THE ROLE OF MARKETING MANAGEMENT IN FAST-GROWING SMALL

ENTERPRISES – PLANNING OR MANAGING CRITICAL OPPORTUNITIES?

Henrik Agndal, Bjorn Axelsson and Tomas Karlsson

Jonkoping International Business School

Abstract

The value of Business planning in general and marketing planning in particular is

attested to by numerous textbooks and consultants. Supported by the inability among
scholars to find a clear connection between planning and market success, though, we
argue that in the case of small, fast-growing firms planning in the traditional sense is
largely futile. This is especially the case for firms existing in a volatile environment. We
highlight this position in three case vignettes drawn from an empirical study of four
fast-growing small firms. This material indicates that firms develop not because of
marketing plans, but when grasping critical opportunities in the environment,
opportunities for which it would have been impossible to plan in advance. Rather then
wasting efforts making elaborate plans, firms should thus create an infrastructure that
can identify and take care of such opportunities. This can be done by being present
where critical opportunities might arise and by employing “opportunity recognisers”.

Introduction

This paper is structured in the following way; firstly the traditional approach to the role
of the marketing function is examined, its relevance for fast-growing SMEs being
largely rejected. Secondly, a number of illustrations of how critical opportunities instead
of intended strategies form realised marketing strategies are provided. Thirdly, based on
these illustrations, it is argued that the role of the marketing function in fast-growing
SMEs is to identify, create and manage opportunities, to trace, create and act on events
and expose the firm to seemingly random opportunities, rather than be involved in long-
range planning.

The Rational Approach to Marketing Planning and Its Shortcomings

For over half a century significant efforts by scholars and practitioners have been
directed towards creating models for business planning, of which marketing planning
has been an important part. These traditional models of planning for marketing largely
assume that the role of the marketing function is to firstly find appropriate market
segments, and secondly to identify ways to make a firm’s offerings attractive to those
segments. From this perspective, the market plan is a rational activity that assists
managers and entrepreneurs to earn larger profits, either through efficiency gains or
through greater sales. Plans are said to provide a systematic way of collecting
information about the firm’s present state and the future implications of present
decisions as well as sequencing the activities needed (Mintzberg, 1994). Gains may thus
occur through an explicit process of the formulation of strategy, to ensure that
functional departments are coordinated and directed towards some common goal
(Porter, 1980). Business plans, and marketing plans in particular, can be seen as a way
of ensuring that sales people do not sell what the production personnel cannot produce.
Articulate plans improve firm co-ordination, ensuring that unnecessary work is reduced
(Mintzberg 1994).

There are scholars who maintain that plans have a value in themselves, because the
planning activity that produces the plan simultaneously enhances communication within
the organisation (Hax & Majluf, 1984). In a similar manner, individual commitment in
projects and the self-image of the businessman can also be strengthened by doing a
business plan (Cialdini, 1988). The existence of a plan may further increase the efforts
of employees or business owners investing in a firm, and therefore improve results.
Several studies have revealed that there exist flaws in the rational perspective, however.
E.g., actors have cognitive limitations making it difficult to realise what is rational
decision making (Cyert and March, 1963). Further, not all decisions are made with a
clear goal structure (Simon, 1957) and there often exist several alternative goals to
profit maximisation. Particularly in strategy literature models assuming stable
predictability of the environment (Andrews, 1971; Ansoff, 1965) have been under
significant critique, and have largely been replaced by ambiguity models (Schwartz,
1991; Stone & Brush 1996). Empirical evidence examining the effectiveness of
planning in new and small firms has been limited, and offers conflicting information
(Van de Ven 1980). Some studies have found that planning assists with the growth and
success of new firms (Bracker, Keats & Pearson 1998; Schwenk & Shrader 1993),
while others have failed to find any association (Robinson & Pearce 1983; Boyd, 1991).

We argue that the inability to find a relation between planning and growth/success of
new firms depends on the inability to account for the influence of the environment. In
fast-growing SMEs, business decisions in general and marketing decisions in particular
appear to be based largely on factors other than those suggested by the rational
planning literature. When talking to managers in such firms an interesting picture
emerges. Anecdotal evidence indicates that long-range plans are rarely followed if they
exist at all, and that sudden changes in the environment – e.g. in the form of critical
opportunities – have a much stronger influence on how firms develop over time. To be
able to illustrate and to better understand the nature of these influences we have
conducted a real-time, in-depth study of four fast growing small firms. Below are
illustrated three representative case vignettes selected from this material, indicating how
market expansion and the introduction of new products can be influenced by critical
opportunities.

