W h i l e W o r k m a n e t a l . ( 1 9 9 8 ) p r o -

v i d e a n i n t e g ra t i v e f r a m e w o r k f o r t h i n k in g a b o u t m a r k e t -

in g o r g a n iz a t io n a n d id e n t i f y s t r u c tu r a l a n d n o n s t r u c tu r a l

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T A B L E

R e s e a r c h o n C h a n g e s i n M a r k e t in g a n d S a l e s O r g a n i z a ti o n

rimary

Author s) Focus

Organization

Design Basis of

Dimensions Support

Summary C omments

Achrol 1 9 9 1 Marketing organizational Structure,

forms appropriate for coordination

turbulent environments

Berthon, Hulbert, Futu re of brands and Structure,

and Pitt 1997 brand management coordination

Cravens 19 95 Chang ingole of the Structu re,

sales force coordination,

skills

D ay 1 9 9 7 M a r k e t in g ' sole in new Structure,

organizational fo r m s coordination

Doyle 1 9 9 5 Considers key tasks of Structure, skil ls ,

marketing in the futur career paths

George, Freeling, Changes in how firms Structure,

and Court 1994 organize for marketing coordination

Webster 1 9 9 2 Marketing s role within Structure,

the firm coordination

Web ster 1997 Future role of marketing Structure,

with in the firm coordination

Concep tual Argu es hat unusual forms of marketingorganization that are

ambidextrousand high ly flexible)are needed n complexand

dynamicenvironm ents Describes wo such forms.

Conceptual Con sider unctionsbrands provide or sellers and buyers; consider

pressures for change of b rand m anagement;present hree

scenarios of future of brand management.

Conceptual Argu es hree majorchanges are changing selling: flatterorganiza-

with many tions with multifunction eams, market segments as basis for

examples sales organization ,more specializedsales forces.

Conceptual Conside rs ole of marketing n horizontal,process-oriented

structures as w ell as in hyb ridstructures hat comb inebusiness

processes w ith integrating and specialist functions.

Conceptual Arguesmarketinghas focusedon tactics at the bran d level and

with examples do esnot contribute o fundam entalstrategic ssues within he

firm; explains differing areerpaths in marketing.

M cK insey Em pha size oles of specialists and coordinators n process-based

consulting organizations,mphasize eams and pro cess managers, consider

clients changes in roles of productmanagers n consumergood s firms.

Concep tual Emp hasizes hanges n marketing's ole as firms movealong a

continuum rom ransaction o network-based elationships.

Con ceptua l Co nside rs trategic, actical, and culturalaspects of marketing;

considers changes n m arketingorganizationand role due to

increased customer ocus, nformation echnology,globaiization,

relationships, inter fumnetworks.

o r g a n i z a t io n a l d i m e n s i o n s , t h e i r r e s ea r c h d o e s n o t d i r e c t l y

a d d r e s s t h e i s s u e o f h o w m a r k e t i n g o r g a n i z a ti o n m a y b e

c h a n g i n g . T h i r d , g i v e n t h a t a l l o f t h e p r i o r re s e a r c h o f

c h a n g e s i n m a r k e t i n g o r g a n i z a t i o n i s c o n c e p t u a l ( s e e

Table 1 ) , the re i s a need fo r f i e ld re sea rch on changes in

m arke t ing o rgan iza t ion . F ina l ly , im plem enta t ion i s sues

h a v e n o t b e e n s y s t e m a t i c a l l y st u d i ed . W h i l e m a n y o f t h e

i d e a s f o r c h a n g i n g m a r k e t i n g o r g a n i z a ti o n a r e i n n o v a t iv e ,

t h e r e i s a n e e d t o b e t t e r u n d e r s t a n d t h e i m p l e m e n t a t i o n

cha l l eng es f i rm s face .

M E T H O D

G i v e n o u r o b j e c t i v e s o f i d e n t if y i n g t h e m a i n c h a n g e s

t a k i n g p l a c e i n m a r k e t i n g a n d s a l e s o r g a n i z a ti o n a n d o f

i d e n t i f y i n g t h e p r i n c i p a l i s su e s i n t h e i m p l e m e n t a t i o n o f

these chang es , w e dec id ed to use f i e ld in te rv iews tha t sys -

t e m a t i c a l ly e x p l o r e d m a j o r c h a n g e s i n e a c h o f a n u m b e r o f

d i f f e r e n t d o m a i n s . Q u a l i t a t iv e s t u d i e s h a v e b e e n r e c o g -

n i z e d a s a n a p p r o p r i a t e m e a n s o f k n o w l e d g e p r o d u c t i o n i n

t h o s e c a s e s w h e r e t h e s u b j e c t a r e a is b r o a d a n d c o m p l e x

( B o n o m a 1 9 8 5 ; E i s e n h a r d t 1 9 8 9 ; Z a l t m a n , L e M a s t e r s ,

a n d H e f f r i n g 1 9 8 2 ) . W e v e r i f i e d t h e a p p r o p r i a te n e s s o f

o u r q u a l i ta t i v e m e t h o d o l o g y t h r o u g h a t h o r o u g h r e v i e w

o f q u a l i t a t iv e w o r k i n t h e

Journa l o f Marke t ing

and the

Journal o f Market ing Research s ince 1984 . Af te r exc lu-

s i o n o f s t u d i e s w h o s e q u a l i t a t i v e d a t a w e r e c o d e d a n d

s ta t is t i ca lly ana lyzed (e .g . , An derso n and Co ughla n 1987;

S zym ansk i and Church i l l 19 90) and of a r ti c le s us ing ne t-

work ana lys i s in s ing le o rgan iza t ion s (e . g ., Hut t , Re inge n ,

and Ronche t to 1988) , we were l e f t wi th s ix a r t i c le s .

A m o n g t h e s e , o u r a p p r o a c h c o m e s c l o s e s t t o t h o s e o f

K o h l i a n d J a w o r s k i ( 1 9 9 0 ) a n d W o r k m a n e t a l. ( 1 9 9 8 ) i n

t h a t w e d o n o t p r i m a r i l y ta k e a n e t h n o g r a p h i c ( W o r k m a n

1 9 9 3 ) o r g r o u n d e d t h e o r y a p p r o a c h ( D r u m w r i g h t 1 9 9 4 ,

1996; Gi l ly and Wol f inba rge r 1998) , bu t ra the r s eek to

d e v e l o p a p r i m a r y o r g a n i z i n g t h e m e w i t h s u p p o r t i n g

propos i t ions .

M a n y o f th e s t a t e m e n t s a b o u t c h a n g e s i n m a r k e t i n g

o r g a n i z a t i o n a r e b a s e d o n o b s e r v a t i o n s i n l e a d i n g - e d g e

c o m p a n i e s a n d e x a m p l e s f r o m c e r t a i n i n d u s t ry s e c t o r s t h a t

a r e n o t r e p r e se n t a t iv e o f m o r e b r o a d - b a s e d c h a n g e s a c r o s s

t h e g e n e r a l b u s in e s s c o m m u n i t y . T h e r e f o r e , w e s e l e c te d

f i rm s f r o m a r a n g e o f i n d u s t ry s e c t o r s i n c l u d i n g s e r v i c e

a n d m a n u f a c t u r i n g f i rm s , w i t h t h e m a n u f a c t u r i n g c o m p a -

n i e s e n c o m p a s s i n g b o t h i n d u s t r i a l g o o d s a n d c o n s u m e r

g o o d s c o m p a n i e s . 3 W e a d d i t io n a l l y i n c l u d e d f i rm s f r o m

m o r e r e c e n t l y d e r e g u la t e d i n d u s tr i e s s u c h a s t e l e c o m m u -

nica t ions and publ ic u t i l i t ie s . Wi th in the f i rm s , we in te r -

v i e w e d m a n a g e r s i n c h a r g e o f m a r k e t i n g a n d / o r s a l e s t o

r e a c h s o m e o n e f a m i l ia r w i t h m a j o r c h a n g e s o c c u r r i n g i n

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marketing and sa les organization. To get additional per-

spect ives across industry sectors , w e interviewed market-

ing academ ics in the United States and G ermany famil iar

with organizat ional issues as well as industry observers

such as ma nagem ent consul tants and m arketing special is ts

for ma jor business publications. Altogether, the com posi-

t ion of the sample wa s 30 managers from 30 companies , 12

academics ,4 and 8 industry obse rvers .

