Harvard
Business School 9-666-111
Rev. March 4, 2001
Managing the Devil’s Pact in
the 21st Century
“Basically, our
business is not different from theme parks. Our primary goal is to attract as
many people as possible. More people means more revenues and so on and so
forth. Our problem is that even though our industry will never vanish, there
are only two big players in this industry. Where you can get tens of theme
parks in the United States, here you only have two possibilities. Therefore, we
have to find a way to make our business the more attractive out of the two.”
With these words, Lucifer, President and CEO of House of Enjoyment and
Liberty’s Lair – known as HELL – had
begun his 2000 annual report to shareholder. Trying to find the required
inspiration in the reading of these few words, his old friend and partner
Mephistopheles looked out the window from his sixty-sixth-floor office at the
company’s headquarters in Demonia, Underworld, on a cloudy and stormy day in
February 2001. While sipping a glass of Medford Rum – his all-time favorite –
he was looking at the souls toiling and suffering underneath. In these troubled
days, this view, which used to make him happy, could hardly make him smile.
Appointed as manager of the Devil’s pact branch in 1999, Mephistopheles
knew that he had to do something to solve the firm’s problems if he wanted to
keep his job. The pressure was so strong on him that he could almost sense it
and he did not like that feeling. In this kind of position, there was no second
chance. Climbing his way to the top had been long and difficult enough for him
and he did not want to have to do it all over again. But his task just seemed
impossible. Even though this business had been profitable for centuries, the
situation had been declining since the beginning of the 20th
century. Once again, Mephistopheles looked at Lucifer’s speech and leaned back
in his chair, lost in his thoughts.
The
Rise and Fall of HELL
In the beginning of times, there was just nothing. Therefore, there was
no need for competition. But soon after appeared Eve who triggered a chain
reaction. As human kind fell, it appeared that Great Old Discounts – known as
GOD – could be defied and that there was room for bold competitors. Animated by
a incredible entrepreneurial spirit, Lucifer convinced a few friends of his to
rebel with him against GOD and to start their own business. Supported by
Mephistopheles and a few other angels, Lucifer started HELL, a small-size
business with only a few customers.
Thibault Maitre, Undergraduate Class of 2003, prepared
this case under the supervision of Professor Simon Richter and with the
assistance of Teaching Assistant Sukanya Kulkami as the basis for class
discussion rather than to illustrate either effective or ineffective handling
of an administrative situation.
As mankind proliferated, sins became more and more common. There were
just so many opportunities that the original team was not able to handle all of
these. Provided that they were competing against an established and global
player, they knew that they had to move very fast and to expand worldwide. As a
result, they appointed their most loyal customers to key position in the middle
management – mainly as salespeople – and began an intensive campaign of
training (language, manners, responsibilities…). Starting with a market share
of less than 2%, the business turned profitable a few years later and after a
century or so – public information is quite scarce in this area – they held a market
share of 27%.
As years passed, their market share kept on increasing and finally
reached a peak of 38%. Still, Lucifer and his friends were not satisfied. They
had not managed to get big customers and the souls they collected were not very
high quality. They felt that if they wanted to attract a more upscale
population, they had to diversify their product portfolio and to secure a few
significant customers. Witches and sorcerers, even the famous ones, were not
the customers they were looking after even though they still paid attention to
their core customers. In fact, they were looking for the perfect customer, the
one who would make HELL famous.
After a few centuries of unproductive search, they finally found the
perfect prospect. His name was Dr Johannes Faust and he was a depressive
scholar. In his quest for knowledge, he was ready to do anything. Thanks to a
few very good salesperson, Dr Faust came to know that he could sell his soul to
the Devil. Dr Faust believed till his tragic death that it was his idea but in
fact, he had been manipulated from day one. Lucifer and his fellow demons chose
him because they knew that people would talk about it, especially thanks to
some mentally ill guy living in Wittenberg named Martin Luther.
And it worked. It worked so well that customers arrived from all over
the world. A little while after that great event sponsorship, it became obvious
that the firm had to be reorganized. The founders’ works often overlapped and
they had very little efficiency. Therefore, Lucifer convoked all his partners
in his office to decide the future of the firm. As rivalries existed between
the team members, Lucifer decided to split the firm in three different business
units:
·
Logistics: the
main task was to make sure that there was enough room for all the damned souls
and that they were occupied. Another significant task was to ensure that the
sales person and the middle management was well trained for their mission.