Some Empirical Illustrations of how Critical Opportunities Form Marketing

Strategies

Over a period of one year, four companies experiencing on average over 30% growth in
turnover between 1995-1999, were studied at several points in time. Multiple data
collection methods were used, including 31 interviews, observations from the
workplaces and archival sources. This approach provided us with a strong substantiation
of descriptions and constructs. The interviews were unstructured and conducted face-to-
face. Different actors within the management team were interviewed at several points in
time. Using multiple informants and sources in the data gathering enabled us to do inter-
informant comparisons over different phases in the opportunity realisation process.
Discrepant information could be tested, and reported time estimates were validated with
the documented material. Furthermore, the attitudes of the different respondents were
compared, and different pictures from different informants gave us better possibilities to
describe the phenomena with little bias from single actors. By doing it this way we were
able to trace the kind of upcoming, seemingly random, events that these firms were
exposed to and became aware of during the time-period in question. This offered a way
to not only rely on reconstruction afterwards and it made it possible to gain
understanding of the intensity of such upcoming events.

Condesign

Condesign delivers technical consultancy services to the manufacturing industry, and

has strong ambitions to grow and expand its market. Between 1993 and 1998 the firm
grew from 16 to 84 employees. Shortly after the firm was started, the manager was
approached by the firm’s insurance agent who had a relative who was planning to leave
his old firm to start a business of his own. Having great faith in the insurance agent, the
management team agreed to meet with his relative. At the first meeting it was obvious
that he had a basically complete business idea, focusing on the design of piping and
tubing, and that he would be able to bring along both staff and customers from his old
employer. To the management team of Condesign it seemed clear that a self-sustaining
subsidiary could be started both quickly and with limited efforts, which also turned out
to be the case in three months’ time. At one point in time in Condesign’s development,
the design of piping and tubing corresponded to about 30% of the company’s turnover.

Erda

Erda is an IT consulting firm, originally a spin-off from Linkoping University. In 1992

the manager was offered to buy the firm from its current owners, who were not
impressed by Erda’s poor performance at that time. In spite of a strong desire to grow
graphically, ideas of how to go about this were very vague. However, at one occasion
Erda was contacted by an external group of people that were interested in leaving their
existing employment within a large organisation in order to pursue their own
entrepreneurial ideas. These people approached Erda with propositions to start a new
venture in co-operation with Erda. However, at this time Erda did not see how they
could help the group within their present structure and with their limited financial and
human resources. Annoyed by this inability to capture a promising opportunity, the
manager of Erda together with other members of the management team came up with a
model of how this sort of situations could be taken advantage of, at present and in the
future. With greater ability to make use external competencies and resources through
the application of a franchise-like concept, they believed they could achieve their
desired expansion. The firm even began a focused search of people who, through
applying this concept, could aid Erda in expanding operations. Soon after, two more
groups were identified and consequently two more opportunities were realised, one of
which originated in Erda’s growing network. Today, Erda no longer resembles the firm
that was bought by its manager in 1992. E.g., between 1993 and 1998 the firm grew
from 17 to 50 employees and its current product offerings are more influenced by
company’s franchise-like concept than its original strategy.

IQ

Influenced by self-employed relatives, the manager of IQ decided to start his own firm
when working at IT consulting firm SYSteam AB. Exactly what type of firm to start he
only had vague ideas about. While already possessing relevant IT-related skills,
experience and networks, he realised that he had to obtain the specific competence
needed for starting and running a firm. Therefore, using contacts in his network he
identified an individual who possessed both the requisite skills and who was interested
in starting such a firm. In the process of doing this, the external environment was of
little influence. The key link to the actual start-up of the firm was the acquiring of
necessary management competence. The firm employed 20 employees even when it was
started in 1998. It survived the Internet crisis, and now has about 50 employees.

Implications for Marketing

The case vignettes clearly illustrating how ineffectual marketing models based on a
stable and predictable environment can be, had the firms in question even bothered to
make them. In the entire material, here represented by three vignettes, we could find no
instances where products were given by R&D departments to be marketed by the
marketing function, no instances where plans concerning market segmentation were
made and so on. In all cases, the external environment influenced the marketing strategy
in significant ways, and more to the points – ways in which the firms could not have
planned for in advance.

In the Condesign and Erda cases for instance, firms expanded their markets not through
careful long-range planning but through chance events. In Condesign’s case the
expansion was not due to any specific efforts inside the firm, but rather the result of a
critical opportunity grasped. In Erda’s case the inability to handle a critical opportunity
lead to the creation of an infrastructure to manage growth opportunities. When this
infrastructure was in place, the firm began searching for such opportunities in the
environment, its starting point not being current products and markets but rather a
complete openness to anything that might lead to growth. In the IQ case the
development of the firm, its offerings and so on depended the interaction between two
individuals. Had the original business founder come into contact with someone other
that the person with whom he started the firm, most likely a very different company
would have developed.