Potent ial informants were ident if ied from industry

directories , references , and personal know ledge and were

contacted b y an adv ance let ter or fax. Informants s tated

their agreement to participate and their preferred time on

an enc losed answer shee t . F i f ty t e lephone in te rv iews

(evenly spl i t between the United States and Germany)

were arranged and w ere conducted by the second author in

the United States and b y the th ird author in Germany. Th e

interviews averaged 30 m inutes in length and w ere done in

the native lan guag e of the informant.

The fi rs t part of the in terview was semistructured

arou nd the gene ral organizational desig n dime nsions iden-

tified in our literature review (structure, coordination, cul-

ture, and power). Within each area, the authors asked for

the most important chang es and used fol low-u p quest ions

to explore the g oals o f the change, the factors driving the

change, and the key chal lenges in implementing the

change. Such use o f fol low-up quest ions in qual itative

research i s cons i s ten t wi th the l adder ing approach

(Durg ee 1986) and the narrat ive approach (Mishler

1986) adv oca ted by other qualitative researchers. In the

second part of the in terviews, we asked ab out changes in

four imp ortant topical areas that are class ical ly market ing

and sales related: th e r01e of produ ct managers, the man-

agemen t o f key accoun ts , the deve lopmen t o f new p rod-

ucts, and the interaction of the marketing and the sales

function. A t the end of the interview, informants we re

asked for addi tional com men ts and for an assessment of

which two changes they viewed as the most important .

Systematic notes were taken during the interviews, and

full transcripts w ere com plet ed shortly af ter the interview.

The field research data were then organized in the fol-

lowin g way. First, the transcript of each interview wa s

review ed to ident ify (a) the most important changes, (b)

the prima ry drivers o f the changes, an d (c) implementation

chal lenges f or each o f the areas cove red in the in terviews

(the four organizat ional design dimensions and the four

topical areas mentioned above). Summary s tatements of

the key changes were then organized in text f i les , and key

quotat ions and exam ples were s tored with these summary

statements to al low for d iscussion among the authors .

Since the g oal o f this research was to look for in tegra-

t ive theme s that could encom pass changes that heretofore

have been disc ussed in isolat ion, we w ent through a highly

iterative pr oce ss to identify such themes. W e initially d is-

cussed the most frequently mentioned changes within

each of the eight s t ructured areas of the in terview and then

narrowed these down to the m ost broad -based and s ignifi -

cant changes. Informants often used different terminology

for the same general change, so we identified which indi-

vidual chang es could be categorized und er a m ore general

theme. Ou r in it ial at tempt to deve lop a hol ist ic framew ork

involved the identification of five cha nges w e view ed as

mo st frequently me ntioned significant chan ges and identi-

f icat ion o f the factors leading to these changes. We then

discussed the in terrelationships amon g these determ inants

and changes to develop a mo re hol is t ic perspective. The

integrat ive theme of movement toward customer-focused

organizational structures em erg ed from this analysis and

synth esis of our field data. Th is iterative ana lysis of quali-

tative data to develop holistic themes is consistent with

that recommend ed by a numb er of qual itative researchers

(e.g . , Belk , Sherry , and Wallendorf 1988; Eisenhardt

1989; Hirschman 1986) and utilized b y researche rs in

marketing (e.g., Drumwright 1994; Workman et al. 1998),

consumer research (e .g . , Schou ten and McAlexander

1995), and management contexts (e.g . , Hargadon and

Sutton 1997 ; Leonard-Barton 1992).

D E S C R I P T I O N O F S P E C I F IC

C H N G E S IN M R K E T I N G

O R G N I Z T I O N

C h a n g e s C o n c e r n i n g

Pr ima r y Ma r k e t in g Co o r d in a t o r s

To relate changes in coordination roles in marketing

and sales , w e introduce the concep t of a primary m arket ing

coordinator. W e define a primary m arketing co ordin ator as

an individual who is the most influential coordinator for

marketing and sa les activities c arried ou t by different peo-

ple or subunits within an organization for a specif ied set of

prod ucts or customers.

Changes With

espect

to

Key ccountManagers

On e of the more significant organizational chan ges

identified in our field research is an increasing emphasis

on key accoun t managemen t and the es tab l ishmen t o f cus -

tomer segment managers within the sales organization.

We def ine key accoun t managemen t (K AM ) as the des ig -

nation of special personnel and /or perform ance o f special

activities directed at an organizatio n's mo st important c us-

tomers. An important implication of the increased impor-

tance of KAM is that key account managers and/or cus-

tomer segmen t managers ( such as indus t ry segmen t

managers) are increasingly taking on the role of a primary

marketing coordinator.

This increased im portance of KA M is reflected by two

trends in relation to person nel w orking w ith key accounts.

First , w e observed that more senior people are ass igned to

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464 JOURNALOF THE ACADEMYOF MARKETINGSCIENCE FALL2000

key accoun t s . Fo r exampl e , a G erma n s t ee l i ndus t ry man -

a g e r c o m m e n t e d ,

Top- l eve l me et i ngs a r e no t new, bu t t hey used t o be

m u c h m o r e i n f o r m a l . . . I n th e pa s t, o n e c o u ld m a k e

dea l s on t he l ower sa l es l eve l s ( You ' l l ge t some

more t ons nex t t ime ) . Th i s is i mposs i b l e t oday as

pu rchas i ng po l i cy i s sub j ec t t o much t i gh t e r con -

t ro is . . . Ten year s ago , ou r sa l espeop l e had eno r -

mo us hosp i t a l i t y expenses .

S i mi l a r l y , t he au t om ob i l e i ndus t ry p rov ides m any exam -

p l es o f t op manag er s be i ng i nvo l ved in p rocu rem en t nego-

t i a t i ons , wh i ch had p rev i ous l y been conduct ed on t he

operat ional level .

S e c o n d , w e o b s e r v e d a n i n c r e a s i n g a s s i g n m e n t o f

cross - func t i ona l team s t o maj o r accoun t s . Fo r exampl e , a

U . S . c o n s u m e r g o o d s m a n a g e r n o t e d ,

A l l o f o u r b i g c u s t o m e r s n o w h a v e a d e d i c a te d t e a m

t ha t inc l udes dem and-s i de sa l es t ypes as wel l as sup -

p l y - s i de peop l e . The y l i ve in t he c i t y where t he cu s -

t ome r headquar t e r s i s . Tha t has been a n ou t g rowt h

of t he accep t ance o f t h i s i s t he way you do bus i -

ness . . . These t eam s r ep resen t a l l o f ou r b rands .

Th i s i s a d i r ec t r esponse t o t he need o f mu l t i func t i ona l ex -

per t i se when co l l abo ra t i ng c l o se l y wi t h i nd i v i dua l cus -

t omers . I t seems t o be a wi desp read app roach t o fo s t e r

i n t e r ac t i on be t ween equ i va l en t func t i ona l spec i a li s ts i n t he

buy i ng and se l l i ng o rgan i za t ions .

