6
Managing Market Demand
Purpose
To deploy the Value Proposition to the marketplace to achieve Strategic Business Objectives. To ensure the market needs are understood with effective response from the organization and its partners. To deliver financial goals enabled though sustained Class A capability and performance.
Positioning
Market Demand Management encompasses how the business meets the needs, wants, and expectations of customers wherever they reside in the Value Chain.
Process maturity improves over time through education, committed leadership, expert guidance, and a focused effort to attain key business milestones.
Many companies begin their Class A improvement journey in a disconnected state, marked by functional silos, defensive behaviors, a disproportionate focus on the past, and a lack of clarity about the future. After embarking on the path to improvement, accountabilities are assigned, the elements and characteristics of the processes are implemented, and targeted measures drive improvement to enable process transformation.
Done well, a Class A Milestone is achieved at the top of Phase 1 of Business Maturity (see Foundation, Figure I.1). At this stage, formal Market Segmentation is defined, the consensus Demand Plan is based on multiple views, bias has been eliminated, and Demand Plan accuracy is improving. Volume, value, and margin are integrated and aligned, underpinned by assumptions, analytics, knowledge of vulnerability, and opportunity management supported by scenario planning.
From this Class A Milestone vantage point, it is possible to introduce this next level of maturity in the seventh edition of The Oliver Wight Class A Standard for Business Excellence.
Chapter Content
- Driven by Strategy
- Integration
- Modeling and Analytics
- Market Segment Planning
- Customer Collaboration
- Market Segment Plan Execution
- Demand Review Preparation
- Demand Execution
- Technology
- Behavior and Competencies
- Performance Measurement
Driven by Strategy
1. The Strategic Plan Includes Market, Product and Portfolio, Supply Chain, and Finance Strategies. These have been Used to Develop a Market Roadmap, Which Includes a Market Segment Roadmap. The Combined Direction is Used to Plan and Drive Market, Channel, and Customer Activities.
a. Congruence with Strategic Plan
The accountable leader for managing market demand uses the Strategic Plan to develop a Market Roadmap that drives market management.
b. Value Proposition and Value Disciplines
The Market Roadmap and supporting Market Segment Roadmaps fully align with the Value Proposition and Value Discipline focus.
c. Competitive Analysis
The Market Roadmap is updated at least annually with insights derived from an analysis of the competition and industry standards.
2. Market Segment Roadmaps have been Developed That Further Refine the Market Roadmap. These Define How the Business will Address the Market and How That will Develop Over the Strategic Horizon to Deliver Strategic Business Objectives.
a. Understanding of Market Segments
The business has a process for segmenting consumers and customers into homogenous groups who share similar needs, wants, and behaviors.
b. Market Segment Roadmaps
Market Segment Roadmaps have been developed that define how the business will address each Market Segment and how that will evolve over the strategic horizon to deliver Strategic Business Objectives. Key elements include portfolio offering, competencies, promotional support, product placement, and customer collaboration.
c. Focus on Critical Success Factors
Critical Success Factors have been identified for each Market Segment Roadmap. These are defined annually and drive planning, decisions, and actions within Marketing and Sales.
d. Ownership—Market Segment Roadmaps
Market Segment Roadmaps are owned and deployed by Marketing and Sales.
e. Ownership—Detailed Marketing Mix Plans
All activities surrounding portfolio offering, pricing, promotional activity, product placement, and required marketing and sales resources are owned by Marketing and Sales. These are reflected in the demand plan and monitored and managed through Integrated Business Planning (IBP).
Integration
3. Demand Plans are Created, Assessed, and Managed Through an Ongoing Market Segment Planning Process, Owned by Marketing and Sales. Integration with Product Management, Supply Management, and Financial Planning is Ensured Through Integrated Business Planning.
a. Process Mechanism
The linkage between Demand Management and the other elements in IBP is defined and made explicit.
b. Linkages
The Demand Management process ensures the volume, revenue, and margin projections are updated at least monthly. The updated numbers, with supporting Assumptions, are provided to the business and are used as inputs to the plans and projections.
c. Marketing Mix Investments
Knowledge of the impact of marketing mix investments and effectiveness is developing and is used to improve analytical models. Demand Management proactively evaluates and adjusts investments in response to performance and market changes.
d. Linkage to Integration and Optimization
Demand Management develops business solutions where the proposed plans identify business gaps or business risks that are deemed unacceptable.
e. Linkage to People Operations
People Operations is a business partner to the Demand Management process and ensures that behaviors and competencies required to achieve the Market Segment Plans and the Demand Plans are being planned and developed.
f. Linkage to Business Improvement
Progress toward Business Improvement activities associated with Demand Management is reviewed at the monthly Demand Review.