Two main implications can be identified. Firstly, that long-range marketing planning in
the traditional sense appears futile in the kinds of firms in our study. We are certainly
not the first to put into question the traditional form of rational planning taught at most
business schools and argued for by most consultants. This has long been criticised by
management scholars (see e.g. Bryson, 1988; Eisenhardt & Zbaracki, 1992) and later on
by entrepreneurship researchers (see e.g. Schwenk & Shrader 1993; Honig & Karlsson
2001). This study lends further support to this notion, however.
Secondly, another kind of planning might be required. We do not argue that planning
per se is fruitless, but rather that another type of planning is needed in the context of
small, high-growth firms. In firms that exist on markets where boundaries are floating,
where innovations can quickly redefine who is your competitor, supplier and customer,
traditional models of what are the tasks of the marketing function are inappropriate. Our
empirical evidence indicates that fast growing small firms are strongly influenced the
external environment, continuously facing critical opportunities. If we accept this
notion, the role of the marketing function in these firms becomes to make sure that the
firm is exposed to such opportunities, is able to react quickly and properly to them. This
means, in turn, that there is a need to create an infrastructure that can identify, create
and manage critical opportunities. It is thus “rational” for the firm to have
representatives positioned in such a way that they are able to identify and evaluate
opportunities in the environment – “opportunity recognisers” with more or less loosely
defined roles. Like “strategic windows”, opportunities occur and disappear (Axelsson &
Johanson, 1992). It is therefore a question of being at “a” right place at “a” right time, or
of being exposed to critical opportunities. It is also a matter of preparedness to act on
the “right” opportunities at the “right” time and in the “right” way (Hakansson, ed,
1987). How does one go about this?

Basically, the firm needs to manage its exposure and timing of internal as well as
external processes. Being at the right place at the right time could be facilitated by the
adoption of structures able to handle an unpredictable environment. Fast footwork
instead of formal planning would be one implication (Kinch, 1990). Trying to influence
the timing of opportunities is another. It is at times possible to hasten but also to delay
events, i.e. to make them occur earlier or later than if nothing is done. Already by
adopting a perspective on the firm and its environment as continually ongoing processes
rather than as a given structure existing in a stable environment is one step forward. For
instance, there could be lots of ways to fasten or delay external processes, but also to
extend firms’ own preparedness to take advantage of such opportunities. One way
would be to try to conserve (“mummify”, Hakansson, 1989) the ability to act on
possibilities the firm “knows” are likely to occur at some point. Other ways include a
general attitude to planning versus acting in favour of acting. To expend energy on
acting and making things happen, to provoke the environment, interpret and make sense
of the patterns that arise (Axelsson & Johanson, 1992) at the expenses of more formal
planning activities seems to be a more fruitful approach. Still, formal planning should
be directed towards such issues as increasing firms’ abilities in sense making, in being
active and reactive, and in being flexible. Similarly, it is important to identify interesting
meeting places (where you get exposure to “randomly occurring opportunities”), in
what ways the timing of desired or expected processes could be influenced and so on.

What has been said is probably especially important to SMEs. In many SMEs often only
very limited resources can be devoted to planning activities (Ayvari & Moller, 1999).
Likewise, the small firm can mostly not influence its environment and force through its
plans, while simultaneously being strongly dependent on its environment. At the same
time it is difficult to predict exactly where and when opportunities will arise. Therefore
opportunity recognisers must have positions that allow them move around and to act
swiftly. This might be an advantage for the small firm with its greater flexibility.
 Conclusion

Despite various reversals in trends and fads, learning about traditional long term
strategic planning continues to be a significant element of management training,
promotion, and development (Mintzberg 1994; Porter 1990). It is thought to be
particularly important at the early stages of organisational emergence, during the time
when resources are scarce, and the organisation itself is in a state of definition, re-
definition and transformation. Contrary to this common belief, such notions are rejected
by our study. Our case material shows that the idea of a stable predictable environment
for many firms is meaningless and even potentially harmful. High-growth small firms
seem to be continuously facing strong influences from a changing external environment,
where critical opportunities arise and disappear. Traditional, sequential models of
marketing suggest that firms firstly find appropriate market segments, and secondly
identify ways in which to make their offerings attractive to those segments. We suggest,
with the backing of our empirical evidence, that the role of the marketing function in
small firms rather should be to expose the firm to such incidents and react quickly to
them – to create an infrastructure that can identify, interpret and manage critical
opportunities.

Implications for future research

Based on our findings, we can see several fruitful avenues for future research. More
knowledge is needed about how small firms can expose themselves to critical
opportunities. This includes how they can work to identify them and how they can train
to identify the “right” places to be at to become exposed to opportunities. But also, and
perhaps most importantly, how they can manage to bring externally initiated ideas and
externally gained resources to develop new products, and enter new markets.

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