Based on ou r i n t e rv i ews , we i n fer t ha t t wo p r i mary f ac-

t o r s a r e d r i v i ng the i ncreased i mp or t ance o f K AM . F i r st ,

m a n y c o m p a n i e s a r e p u r s u i n g t h e g o a l o f d e v e lo p i n g

c l oser r e l a t ionsh i ps w i t h t he i r mo s t i mpor t an t cus t omers

a n d v i e w K A M a s o n e w a y o f a c h ie v i n g t h is g o a l. W h i l e

t h i s t endenc y was ac t i ve l y p rom ot ed i n some com pan i es , i t

a l so r ep resen t ed a r eac t i on t o r equ i r em en t s on t he par t o f

c u s t o m e r s . F o r e x a m p l e , a U . S . c o n s u m e r g o o d s c o n s u l-

tant said ,

S t a r t i ng abou t 1986 t here was a d rama t i c sh i f t o f i n -

fo rmat i on be i ng be t t e r a t t he r ese l l e r and r e t a i l e r

t han t he supp l ie r . Tha t b rou gh t abou t a chang e i n t he

p o w e r b a s e . . . . T h e m a j o r c h a i n s g o t t ir e d o f d e a li n g

wi t h execu t i ona l , l ower l eve l sa les peop l e . They go t

t i red o f wh at I ca l l t he Dea l o f t he M on t h c l ub ,

t hey go t t i r ed o f con f l i c t i ng po l i c i es f rom d i f f e r en t

opera t i ng d i v is i ons i n the same co rpo ra t ion . . . Th i s

has c l ear l y been d r i ven by r e t a i l e r s say i ng t o supp l i-

e r s , You be t t e r ca l l on me ho l i s ti ca l l y , I 'm no t go i ng

t o spend t he t i me t o t a l k t o 3 o r 4 d i v i s i ons .

Typ i ca l l y , bus i ness cus t om ers ' em phas i s on economi es

i n pu rchas i ng opera t i ons l ed t o t he des i r e t o es t ab l i sh

c l oser r e l a t ionsh i ps wi t h a l i mi t ed num ber o f supp l i e rs t o

car ry o u t j o i n t p roc ess op t i mi za t i on ac t i v it i es. Bet wee n

consum er goods f i rms and r e t a i l ing com pan i es , t h i s t rend

man i fes t s it se l f i n e f f i c i en t cons um er r esponse (ECR ) p ro -

j e c t s , w h i l e b e t w e e n i n d u s t r i a l s u p p l i e r s a n d b u y e r s

j u s t - i n - t i me ( J IT) a r r angemen t s may be es t ab l i shed . The

com m on t r a i t o f t hese t r ends is t he des i r e on t he pa r t o f t he

cus t om er t o deve l op a c l o ser r e l a t i onsh i p wi t h a supp l i e r t o

crea t e e f f ic i ency . Th i s d eve l opm en t i s para l l e l ed by i n -

c r e a s in g c u s t o m e r c o n c e n t r a t i o n a n d c u s t o m e r p o w e r i n

ma ny i ndus t ri es .

A s e c o n d r e as o n f o r th e i n c r ea s e d e m p h a s i s o n K A M i s

i ncreased cen t r a l i za t i on o f pu rchas i ng dec i s i ons . Cus-

t omers i ncreas i ng l y coo rd i na t e pu rchas i ng across l oca-

t i ons and i nvo l ve more se n i o r manage r s and peop l e f rom

more func t i ona l a reas i n p roc u rem en t dec i s i ons . I t i s d i ff i -

cu l t to be success fu l i n such cases w hen u s i ng geograph i -

ca l l y based sa l es per sonnel w ho ca l l on l oca l pu rchas i ng

m a n a g e r s . T h u s , m a n y f i r m s e s t a b l i s h K A M p r o g r a m s

wi t h t he goa l o f coo rd i na t i ng sa l es r esou rces across r e -

g i ons , ca l l ing on t he cus t om er a t h i gher l eve l s , and us i ng

peop l e f rom m ul t i p le func t i ona l a r eas . A spec i a l case o f

t h i s cha l l enge o f coo rd i na t i ng sa l es e f fo r t s across geo -

g raph i ca l a reas occu r s whe n f i nns se l l to cus t ome rs who

operate on a mul t inat ional basis . In th i s case, there i s a

need t o coo rd i na t e marke t i ng and sa l es po l i c i es across

coun t ry boundar i es and i n par t i cu l a r to coo rd i na t e p r i c ing

dec i s i ons . In t e rna t iona l o r g l oba l KA M t eams are one w ay

i n wh i ch such coo rd i na t i on i s ach i eved across coun t r ies .

As an examp l e o f th i s tr end , a marke t i ng ma nage r i n a Ger -

ma n chem i ca l f irm no t ed ,

We need i n t e rna t i ona l leverage i n t he f ace o f i n t e rna-

t io n a l c u s to m e r s . W h i l e o u r c u s t o m e r s m a d e d e c e n -

t r a li zed pu rchas i ng dec i s i ons i n t he pas t , t hey w i sh

t o be add ressed i n a coo rd i na t ed wa y t oday .

hanges With Respect

to ountry Managers

For f i rms opera t i ng i n more t han one coun t ry , a p r i mary

marke t i ng coo rd i na t o r has h i s t o r i ca l l y been t he coun t ry

m a n a g e r (o n e i n fo r m a n t r e f e rr e d to t h e m a s c o u n t r y

k i ngs ) who coord i na t es t he f i nns ' ac t i v it i es fo r cus t omers

wi t h i n t he i r geograph i c r eg i on . We observed t ha t t he i r ro l e

(par t i cu l a r l y coun t ry manager s i n Europe) i s genera l l y

d i m i n is h e d , w i th a s h i f t o f p o w e r a n d r e s o u r c e s a w a y f r o m

i nd i v i dua l coun t r i es t o o rgan i za t i ona l un i t s t ha t span coun-

t ry boundar ies .

hanges With R espect

to Produc t Managers

Hi s t o r ica l l y , t he p roduct man ager has h ad an i mpor t an t

r o l e a s p r i m a r y m a r k e t i n g c o o r d i n a t o r ( c f . L o w a n d

Fu l l e r t on 1994), coo rd i na t i ng t he ac t i v it i es o f ma rke t i ng ,

adver t i s ing , sal es , R&D , man ufac t u r i ng , and o t her func-

t i ona l g roups i n t he f i rm fo r a g i ven p roduct (o r se t o f r e -

l a t ed p roduct s ) . I n consum er goods f i rms , we o bserved a

t r en d o f d e c r e a s in g i m p o r t a n c e o f p r o d u c t m a n a g e m e n t . I n

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genera l , t here was a sh i f t o f peop l e a nd do l l a r s t o t he sa l es

o rgan i za t i on . Fo r exampl e , a Ge rman a cadem i c no ted ,

The r espon s i b i l it y o f t he b rand ma nage r is more and

m o r e c u r b e d a n d o v e r l a y e d b y k e y a c c o u n t m a n a g e -

m e n t , c a t e g o r y m a n a g e m e n t , a n d r e g i o n a l s a l e s

m a n a g e m e n t . H e i s n o t t h e d e c a t h l o n a th l e te o f t h e

pas t anym ore , because he has l o s t h i s access t o r e -

t a i l e r s and key accoun t s . A l so h i s i n f l uence over

b rand po l i cy i s l imi t ed .

