Plainly put, I had had enough! On paper, our editorial team meeting had started with the premise that we should run the Golden jubilee issue (yes, we’ve reached 50 glorious issues!) with a spectacular array of the top 50Ps of marketing. Obviously, the war had started even before I had entered the battleground! Just when I thought I had ducked the massive war of words (worlds?), the stinging crossfire hit me straight in the guts. Apart from accusing me of focusing horse-headedly on just ‘Ps’, the main accusation was that we were not even considering the most important factor for a company’s growth and shareholder value, namely the concept of Research and Development, which – according to the extremist warriors sitting inside my office meeting room – was the numero uno ‘P’!!! I was forcibly plastered with the names of the top ten R&D spenders in the world – Toyota, Pfizer, Ford, Johnson & Johnson, Daimler Chrysler, GM, Microsoft, GlaxoSmithkline, Siemens and IBM, all excellently performing companies, constituting a mind numbing 15.3% of global R&D spend – as the final proof that it’s R&D and not any ‘P’ that is most important for companies.
(‘When faced with a powerful adversary, run!’ – old jungle saying). I ran! Straight to my research team! And this is what I found! The joint HBS and Southwestern University 2006 ‘Industry R&D Survey’ shows how the total number of R&D spenders in the US, while rising since 1974 and peaking in 1993, have almost regularly gone down year after year since then till the turn of the century. Even the benchmark paper of Dr. Scott J. Wallsten of Stanford, ‘The R&D Boondoggle’, assertively confirmed the same fact that globally, firms have started investing lesser in R&D. And the reason, Wallsten confirmed, was that R&D spenders generally had received considerably lesser benefits than all other firms. BusinessWeek in November 2006 researched the top five R&D spenders in the world and asked the question, “Are there parallels between lavish R&D spending and stock-price gains?” The answer they found was, “Not really!” But what shocked me right through was another hallmark 2006 report titled, ‘The Stock Market Valuation of R&D Expenditures’ by Chan, Lakonishok & Sougiannis of The University of Illinois, who proved definitively that “the average historical stock returns of firms doing R&D matches the returns of firms without R&D... The market is too pessimistic about beaten-down R&D and companies with high R&D to equity market value tend to have poor returns!”
Leave all that, one look at the latest NYSE CEO Report 2008 shows how a huge 57% of global CEOs have refused any increase in R&D spending. Of all CEOs, only 10% thought that ‘New Product Development’ was the most important internal factor influencing profitability! Veritably so, perhaps the biggest hit for the R&D camp was given by none other than a previous supporter of R&D, the famed Booz Allen Hamilton itself, which in October 2007 analysed the top 1,000 R&D spenders globally in their report, ‘Global Innovation 1000!’ (who constitute around 84% of the global corporate R&D spending) over five years. Statistically, the report proved with stupendous clarity that there existed “no correlation” between any performance factor (sales, profitability, shareholder return...) and R&D spend! You could argue for days on the topic, but the killing fact is that not only does WalMart (the world’s largest corporation) not even feature in the top 1,000 R&D spenders’ list, but also that as per York University’s classic January 2008 report, even Big Pharma spends “almost twice as much on promotion as it does on R&D, contrary to the industry’s claim!” Obsessive compulsive spenders in R&D end up devastating shareholder value, sales, profits and other performance factors beyond repair. Sadly, there are still a plethora of CEOs who believe R&D and not a focus on the Ps of marketing can lead them to success.
(‘When faced with a weak adversary, destroy remorselessly!’ – one of my original sayings). Another day, another editorial meeting! What followed was target practice; and I’m proud to say I took no prisoners! The result is this fantabulous issue of 4Ps B&M, which is a commemoration to that inimitable and absolute power of the indomitable Ps of marketing, which are the most critical reasons for a company’s thundering success or pathetic failure. And we have listed 50 of those Ps! R&D – but obviously – doesn’t make it a mile close to this list. The world’s excellently performing corporations have got this equation bang on! If you still haven’t, I’ve got the perfect solution – go ahead, flip the pages, it’s all there...