Mephistopheles started in this branch since he had been a little rebellious
against Lucifer in the past decades.
·
The Devil’s Pact:
this was a highly regarded branch of the firm. In fact, this branch was
supposed to identify potential interesting customers, i.e., customers who would
increase the brand equity such as Dr Faust. Even though difficult, this job was
one of the most sought after since performing well in this branch would ensure
a position in the Center. On the other hand, a misfortune would bring you down
the social ladder, most likely to the level of the salesperson.
·
The Center: this
was the head of the organization. Lucifer was appointed as President and CEO of
HELL and completely controlled the Center. Its main task was to set the
objectives for the other branches and to take care of essential activities such
as marketing and research.
For a few centuries, the business remained highly profitable. While
increasing its overall market share from 38% to 40%, HELL managed to attract
more and more important customers thus establishing a good reputation in the
marketplace. Nevertheless, in the course of the 20th century, the
revenues of the Devil’s Pact branch started to decline (exhibit 1 A and B) and
forty-two different managers were appointed in less than 80 years during the 20th
century. Finally, Lucifer appointed Mephistopheles as managers of the branch.
The
Devil’s Pact Branch
History
The Devil’s Pact branch got started in the 16th century, just
after the first pact with Dr Faust. A copy of the original contract is kept in
a safe in Lucifer’s office. The problem this branch had to face was the lack of
legal institutions. The overall instability and diversity of the legal
institutions all over the world made it very difficult to define a common
pattern for the contracts. An example of this is the fact that Mephistopheles
has had to force Faust to sign a second contract to validate the first one.
Such important issues called for a reorganization of the branch and a better
management. An diagram of the organization is presented in exhibit 2.
The first manager of this branch was
Andrealphus, Demon Prince of Lust. He was commander of thirty infernal legions, teacher
of geometry and mathematics, also proficient in astronomy and astrology. This
made him perfect for the job. The problem was that, as the Demon Prince of
Lust, he tended to select customers on the basis of their corporeal needs. The
high sense of nobility Lucifer had found in Dr Faust was somehow lost under
Andrealphus’ direction. Andrealphus was removed after a hundred years.
His successors were more
or less insignificant, most of them just striving for a place in the Center.
Their ambition was so huge that they were replaced very quickly, provided that
Lucifer did not like managers who were looking after his seat. Most of them
disappeared in tragic and mysterious circumstances. Nevertheless, these
different managers succeeded in attracting famous customers and thus
maintaining the status of the Devil’s Pact branch as a profitable unit.
The last significant
customer they attracted was Robert Johnson, a very famous blues man who was
able to play the guitar like no one on Earth. In fact, Robert Johnson was the
last person to sign a contract for a given number of years. A copy of a
traditional contract is displayed in exhibit 3. Foreseeing the advance in
one-to-one marketing, Lucifer ordered his minions to customize the contracts
for each customer. This rose some issues that will be discussed later on.
Competition
One of the reasons
why the Devil’s Pact branch has lost many of its customers is that competition
has become fiercer. Even though HELL still only has one competitor,
third-parties have emerged and tend to disturb its business.
GOD. For centuries, GOD has relied on
its salespeople and on its shops conveniently placed all over the world. But in
the late 1780s, GD launched an offensive marketing campaign to reach new
customers. Salespeople called missionaries
were sent all over the world and were supposed to spread GOD’s message
everywhere. Due to limited financial resources, HELL has not been able to
retaliate immediately and its presence in many countries has declined. The
influence of these missionaries became obvious in the first half of the 20th
century when HELL hired former consultants from Andersen Consulting for an audit of its activities (see exhibit
4). GOD thus remained the unrivaled leader on the market. The firm developed
new services and new products which attracted the new generations because of
their convenience and ease of use. All one needed to access these features was to
be dead and repentant. Moreover, these services were free of charge and
available for eternity. Compared to HELL’s offers – get all you want in
exchange of your soul – this offer was really attractive.
Scholars. Those who used to be HELL’s best customers turned out to be its worst
enemies. Even though we could give hundreds of examples, we will only discuss
the most representative one, Dr Simon Richter. Undergraduate and graduate
teacher, this Goethe’s fan knows everything about the Devil’s Pact and has created
a class to warn his students against the Devil’s tricks. Due to his enthusiasm
and amazing energy, he appeals to tens of students every semester, not to
mention those who cannot enroll in his class, and simply deconstructs the myth
of the Devil’s Pact. HELL has tried to approach him a couple of times but he
has always opposed the idea of a merger. He seems to have developed a sphere of
influence of his own and exploits it. Since this is a family owned business,
the shares are not traded on the Stock Exchange market and t s therefore
impossible to aggressively acquire this business.