The t yp i ca l j u s t i f i ca t i on fo r t h i s t endency was t he g rea t e r

ro l e o f t he sa l es o rgan i za t i on i n par t ner ing w i t h maj o r ac-

coun t s and a dap t i ng p rog ram s fo r t hese accoun t s. We add i -

t i o n a l l y o b s e r v e d a s h i f t o f f o c u s i n p r o d u c t / b r a n d

m a n a g e m e n t i n m a n y c o n s u m e r g o o d s c o m p a n i e s . M o r e

spec i f ica l l y , t here i s a s t ronger foc us on m anag i n g a se t o f

b rands w i t h i n a p roduct ca t ego ry ra t her t han manag i ng the

i nd i v i dua l b rand . Th i s de ve l opm en t has l ed t o t he u se o f

t h e t e r m c a t e g o r y m a n a g e m e n t i n m a n y c o n s u m e r g o o d s

f i rms . The fun dam en t a l exp l ana t i on fo r t h i s change seems

t o be t ha t t he cu s t omers o f consu me r goods f i nns ( re ta il -

e r s ) i ncreas i ng l y t h i nk i n t e rms o f p ro f i t ab i li t y o f p roduct

ca t ego r i es r a t her t han sa l es o f i nd i v idua l b rands . The sh i f t

i n focus i n p roduct managemen t r e f l ec t s an a t t empt t o

be t t e r t h i nk i n t e rms o f t he ca t ego r i es o f the d i r ec t cus t om-

er s who se pow er has i ncreased . Th i s i nvo l ves a lo ss o f i n -

f l u e n c e o f p r o d u c t m a n a g e r s i n c h a r g e o f i n d i v i d u a l

b r a n d s. A s o n e G e r m a n m a r k e t i n g a c a d e m i c n o t e d,

C o m p a n i e s a r e i n c r e a s i n g l y s e n d i n g e m p l o y e e s

wh o are sup posed t o w ork i n marke t i ng l a te r, t o t he

se l l i ng f ron t fo r a number o f mon t hs . They a l so

vo i ce v i s - a -v i s t he un i ver s i t i es t ha t t hey shou l d i m-

p rove t he educa t i on wi t h r espec t to se l l i ng man age-

m en t and se l l ing nego t i a t i on .

S i m i l a r ly , a U . S . a c a d e m i c n o t e d t h a t t he m a j o r c o n -

s u m e r p a c k a g e d g o o d s c o m p a n i e s r e c r u i t i n g M B A s

t e ll t h e m , Y o u ' r e g o i n g to s p e n d tw o y e a r s o n t h e

W a l - M a r t t e a m o r w h a t e v e r , b e f o r e y o u m o v e i n to c a t e-

g o r y m a n a g e m e n t .

Whi l e t he ro l e o f p roduct manager s i s chang i ng , ou r

ev i dence i nd i ca t es t hey co n t i nue t o be cen t r a l t o t he mar -

ke t i ng o rgan i za t i on . Thus , i n con t r as t t o t hose who have

p r o c l a i m e d t h e d e a t h o f t h e b r a n d m a n a g e r ( D e a t h o f

t he Brand Ma nag er 1994) , we found no ev i dence t ha t

p roduct managemen t i s go i ng t o d i sappear . None o f t he

compan i es i n t e rv i ewed t ha t had es t ab l i shed a p roduct

m a n a g e m e n t o r g a n i z a ti o n h a d d i s b a n d e d it, n o r d i d a n y o f

t he i n t e rv i ewed per sons p red i c t t h is . However , we foun d

t ha t t he imp or t ance an d ro les o f p roduct mana ger s var i ed

s i gn i f i can t l y by i ndus t ry .

In mos t i ndus t r i a l goods compan i es , con t r a ry t o con -

sumer goods f i rms , p roduct managemen t i s ga i n i ng i n -

creas i ng o rgan i za t i ona l l eg i t i macy . Hi s t o r i ca l l y , a s i g -

n i f ic a n t n u m b e r o f i n d u s tr i a l a n d t e c h n o l o g y - b a s e d f i rm s

h a d p r o d u c t m a n a g e r s r e p o r t i n g t o R & D o r o p e r a t i o n s

ra t her t han marke t i ng . However , mos t o f t he i ndus t r i a l

f i rms we i n t e rv iewed had p roduc t ma nager s es t ab l i shed as

a cen t r a l and i n f l uen t i a l par t o f t he m arke t i ng o rgan i za-

t i on . Fo r exampl e , i n one U.S . Fo r t une 500 com pu t er com-

pany , t he i n fo rm an t i nd i ca t ed ,

In t he pas t , t he p roduct ma nage r had r espons i b i l i t y

f o r d e v e lo p m e n t a n d m a n u f a c t u r in g . N o w t h e y h a v e

fu l l P&L respons i b i l i t y fo r a l l o f t he e l emen t s o f

brand va lue. I t i s the offer ing, the terms, fu l f i l lment ,

suppor t, d i s t r ibu t i on , and com mun i ca t i on .

A r e l a t ed t r end wi t h i n t hese f i rms was t o g i ve t hese

p roduct mana ger s mo re powe r and a g rea t e r ab i l i t y t o r ep -

r e s e n t c u s t o m e r n e e d s . F o r e x a m p l e , a G e r m a n c h e m i c a l

i ndus t ry ma nage r no t ed ,

T h e t a sk s o f t h e p r o d u c t m a n a g e r h a v e u n d e r g o n e

t r emendo us chan ge du r i ng t he l as t f i ve year s . Hav-

i ng been a p roduct adm i n i s t ra t o r in t he pas t , he i s

now car ry i ng more ho l i s t i c r espons i b i l i t y and i s

more cus t omer -d r i ven .

In se rv i ce f i nns , t here i s an i ncreased r eco gn i t i on o f t he

i m p o r t a n c e o f s y s t e m a t i c p r o d u c t m a n a g e m e n t . W e o b -

served t ha t se rv i ce f i nns a r e i ncreas i ng l y i n t roduci ng

product m anager s i n t o t he i r o rgan i za t i ona l s truc t u res t o

h e l p m a k e a n d i m p l e m e n t d e c is i o n s a b o u t c u s t o m e r s e g -

men t a t i on , deve l opm en t o f p roduct l i nes , b r and i ng o f se r -

v i ce o f f e r i ngs , and s t andard i za t i on ver sus cus t om i za t i on

of se rv i ce o f f e r i ngs .

r o p o s i t i o n s

To summar i ze t he observa t i ons r epo r t ed above , we

have o rgan i zed ke y r e l a t iona l s t a t emen t s as p ropos i t i ona l

s t a t emen t s . P ropos i t i on 1 i s r e l a t ed t o an t eceden t s o f

changes i n t he r e la t i ve i mpor t ance o f key accoun t ma nage-

men t , w h i l e Propos i t i on 2 cons i s t s o f o rgan i za t i ona l con -

s e q u e n c es o f a n e m p h a s i s b e i n g p la c e d o n K A M .

Proposition : The

r e l a t i ve i mpor t ance o f key accoun t

m a n a g e m e n t i n c re a s e s

as f i rms seek t o es t ab l i sh c l o ser r e l a t i onsh i ps wi t h

t he i r cus t omers ;

as t he ex t en t o f coo rd i na t i on o f l og i s t ics be t wee n buy-

ers and sel lers increases;

as buyer s r educe t he num ber o f supp li e r s ;

a s d e c i s i o n m a k i n g i s c e n t r a l i z e d h i e r a r c h i c a l l y

wi t h i n cus t ome r o rgan i za t i ons ;

as mu l t i na t i ona l cus t omers cen t r a l i ze pu rchas i ng de-

c i s i ons across co un t r i es .

Proposition 2: As a g rea t e r em phas i s i s p l aced on ke y ac-

c o u n t m a n a g e m e n t ,

mo re sen i o r per sonnel a re ass i gned t o mana ge key ac-

coun t s ;

c ross - func t i ona l t eams are mo re l i ke l y to be u sed ;

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the relative power of product managers decreases;

people in the sales organization are more likely to be

primary marketing coordinators.

Increasing Dispersion

of Marketing ctivities

Another significant change in marketing organization

is the increasing dispersion of the marketing effort. One

U.S. consultant generally noted that more and more of the

actual activities that w e associate with marketing are not

part of the marketing organizational structure per se To

clarify the concept of increased dispersion of marketing

activities, we initially provide an example and then pro-

vide a classification scheme for different types of disper-

sion. A limited f orm o f dispersion occurs when marketing

retains responsibility for an activity but seeks greater in-

volvement from other functional groups, often through

cross-functional teams. For example, a marketing man-

ager in a German industrial machinery firm said,

We have founded a so-called MTS-circ le [marketing-

technical-sales] which meets every 2-3 weeks . . .