4. Processes Exist to Forge the Operating Links Between Day-to-Day Planning and Execution, Providing Visibility and Control of Uncertainty, and Enabling Consistence and Improving Performance in Support of Business Goals.
a. Ongoing Monitoring
Actual demand is monitored, and change is responded to.
b. Fully Integrated with Core Processes
Processes share real-time information to enable decisions to be made at the optimal time.
c. Performance Gap Management
Timely adjustments to Assumptions enable performance gaps to be identified for decision and action.
Modeling and Analytics
5. The Marketing and Sales Teams are Analyzing Market Data to Generate Insights to Describe, Predict, and Improve Sales and Marketing Performance. Analytics and Predictive Modeling are being Used to Drive Greater Understanding, Create Scenarios, and Enable Decision Making.
a. Role of Analytics
Correlations between demand-driving parameters have been proven, enabling a good understanding of their cause and effect on marketing mix effectiveness and business results. Analytics are being used to develop predictive models, provide management information, and enable decisions through IBP.
b. Predictive Modeling
Predictive modeling is used by the Sales and Marketing Teams, providing multiple scenarios and options enabling appropriate adjustments to the Marketing Mix to support the achievement of Strategic Business Objectives. Predictive models are validated, and trust in the models is developing in the business teams.
c. Role of Demand Analyst
The Demand Analyst is a senior member of Sales and Marketing and is an expert in statistics, trend analysis, life-cycle planning, what-if analysis, and predictive modeling. The Analyst provides the Commercial Team with ongoing visibility and insight into macroeconomic and microeconomic trends, consumer and customer insights, and competitive intelligence.
Market Segment Planning
6. Rolling Integrated Market Segment Plans, Which Cover Categories, Channels, Customers, and Consumers, are Actively Managed to Deliver the Value Proposition and Achieve the Business Goals Over the Integrated Business Planning Horizon.
a. Value Chain
Market Segment Plans address the total offering across the Value Chain. Push/pull activities are integrated, understood, and managed.
b. Characteristics
The Market Segment Plan demonstrates a complete integration of Sales and Marketing activities across the Value Chain. The plans clearly articulate positioning, portfolio offering, pricing, placement, promotion, people, physical evidence, and process.
c. Horizon and Granularity
The horizon and level of detail of the Market Segment Plans are consistent with IBP. The plans are expressed in volume, value, and margin.
d. Organization
Segment teams are established to focus on the Value Chain and deliver the business goals. Segment Teams typically include Demand Analysis, Insights, Channel and Customer Marketing, Brand, Sales, Finance, People Operations, Supply, and strategic partners.
e. Opportunity and Vulnerability Management
Opportunity and Vulnerability Management is an established and formal process used to proactively manage gaps and maximize business performance.
f. Monitoring
Business performance and customer/consumer experience are continuously monitored to ensure delivery of the Value Proposition. Key learnings and Insights are used to refine the plans.
Customer Collaboration
7. Collaborative Partnerships Exist with Strategic Customers. Inter-Business Teams Develop and Execute Market Segment Plans.
a. Scope
Strategic partnerships exist throughout the Value Chain. Collaboration ensures that customers and customers' needs are understood and embraced.
b. Characteristics
Clearly defined and agreed collaborative partnerships deliver shared objectives and benefits through joint Strategic Planning, Business Planning, and execution. Business Plans cover, at a minimum, the full IBP horizon. Real-time data are used across partnerships for planning, execution, and Performance Management.
c. Organization
Teams are established, which include business partners and functions, with documented shared goals, roles, responsibilities, and measures. Team members are organized to focus on daily, weekly, and monthly planning processes.
d. Monitoring
Business performance, along with customer and consumer experience, is continuously monitored to ensure delivery of the shared Value Proposition. Key learnings and Insights are used to refine Market Segment and Company Plans.
