Why Upstream Marketing?
The primary reason, of course, for pursuing upstream marketing is improved business performance. When properly executed, upstream marketing provides substantial new revenue and profit streams, that extend far beyond the core business. In adopting upstream marketing principles and practices, companies tend to look very different compared with their early stages. Markets served and products delivered demonstrate considerable expansion. Consider the profile companies.
Imagine if Apple defined its business in product terms only – as a manufacturer of desktop computers. It would have missed completely the revenue associated with the iPod, iTunes, iPad, iPhone, Apple Watch, Apple TV and other expansions. Today, the combined value of these “newer” businesses dwarfs the original desktop computer portfolio.
Similarly, what if Amazon had remained an online retailer of books only? It’s now the world’s largest retailer, supplemented by other products from Kindle to Echo, to a host of businesses, including grocery retail, self-publishing, website hosting, and the like.
Disney got its start in animation. Today, they are the largest media company in the world. Studio Entertainment, consisting of all films released by Walt Disney Animation, Lucasfilm Touchstone Pictures, DreamWorks Pictures, Marvel Studies and Pixar accounts for roughly 15% of total company revenues. The majority of sales and profits though comes from its Media Networks and Parks & Resorts business.
These examples may seem obvious. It’s hard to imagine Apple, Amazon, Disney not being as expansive as they are today. And yet many companies – most companies, in fact, tend to do what they’ve been doing from inception. It’s why many small businesses remain small businesses. Though it’s not for lack of trying. A study by the management consulting firm, McKinsey and Company, indicates that 84% of global executives see innovation as extremely important to their growth strategies, yet a staggering 94% are dissatisfied with their organization’s innovation performance.
Many companies are founded on the principles of upstream marketing, though gradually lose this perspective. When launched, they considered choices like where to play, how to win, and other strategic decisions. Over time, meeting day-to-day business requirements can take over. Along the way, marketing shifts from strategic to tactical. Instead of working on the business, execs find themselves working in the business.
Despite its importance to business success, many companies are unfamiliar with upstream marketing and how to apply it. This begs the question, why is it so neglected? Why do so many companies focus on downstream marketing and undervalue upstream marketing? This occurs for several reasons as described next.