This is how we manage to have engineers accom-

pany sales and marketing people on their customer

visits . . . . In the old days, a salesman in the field or-

ganization who noticed a customer problem had to

look for someone at the plant who felt responsible

for that problem . . . . With today 's MTS circles ,

salespeople know the product better and there are

clear responsibilities for problem solving.

We vie w this as a case of limited dispersion in the sense

that neither personnel nor responsibility are reassigned. In

the remainder of this section, we describe four types of dis-

persion that we encountered in our field research.

ispersion to a Temporary Team

In this case, there is a transfer of responsibility for an

activity to a temporary team. Such teams are typically

comp osed of mem bers from m ultiple functional areas and

have a team or project manager. The team is now responsi-

ble for the decision with personnel sometimes reporting in

a dotted line fashion to the team manager and sometimes

being fully assigned to the team. Common examples of

this type of dispersion include new product developme nt

teams and temporary task forces for issues such as cus-

tomer satisfaction.

ispersion to a Permanent Team

The distinction betw een this type of dispersion and the

former is the permanence of the change. Many firms in-

creasingly think of their business in terms of cross-func-

tional business processes (Day 1997; George et al. 1994;

Webster 1997). Once firms have identified their key busi-

ness processes, there is often a movem ent of key marketing

activities and personnel to process teams responsible for

activities such as order fulfillment, customer service, and

logistics. As a manager in a German steel company

pointed out,

In order to foster communication, we are establish-

ing order handling centers, which com bine comm er-

cial and technical activities. Imagine one big room

where all are sitting next to one another. This re-

duces interfaces.

ispersion to an

Existing Organizational

nit

Another form o f dispersion occurs when responsibility

and personnel are transferred fro m marketing to another

existing functional group. Keeping in mind that marketing

and sales usually are distinct organizational entities, we

obse rved the greatest shift in direction of marketing activi-

ties has been from m arketing to sales. As one U.S. market-

ing academic noted,

Activities traditionally done by marketing people

are getting done now by the sales force or staff peo-

ple in the sales force area. They'r e just closer to the

customer.

A marketing vice-president at a U.S. packaged goo ds firm

provided an example o f such a reassignment o f marketing

personnel:

We have marketing and sales people serving on ded-

icated, cross-functional teams working in the field

supporting accounts . . . The cross-functional mem-

bers of those teams have hard reporting relationships

into sales now and dotted-line into the rest of the

business.

ispersion to a

New Organizational Unit

Another form o f dispersion occurs when a new unit is

established with responsibility for a marketing activity

that reports directly to a general manager. This is most

commonly observed when a marketing activity becomes

so strategically important that it merits special attention.

For example, in som e industries it is comm on for the pric-

ing function to be taken out of the marke ting unit (e.g., air-

line and telecommunications industries). Other firms have

created new organizational units to focus on customer

information, worldwide brand image, and customer ser-

vice. In Germany, many firms are establishing a new

high-level pricing m anager to ensure coordination of pric-

ing structures across Europe, d ue to the approaching com-

mon currency.

Propositions

There see m to be two general reasons for the increased

dispersion o f marketing effort. First, many firms move ac-

tivities out of the marketing department to get closer to

customers and to provide additional value to customers.

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One exa mp le is by mak ing cus tomer - re l a t ed bus iness p ro -

c e s s e s s m o o t h e r a n d m o r e r e s p o n s iv e t o c u s t o m e r n e e d s .

A second r easo n fo r i ncreased d i sper s ion i s t o ob t a in t he

necessary spec i a l i za t i on and exper t i se needed t o per fo rm

cer t a in marke t i ng ac t i v i t i es . Based on t hese and r e l a t ed

s t a t emen t s ma de i n ou r i n t e rv i ew, we ma ke t he fo l l owing

propos i t i ons conce rn ing d i sper s ion :

Pro p o s i t io n 3 :

Disper s ion o f ma rke t i ng ac t i v i ti es wi l l be

g rea t e r

i n f i r m s t h a t p u r s u e t h e g o a l o f b e i n g c l o s e t o t h e i r

c u s t o m e r s ;

as t he need fo r spec i a l i zed marke t i ng exper t i se i n -

creases .

C U S T O M E R F O C U S E D

O R G A N I Z A T I O N A L S T R U C T U R E S

A S A N I N T E G R A T IV E T H E M E

T h e C o n c e p t o f a C u s t o m e r

F o c u s e d O r g a n i z a t i o n a l S t r u c t u r e

As w e d i scusse d i n t he method o logy sec t ion , t he in t e -

g r a ti v e t h e m e t h a t e m e r g e d f r o m o u r d a t a a n a l y s is i s t h e

in t e rp re t a t i on t ha t t he changes i n marke t i ng and sa l es

o rgan i za t i on a re i n t e r r e l a t ed and are embe dded i n a gen -

e r a l m o v e m e n t t o w a r d c u s t o m e r - f o c u s e d o r g a ni z a ti o n a l

s t ruc tu res . The chang es i n o rgan i za t i ona l des ign re l a t e t o

the bas i s on w h ich bus iness un i t s a r e es t ab l i shed . Accord -

ing t o Cespedes (1989) , t here a re t h ree main bases fo r

def in ing s t r a t eg i c bus iness un i t s - -p roduct g roups , geo -

g raph i ca l r eg ions , and cus tom er g roups . We def ine a

cus

to m er fo cu sed o rg a n iza t io n a l s t ru c tu re as an organiza-

t i ona l s t ruc tu re tha t u ses g roups o f cus tomers r e l a t ed by

i n d u s t r y , a p p l i c a t i o n , u s a g e s i t u a t i o n , o r s o m e o t h e r

nonge ograph i c s imi l a r i t y as t he p r imary bas i s fo r s t ruc tu r-

i ng t he o rgan i za t i on . A

p ro d u c t . fo cu sed o rg a n iza t io n a l

s t ru c tu re

i s an o rgan i za t i ona l s t ruc tu re t ha t u ses g roups o f

r e l a t ed p roduct s as t he p r imary bas i s fo r s t ruc tu r ing t he

o rgan i za t i on . A

g eo g ra p h ica l ly fo cu sed o rg a n iza t io n a l

s t ru c tu re

i s an o rgan i za t i ona l s t ruc tu re t ha t u ses geograph-

ical ter r i tor ies as the pr im ary basis fo r s t ructur ing the orga-

n i za t i on . Whi l e e l emen t s o f p roduct g roups , cus tomer

g roups , and geograph i ca l l oca t i on a re p resen t i n a l l o rgan i -

za t i ons , ou r def i n i t i ons a im a t t he p r imary o rgan i za t i ona l

s t r uc t u r in g m e c h a n i s m .

T h e r e i s a d i f f e r e n c e b e tw e e n t h e i d e a o f a c u s t o m e r -

focu sed o rgan i za t i ona l s t ruc tu re and t he i dea o f a m arke t -

o r i en t ed o rgan i za t i on . Conce p tua l i za t i ons and opera t i on -

a l i za t i ons o f a marke t o r i en t a t i on have emphas i zed cu l -

t u ra l and behav io ra l aspec t s r a t her t han s t ruc tu re (Desh -

pand6 an d Far l ey 1998 ; Jaworsk i and Koh l i 1993; Narver

and S l a t e r 1990). W e v i ew a cus tomer - focuse d o rgan i za-

t i ona l s t ruc tu re as an an t ecede n t t o and as a f ac i l i t a t o r o f

marke t i n fo rmat ion acqu i s i t i on and d i ssemina t i on and

the coo rd ina t ed c rea t i on o f cus tom er va lue (Narver and

Slater 1990:21) , th at is , mark et or ientat ion. To clar i fy th is

s t ruc tu ra l me ans o f mov ing c loser to cus tome rs , cons ider

t h e c o m m e n t o f a U . S . c h e m i c a l m a n a g e r :

The b as i c ph i l o sophy i s t o o rgan i ze a round ma rke t s ,

have a l o t mo re focus on w hat d r i ves marke t s , what

m a r k e t s n e e d i n t e r m s o f p r o d u c t s a n d s e r v i c e s, a n d

pu t ou r se lves in a pos i t ion so t ha t we c an cha nge o u r

p r o d u c ts a n d s e r v ic e s s o w e c a n c h a n g e a n d a d a p t

mo re qu i ck ly .