Market Segment Plan Execution
8. Detailed and Time-Phased Sales and Marketing Activities Exist to Deliver the Approved Market Segment Plan. These Plans are Integrated with the Day-to-Day and Month-to-Month Activities of Sales and Marketing, Including Marketing Activity Management, Account Management, Call Cycles, and Follow-Up.
a. Time Phase
Time phase is determined by the respective lead times to deploy specific Sales and Marketing Plans.
b. Detailed Activity Planning
The set of activities required to fulfill the Market Segment Plan is organized in a time-phased activity plan, allowing individuals to understand what they are responsible for, when it needs to be completed, and the interdependencies across activities.
c. Organization
There is a clear link and formal information flow between Segment Teams and Sales and Marketing Execution Teams.
d. Monitoring
Real-Time Insights gained from activity performance inform the Market Segment Team and lead to changes of both the Market Segment Plan and marketing activity levels.
Demand Review Preparation
9. The Market Segment Planning Process Culminates in a Monthly Demand Review, a Key Element of Integrated Business Planning.
a. Demand Manager
The Demand Manager drives the monthly Preparation Cycle and Demand Review, identifying the key business issues, options, and outcomes. The Demand Manager works closely with the Market Segment Teams, Demand Analyst(s), Demand Execution Manager, Product Planning Manager, Supply Planning Manager, and the IBP Process Leader to ensure alignment of performance and plans to strategy.
b. Preparation
The Preparation Cycle incorporates key information and activities across all market segments: performance of market segment strategy and plans, changes in insights, modeling scenarios, adjusted segment plans, opportunities and vulnerabilities, consolidated financial projections, and gap-closing recommendations.
Demand Execution
10. Daily and Weekly Processes Ensure That Actual Demand is Proactively Managed in Line with Market Segment Plans and That the Business can Respond.
a. Demand Execution Manager
The role includes management of specific issues in the near-term Demand Planning horizon when demand is greater than or less than planned. This involves identifying and resolving Abnormal Demand, managing Available to Promise, and monitoring Forecast Consumption. At a minimum, it enables a weekly review process.
b. Demand Sensing
Capabilities are established in the business using near real-time market information to respond effectively to changing demand signals and improve customer service levels.
c. Time Fences
Time fences are challenged to ensure decision points are driven closer to the point of delivery to enable a cost-effective, agile response.
d. Abnormal Demand
All orders are automatically evaluated against the Abnormal Demand rules embedded in the order entry system. Unexpected orders outside of defined tolerances are flagged for resolution by the Demand Execution Manager.
e. Order Management
Customer orders are routinely received, committed to, and fulfilled without human intervention. Order commitment is made systematically through Available-to-Promise/Capable-to-Promise functionality. Customer requests that cannot be satisfied are flagged with system-proposed alternatives.
f. Customer Segmentation
Customer segmentation defines service levels and is understood and managed across Segment Teams.
g. Customer Response
Speed to respond to and satisfy customer requests is improving through higher velocity that comes from system-based rules and segment prioritization.
h. Exception Reviews
Exception reviews occur as required to resolve issues and respond to unforeseen events that put customer service at risk.
Technology
11. Technology Enables Real-Time Access to Data and Insights That Provide the Ability to Make Informed and Timely Business Decisions.
a. Activity Management, Modeling, and Statistics
An actively used data repository has been enabled to capture demand history and the correlation between volumes, financials, market conditions, and activities to enable predictive modeling to be utilized based on changing market parameters. Variability is measured and understood.
b. Customer Relationship Management
A Customer Relationship Management tool is used to record customer intelligence and opportunities. The system provides the organization the ability to customize its marketing and selling activities to individual customer needs. The system is where all sales opportunities are made visible and prioritized.
c. Demand Planning and Execution
The Demand Planning system is integrated with business systems to enable Class A supply performance, valid order promising, and automated identification of Abnormal Demand.
d. Demand-Sensing Capability
Demand-sensing models utilizing the business's data repository and extrinsic information are used to remodel the near-term Demand Plan to support a rapid supply response.
Behavior and Competencies
12. The Behaviors That Define the Company's Interactions have been Established from Business Values That Enable a Team-Based Culture and Natural Communication.
a. Rewards and Recognition
A team-based culture has been established, enabling both individual and team activities to be recognized and rewarded to communicate successes.
b. Ownership and Accountability
Employees have a clear understanding and ownership of the Strategic Plan, which enables them to establish teams when deviations from the plan are detected. The use of self-managed teams is encouraged by leadership, who hold the teams accountable through the allocation of required resources.
c. Communication
The communication of information and data is technology enabled and has significantly reduced the need for meetings. Employees and teams naturally share their progress to accelerate learning.
d. Decisiveness
The environment enables sharing of information and data, in real-time, which is then used by employees and teams to act on.