W hi l e r esearcher s have l ong argued fo r ma k ing t he cus -

t ome r t he focus o f t he f i rm ' s e f fo r t s ( e .g . , Drucke r 1954 ;

Lev i t t 1960), i t was c l ear f rom our da t a t ha t mana ger s a re

s t il l in t he p rocess o f t ry ing t o imp lem en t o rgan i za t i ona l

changes w h ich wi l l i ncrease t he i r focus on cus tom ers . As

one i n fo rman t no t ed , M ore o f t en you are see ing sa les o r-

gan i za t i ons o rgan i zed a long i ndus t ry l ines an d l ess by ge-

og raph i es . S imi l a r ly , a U .S . marke t i ng ma nage r a t a

For tune 500 h igh - t ech f i rm no t ed ,

S ix year s ago we h ad ou r sa l es o rgan i za t i ons a l igned

by geography . Today , we have ou r sa l es o rgan i za-

t i o n a l i g n e d b y c u s t o m e r b u s i n e s s t y p e - - m a i n l y

along indust ry l ines.

Thus , w h i l e the t r end i s toward cu s tome r - focused o rga-

n i za t i ona l s t ruc tu res , t hese two examples i nd i ca t e t ha t

5

ma ny f i rms have on ly r ecen t l y mo ved m th i s dl recUon. As

a num ber o f r esearcher s have a rgued , t he ac tua l imp le-

m e n t a t i o n o f t h e m a r k e t i n g c o n c e p t a n d t h e i m p l e m e n t a -

t i on o f o rgan i za t i ona l s t ruc tu res , p rocesses , and sys t em s

tha t f ac i l it a t e a focus on cus tome rs a re s t il l p rob l emat i c

(Ander son 1982 ; Bo nom a 1985; Cespedes 1995 ; Webs t er

1981; Work ma n et al . 1998) .

I t is impor t an t t o cons ider cus tom er - focused o rgan i za-

t i ona l s t ruc tu res i n t he con t ex t o f com pet ing o r i en t a t i ons

fo r o rgan i za t iona l s truc tu re t o under s t and where com pa-

n i es a re coming f rom and no t on ly whe re t hey a re t ry ing to

go . We observed t ha t man y f i rms t ha t tr ad i t i ona l ly t ended

toward p roduct - focuse d def i n i ti ons o f bus iness un i t s and

tha t s t ruc tu red t he i r sa l es un i t s a round geograph i es ( t yp i-

ca l l y r eg ions in t he U n i t ed S t a t es o r coun t r i es i n Europe)

are r edef in ing t he i r bus iness un i ts f rom a cu s tome r per -

spec t i ve . Whi l e t h i s does no t mean comple t e ly abandon-

ing t he t r ad i ti ona l o r i en t a t i ons , t he ir r e l a t i ve impor t anc e i s

d imin i sh ing . Hence , as show n in F igu re 1 , t he sh i f t t oward

a cus tomer per spec t i ve has two f ace t s : a de-emphas i s o f

t he p roduct - focused per spec t i ve and a de-emphas i s o f

geograph i ca l r eg ions .

T h e s h i f t f r o m p r o d u c t - f o c u s e d t o c u s t o m e r - f o c u s e d

organ i za t i ona l st ruc tu res i s mo t iva t ed by t he need t o co m e

closer t o t he p rob l ems t he cus tomer i s t ry ing t o so lve .

W i th in a p roduct - focuse d o rgan i za t i ona l s t ruc tu re , sa l es

peop l e a re essen t i a l l y p roduc t spec i a l is t s and a re t yp i ca l l y

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assigned to a single product-focused strategic business

unit (SBU) selling to all customers of that SBU. The new

organizational form seeks to enable sales people to better

assess the industry value chain including the customer's

custom ers an d to differentiate offerings on the basis of this

knowledge. Within such a customer-focused organiza-

tional structure, i t is com mo n to find the sales force selling

al l of the product l ines of the f i rm w hile being ass igned to a

s ingle customer group. A ma nager in a U.S. telecommuni-

cations firm noted,

We have been res t ructured over the years away from

product silos and more toward customers. Sales is

organized by custom er and they are able to sell the

ent i re product l ine of the corporation . . . We t ry to

sel l to the cu stomer whatever they need end to end to

meet their requirements .

Another way of moving toward a more customer-focused

structure is to add m arket or customer segment managers

who act in coordinatin g and liaison roles and represent the

needs o f given customer segments , typical ly within the

marketing organization.

The shif t from geographical ly focused to customer-

focused org anizational structures is the second aspect indi-

cated in Figu re 1. One wa y of acc omplish ing this is to reor-

ganize sales people based on the type o f customer they sell

to rather than their geographic location. As a business

magazine edi tor in the Uni ted States noted, Firms don 't

want a genera list who w ill sell to everyone in the New York

area, they want a financial person who will call on Dean

Wit ter , Goldm an Sachs, Saloman Bro thers In an interna-

tional context, firms operating in m ultiple countries have

typical ly had subsidiaries that were fai r ly autonomous

with a s t rong influence of local management . One Germ an

mana ger in the chem ical industry noted,

Unti l recent ly we left each affi l iated company on i ts

own, they basica lly reported sales numbers. Now re-

gions that face the same problems, are clearly

grouped together.

Another Germ an m anager from an industrial supply f irm

noted,

Until two years ago , everything was strongly decen-

tralized. The national affiliates had their ow n strat-

egy, only 30 percent of the activities were coordi-

nated. Today, 70 percent are coordinated.

Increasingly, firms are establishing sales regions that

span coun try boundaries. Ad ditionally, ma ny firms are es-

tabl ishing com petency centers , which consis t of special -

is ts w ho m ay be geographical ly dispersed and special ized

in certain types o f applications or industry sectors. A U.S.

FIGURE 1

Shift Toward Customer Focused

Organizational Structures

Customer Groups

Products Geographical

Regions

marketing manager at a computers systems firm men-

tioned a specific exam ple of drawing on w orldw ide techni-

cal support:

If somebody at Daim ler Benz in Stut tgart needs a

guy to talk about plant floor autom ation, he calls a

specialist to com e in and help. All o f that is done on a

global basis. So if that skill is in Boulder, C olorado,

he g ets it.

Our interviews provide evidence that there are three

major reasons why fi rms seek a s t ronger coordinat ion

across countries. First, information dissemination across

country boundaries is faci l itated by m odern co mm unica-

t ion and informat ion technologies . General ly this in-

creases the interdepen dence o f activities across countries.

In such circumstances, a firm's marketing activities in

Country A m ay have a s t rong impact on their market posi-

t ion in Country B. This problem turned out to be m ost s ig-

nificant within Europe where price differences across

countries have his torical ly been very high in m any indus-

t ries . As one German manage r noted, uncoordinated

prices are a dangerous gam e due to the forthcomin g intro-

duct ion of a comm on currency, which w il l make prices

more comparable. 6 Second, bu ying fi rms emphasize syn-

ergies across countries in their procurem ent operations to a

stronger extent than in the past. For exam ple, ma ny multi-

national firms operating in Europe ha ve adopted organiza-

tional structures that span coun try boundaries rather than

relying on separate subsidiaries in each country. Sup-

plying firms are better able to serve these customers by

having organizational structures that mirror those o f their

customers. Third, there are also mo tives of the supplier to

emp hasize the centralization of decisions across countries

to a larger extent than in the past. Som e interviewe es men-

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Homburget al. / FUNDAMEN TALCHANGES N MARKETINGORGANIZATION 469

t i oned t he des i r e t o con t ro l p roduc t var i e ty . Fo r exampl e ,

i n consum er goods sec t o r s , f i rms t end t o search fo r ways t o

s t andard i ze b rands across co un t r i es t o exp l o i t cos t syner-

g i es . Add i t i ona l l y , speed i ng up o f g l oba l new p roduct i n -

t r o d u c t i o n w a s m e n t i o n e d a s a r e a s o n f o r i n c r e a s i n g

cen t r a l i za t i on across coun t r i es and a r r ay i ng t he o rgan i za-

t io n m o r e t o w a r d t h e c u s t o m e r .

C o m b i n i n g t h e t w o f a c e t s o f t h e m o v e t o w a r d c u s -

t ome r - focused o rgan i za t i ona l s t ruc t u res y i e l d s an i mpor -

t an t i n s i gh t i n t o t he ques t i on o f whet her marke t i ng and

sa l es opera t i ons wi l l be more ce n t r a l ized o r more d ecen -

t r a l ized i n t he fu t u re . Drawi ng on t he work o f Jaworsk i and

Koh l i (1993) , we def i ne cen t r a l iza t i on as t he inver se o f

t h e a m o u n t o f d e l e g a t io n o f d e c i s i o n -m a k i n g a u t h o r it y

t h rough ou t an o rgan i za t i on and t he ex t en t o f par t i c ipa t i on

b y o r g a n i z a ti o n a l m e m b e r s i n d e c is i o n m a k i n g . O n o n e

s i de , increas i ng i n t e rdepend ence be t we en coun t r i es l eads

t o a s t ronger n eed fo r cen t r a l i za ti on across coun t r i es . On

t he o t her s i de , t o be more cus t omer focused i n t e rms o f

t he i r marke t i ng a nd sa l es opera t i ons , f i rms t end t o decen -

t r a l i ze t he i r ac t i v i t i es i n t e rms o f cus t omer i ndus t r i es .

Thus , ou r f i nd i ngs i nd i ca t e more cen t r a l i za t i on across

coun t r i es and l ess cen t r a l i za t i on across cus t om er g roups .

Our con c l us i on i s t ha t t he mov em en t a l ong the p roduct

s i de i s mo re s i gn i f i can t t han t he mo ve a l ong t he geog raphy

s i de o f F i gu re 1 , because i t r ep resen t s a sh i f t i n o r i en t a t ion

f rom an i n t e rna l emphas i s t o an ex t e rna l emphas i s ( see

Da y 1994 for a s imi lar d is t inct ion) . I t addi t ional ly appl ies

t o more f i rm s t han t he geograph i ca l sh i f t s ince m any f i rms

serve a l i mi t ed geograph i ca l r eg i on and have no t deve l -

oped geograph i ca l l y d i f f e r en t i a t ed o rgan i za t i ona l un i t s .

Based on t he r esearch , we o f f e r the fo l l owi ng p ropos i ti ons

concern i ng t he l i ke l i hood o f hav i ng a cus t omer - focused

organ i za t i ona l s t ruc tu re .

Proposition : Th e l i ke l i hood o f a f i rm o r sub un i t o f a

f i r m h a v i n g a c u s t o m e r - f o c u s e d o r g a n i z a t i o n a l

s t ruc t u re i ncreases

a s t h e e m p h a s i s p l a c e d o n b e i n g c l o s e t o c u s t o m e r s

i n c r e a s e s ;

as cus t om er dec i s i on mak i ng across geograph i ca l re -

g i o n s b e c o m e s m o r e c e n t ra l iz e d ;

as cus t om ers have acce ss t o i n fo rmat i on t ha t a l l ows

product f ea t u re and p r i ce compar i sons across

geograph i ca l r eg i ons .

rganizat ional Transi t ions

W h i l e n u m e r o u s m a r k e t i n g a c a d e m i c s h a v e d r a w n o n

t he ma rke t i ng concep t t o a rgue t ha t f irms shou l d be more

cus t omer o r i en t ed , marke t o r i en t ed , o r marke t d r i ven

(Ander son 1982 ; Car son 1968 ; Day 1994 ; Jaworsk i and

Kohl i 1993; Narver and Slater 1990; Webster 1992) , there

has been r e l a t i ve l y li t tl e d i scuss i on o f spec i f i c o rgan iza-

t i ona l changes r equ i r ed t o ach i eve t h i s ob j ec t ive a nd l i t t le

r e s e a rc h o n t h e c h a l le n g e s o f i m p l e m e n t i n g th e s e c h a n g e s .

Our f i e ld r esearch l eads u s t o co nc l ude t ha t t he t r ans i t ion

f rom a p roduct - focused t o a cus t omer - focused o rgan i za-

t ional s t ructure i s an evo lut iona ry process . In th is sect ion,

we p rov i de a more abs t r ac t descr i p ti on t han we have use d

t h u s f a r to c o n s i d e r t h e p r o c e s s o f m o v e m e n t t o w a r d a c u s -

t omer - focused o rgan i za t i ona l s t ruc t u re . In F i gu re 2 , we

i nd i ca t e som e o f t he aspec t s o f t he t rans i t i on f rom p rod -

uc t - focused SBUs , wh i ch t yp i ca l l y se l l a l i mi t ed se t o f

p roduct s t o many d i f f e r en t t ypes o f cus t omers , t o cus -

t omer - focused SBU s , wh i ch t yp i ca l l y se ll a b roader se t o f

p roduct s t o a l i mi t ed se t o f cus t omers .

In t h i s f igu re , we have a l so i nd i ca t ed a num ber o f t r ends

t ha t ou r da t a ana l ys i s i nd ica t es i s par t o f t he genera l p ro -

cess o f t he sh i f t to cu s t ome r - focused bus i ness un i t s . F i r s t,

p roduct p ro l i fe r a t i on has occu r red i n ma ny f i rms due t o t he

p roduct i on t echno l og i es t ha t a l l ow ma ss cus t om i za t i on

(Pine, Victor , and Boynton 1993) and due to the greater

ab i l it y to t a rge t smal l e r cus t omer seg men t s wi t h p roduc t

f ea t u res tha t a r e more app rop r i a te fo r t he i r needs . Se cond ,

t he i ncreased num ber o f p roduct s ava i l ab le o f t en r esu l t s i n

r ese l le r s w an t i ng ass i s t ance a t t he overa l l ca t ego ry l eve l ,

no t t he p roduct l eve l . Thus , f i rms i ncreas i ng l y have es t ab -

l i shed m anager s r espons i b l e fo r en t i r e p roduct ca t ego r i es .

Th i rd , t here i s an i ncreased i mpor t ance o f se rv i ces i n

d e v e l op e d e c o n o m i e s , w i t h m a n y m a j o r f i rm s r e c e iv i n g

more p ro f i t s f rom serv i ces t han f rom p roduct s . Four t h ,

m a n y f i r m s r e o rg a n i z e t h e i r s al e s f o r c e a r o u n d c u s t o m e r

g roups (o f t en i ndus t ry based ) t o deve l op coheren t so l u -

t i ons ou t o f t he p roduct s and serv i ces f rom mul t i p l e d i v i-

s i ons . F i f t h , fo l l owi ng f rom such an i ndus t ry segmen t a-

t io n , m a n y f ir m s t h e n a s s i g n k e y a c c o u n t m a n a g e r s t o b e

t he s i ng l e po i n t o f con t ac t wi t h m aj o r acco un t s , se l l i ng the

en t i r e r ange o f p roduct s and serv i ces p roduced by t he i r

f i rm. S i x t h , t he f i na l change i nd i ca t ed i n F i gu re 2 i s t he

resu l t an t sh i f t o f marke t i ng r esou rces a nd per sonnel f ro m

t h e p r o d u c t - f o c u s e d b u s i n e s s u n i t s t o t h e c u s t o m e r -

focused bus i ness un i t s .