13. Competencies, Talent, and Skills are Developed to Support Current and Future Needs. The Organization Drives the Formation and Empowerment of Market Segment Teams in Pursuit of Delivering the Value Proposition.
a. Leadership
Leadership has the ability to interpret, blend, and construct plans based on knowledge of futuristic thinking, customer needs, and market segments, and are supported by Sales and Marketing competencies.
b. Segment Teams
Teams, which include partners outside the organization, are naturally formed and re-formed to suit changing business needs. Team behaviors support the natural flow of planning and activity while the organizational structure develops talent and capability to meet future business needs.
c. Developing Competencies, Talent, and Skills
The competencies, talent, and skills required to support current and future business needs are available. Plans and actions are in place to evolve or acquire new.
d. Positioning for Success and Adaptability
Predictive modeling and opportunities are used to articulate the range of potential business outcomes and develop a range of activities in response. There is confidence in committing to business results while recognizing that there is a range of potential outcomes. The organization exhibits flexibility and adaptability with continuous focus on business commitment by adjusting activities in response to market realities.
e. Knowledge-Based Processes
There is a desire to continuously increase knowledge of the market to apply and learn from insight in pursuit of business goals. Knowledge captured in the systems enables improved business decision making. Use of the knowledge systems is widespread.
f. Analytics and Modeling
The ability exists to develop analytical models to create predictive demand scenarios.
g. Planning and Execution
The ability exists to create time-phased Sales and Marketing activities that deliver Market Segment and Channel Plans. Execution competency should include marketing, sales, relationship management, and collaboration.
h. Improvement Mind-Set
The business strives for increased velocity in core business processes and customer response lead times.
Performance Measurement
14. A Balanced Hierarchy of Key Measures That have Targets and Time-Phased Improvement has been Defined by the Demand Management Organization. These Measures are Critical to Business Excellence That Drives Competitive Advantage, the Delivery of the Market Roadmap, and the Creation of the Business Scorecard.
a. Measures Defined and Understood
A balanced suite of measures has been defined. Targets are based on external benchmarking where possible and support achievement of the Market Roadmap. The measures have been communicated to all stakeholders and Market Segment Teams.
b. Reviewed
The key measures are regularly reviewed to align Demand Management activities to the Market Roadmap and achievement of Critical Success Factors. Key Performance Indicators and targets are changed to maintain visibility and prioritize improvement.
c. Hierarchical Linkage
There is a clear hierarchical link between the suite of key measures for each business process and the Business Scorecard. Once process proficiency has been established, the measures are delegated or redefined, or the targets are revised.
d. Competitive Advantage
Key measures and associated Key Performance Indicators are a competitive advantage rather than a goal, and drive individual and team-based behaviors.
e. Balance
A reasonable balance of measures exists among process areas.
15. Process Measures are Valued and Used by the Demand Management Organization to Identify and Provide Focus to Demand Management Process Improvement. Process Measures are Agreed in Advance to Ensure Class a Performance.
a. Demand Planning Capability Performance
There is a suite of measures to measure the effectiveness of the Demand Planning process including, at a minimum, demand plan accuracy, demand plan bias, Demand Planning value-add, and parameter accuracy.
b. Demand Plan Attainment
The extent of delivering the approved monthly Aggregate Demand Plan is measured and improving.
c. Conversion of Opportunities and Vulnerabilities
Opportunities and vulnerabilities are actively managed. Identified opportunities and vulnerabilities that have been successfully exploited or mitigated are measured and improving.
d. Customer Experience
Customer experience is monitored and improving. This includes measures of how the product offering and delivery match up to customer expectations, such as net promoter score, perfect order, complaint rates, inquiry response rates.
e. Trading Partner Collaboration and Feedback
The level and effectiveness of collaboration with strategic partners are measured via feedback mechanisms; for example, 360-degree feedback is utilized.
f. Velocity
Non-value-added time in key business processes is measured and is being eliminated.
g. Market Segment Plan Performance
Delivery of the Market Segment plan in volume, revenue, and margin is measured and improving.
16. Business Performance Measures Identify and Provide Focus to Improve Results.
a. Marketing Mix Effectiveness
Achievement of anticipated return on investment of Marketing and Sales activities is measured and improving.
b. Market Roadmap Attainment
On-time deployment of activities and achievement of planned outcomes in the Market Roadmap are measured. Gaps to achieving the Market Roadmap are identified, and gap-closure plans are developed and tracked.
c. Customer Value
Measures such as the ability to win business, customer/business retention, customer turnover, and cost-to-serve are in place and either achieving established targets or showing meaningful improvement.