To ma ke a t r ans i t ion f rom a p roduct - focuse d t o a cus -

t omer - focused o rgan i za t i ona l s truc t u re , f i rms t yp i ca l l y go

t h r o u g h a n u m b e r o f m a j o r r e o r g a n iz a t io n s . W h i l e w e d i d

no t exp l i c i t l y d i scuss o rgan i za t i ona l t r ans i t i ons i n ou r

i n te rv i ew, we o bserved f i rms ha d d i f f e r en t types o f s t ruc-

t u res fo r i n t eg ra t ing p roduct and cus t om er per spec t ives .

F i gu re 3 p resen t s a r ange o f s i x o rgan i za t i ona l t ypes r ang -

i ng f rom a wea ker t o a s t ronger deg ree o f cus t om er focus .

These s i x o rgan i za t iona l fo rms are i n t end ed no t t o r ep re-

sen t t he t r ans it i ons undergone by any s i ng l e com pany , bu t

r a t her t o i nd i ca t e r ep resen t a t i ve changes f rom l ower t o

h i gher l eve l s o f cus t omer - focused o rgan i za t i ona l fo rms .

The t r ans i ti on f rom 3 (a) t o 3 (b ) r ep resen t s t he c r ea t i on o f

t h e m u l t i d iv i s io n a l fo r m , w h i c h h a s b e e n w i d e l y d i s c u s s e d

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470 IOURNALOF THE ACADEMYOF MARKETINGSCIENCE FALL2000

FIGURE 2

Evolution From Product-Focused to Customer-Focused Business Units

;L, :i:

i? ;: :

:

?:i:

y

m Bat( ~

~ Bb

ec

. . . . . . . . . . . . . . . . . . . .

9Pre-sales support

9 After-sales support

9 Consulting services

9 ! mr . . . . . . . .

Customer

segment I

: . - .

Customer segment 2

Key Key i Other

Account I Account2 i Accounts

|

t

Customer

segment 3

traditional product focus

..-

1. Product proliferation

2. Category management

3. Increased mportance of services

4. Establishmentof customer-focused

business units (often based on industries)

5. Increased mportanceof key account

teams selling multiple products and services

6. Shift of marketing resourcesand personnel

to customer-focused business units

and studied (e.g., Cha ndler 1962). The transition from 3(b)

to 3(c) primari ly consis ts of the addi tion of ma rke t man-

agers (possibly called application, segment, or industry

managers) w ho are int roduced to coordinate the market ing

activities in selling to custome rs in selected markets. One

U.S. bank market ing manager noted, We have segment

managers such as for the affluent segment , for the smal l

business segment , for ret i rees Such segment managers

are distinct from key ac count man agers in that they are typ-

ically part of the mark eting rather than the sales organiza-

tion, usually encomp ass all sales to the specified segment,

and work m ore in a product or service m anagemen t role

than as a coo rdinator of selling efforts. The organizational

placement and degree o f authori ty of these m anagers var-

ies significantly, but most act primarily in a coordinat-

ing/information role, usually reporting into marketing,

with no direct authority over the salespeople calling on

custom ers in this market.

The transition from 3(c) to 3(d) represents a m ajor reor-

ganization at the firm (or division) level as the sales forces

of mult iple product-focused SBUs are combined. This is

typical ly done due to the s imilari ty of sel ling tasks am ong

the SB Us rep resented, to save on selling costs, and possi-

bly due to the de sire of custom ers/resellers to have a single

point of contact. However, one implication is that SBUs

are no longer autonomous, s ince they have lost control of

the selling function. The next transition, from 3(d) to 3(e),

represents a restructuring within the sales organization

around major markets (e.g . , industr ies , appl icat ions)

rather than geographic regions. The market m anagers are

now in the sales rather than the marketing organization,

and they typically have hierarchical authority over the

sales personnel calling on customers in designated mar-

kets. The final transition, from 3(e) to 3(f), is not so muc h a

structural change as it is a chan ge in orientation and inter-

nal systems. The m anagers in charge o f the market (or cus-

tomer-focused ) SBUs now h ave full profit and loss respon-

sibility and ty pically report at a higher h ierarchical level.

At this stage, i t is comm on for som e of the ma rketing per-

sonnel and budgets in the product-focused SBU s to shift to

the customer-focused SBUs. In some firms, these cus-

tomer-focused SBUs are given a high level of autonomy

and are allowed to develop their own products and services

and/or to distribute products and services from external

suppliers if they cannot obtain the appropriate products

and services from internal units.

It is worth noting that as firms move to h igher levels of

c u s t o me r f o c u s , t h e y a r e a l s o i n t r o d u c i n g g r e a t e r

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H o m b u r g e t a l. / F U N D A M E N T A L C H A N G E S I N M A R K E I ' I N G O R G A N I Z A T I O N 4 7 1

F I G U R E 3

T y p ic a l O r g a n i z a ti o n a l C o n f i g u r a ti o n s in t h e M o v e m e n t T o w a r d C u s t o m e r F o c u s e d B u s i n e s s U n i ts

( e ) F u n c t i o n a l O r g a n i z a t i o n

F i r m o r g a n i z e d a r o u n d f u n c t io n a l g r o u p s

( c ) I n t r o d u c t i o n o f M a r k e t / S e g m e n t M a n a g e r s

t

I

[ ~ - e ~ e e s s u l J P m .e ~ b~ M S SU Z ] P ~ y C - ~ S a U 3

Coord ina t i ng / i n forma t iona l o l e w i th l i t t le au thor i t y

Organ' tzat iona[ plac em ent varies (e .g., in marke t ing,

i n s a l e s , r epor t i ng t o head of S BU )

I n f o r m a l c o o r d in a t i o n w / m a r k e t m g r s i n o t h e r S B U s

( e ) S a l e s F o r c e R e s t r u c t u r e d A r o u n d M a r k e t s

CorponlteHQ ]

I

I

p r . .S a O I s . . I

o

Produc l -b lMted SBU 3

S t ruc tura l r ea l i gnmen t o f muc h of s a l e s fo rce a roun d

m a r k e t s / s eg m e n t s r a t h e r t h a n g e o g r a p h y

, F or f i r s t t ime a l l ow s cen l za l ized courd ina t i on of a l l

s e l l in g a c t i v i ty o a c u s t o m e r s e g m e n t

9 M a r k e t / s e g m e n t m a n a g e r s t y p i c a ll y m e a s u r e d o n

r e v e n u e s a n d c o s t s t o a c h i e v e r e v e n u e

9 S om e marke t i n g re s ources s h i f t t o s a l e s o rgan i za t i on

9 P roduc t - focus ed S BU s re t a in func t i ona l g roups

( b ) P ro d u c t . F o c u s e d S B U s

[ c o ~ . ~ . Q I

I I i

I

D ivi s iona l i za t i on o f o c u s o n d is t i nc t nm~cts

A utononm us , p roduc t - focus ed , func t i ona l S BU s

Each S BU re t a ins i t s o w n s s l e s force

( d ) R e o r g a n i z a t i o n t o 9 S i n g l e a l e s F o r c e

S a le s fo rce s o f ~ml t i p l r S BU s co mbine d

9 M a j o r c h a n g e - S B U s n o l o n g e r a u t o n o m o u s

9 Bas i s o f s a l e s u rgan i za t i on ( t yp i ca l l y gcograp ht ca l

r e g i o n