Marilyn Manson. Brian Warner, known as Marilyn Manson, has become one
of the most successful Antichrist singer of the last decade. The problem with
such people is that they claim to have some links with the Devil and their fans
dedicate them a cult of their own. Such behaviors simply ruin the overall
reputation and credibility of HELL’s brands. As Lucifer recalled:
“This guy is just damn freaky. I do not know him and I would not feel
comfortable staying in a room with him. I really do not appreciate the way he
presents our business because it is just nonsense. He makes it look like a joke
whereas it is a very serious business. I would like to see him struggle with
financial reports and the shareholders’ complaints. I am sure he would not have
a clue about what to do with it. Anyway, I am sure that I will soon see him
down here and I can tell it will not be a pleasant stay. The sooner, the
better.”
There is also a variety of black metal and gothic bands but these are
just of minor interest and could be assimilated to Marilyn Manson. Their
existence is only mentioned to make the description of the competition as
complete as possible.
The Pact
Traditionally, the pact was signed with the contractor’s blood. It
included just a few articles defining the commitments on both sides. As a rule,
the contractor only had to sign his name in the bottom of the document since
the contract was completely standard. Nevertheless, customization made its way
to HELL and this format has had to be changed. In the 20th century,
the standard contract had completely disappeared.
The problem that Lucifer had not
foreseen was the evolution of the legal institutions. Even though thousands of
lawyers were working – or burning, depending on the interpretation of their
status – in HELL, Lucifer did not pay
much attention to them, which turned out to be a huge mistake. He let the
Devil’s Pact branch sign contracts with human beings without considering the
legal aspect of the problem.
The best example of failure is
provided by the Bill Gates’ affair. In 1975, a Devil’s Pact representative
signed a pact with William Gates who wanted to run the most important
computer-based business in history. The contract stipulated: “no one will
ever get a chance to achieve the tenth of what I (Bill Gates) will do” (clause 11). The contract was
signed for twenty years with a tacit renewal of 20 years. In 1995,
Quetzdufetcoatl, current manager of the Devil’s Pact branch, received a letter
from Bill Gates’ lawyers saying that the contract could not be honored and
would be broken.
Quetzdufetcoatl immediately called
Lucifer to inform him of the situation. Lucifer then convoked an extraordinary
reunion of the board of directors to discuss the problem. In fact, the problem
was that another representative had struck a deal with Michael Dell in 1984
which violated clause 11 of the contract. HELL tried to argue that overall,
Bill Gates had obtained what he wanted but this clause made the contract
invalid. Therefore, the contract was cancelled. Since it was not possible to
get back what had been given, Bill Gates paid a symbolic sum of $1 in
compensation. Of course, Quetzdufetcoatl was soon thereafter removed from his
position.
Another issue with the Devil’s Pact
was the consequence of what was known as the Legba’s legacy. Legba was
appointed head of the Devil’s Pact branch after Andrealphus and had managed to
attract several important customers. Nevertheless, Legba was an inveterate
gambler and could not resist a challenge. As a result, any mortal willing to
regain his soul was given a chance. Legba thus lost a few souls but overall
managed to bring in more customers than his predecessors.
This attitude remained and it entered
the tradition. As a rule, the mortals had little if any chance to win and it
was not dangerous. But along time, and partly due to some of GOD’s marketing
efforts, the Devil’s Pact’s representatives lost more and more contests. For
instance, in 1986, Willy Brown was saved by Eugene Martone during a rock
contest. Such cases multiplied along the years and the salespeople became less
and less enthusiastic about their job since thanks to this practice, only three
customers out of ten would effectively lose their souls. This lack of
motivation triggered a reduction in the number of prospects contacted and
therefore to a decrease in sales.
Next
steps
Despite the critical situation of the branch, Mephistopheles remained
quite confident in the future:
“Our customers, also known as Faustian figures, are countless. Ambition,
lust, greed are all over the world and there are great opportunities for us out
there. All we have to do is first to focus on a few target segments and to
develop new products. If we achieve that, we will be back in business, and
hopefully, back for good.”
In fact, there were a few strategies
that Mephistopheles considered very attentively.
A new focus
Up to now, the Devil’s Pact branch
had only targeted well-known individuals. The rationale behind it was that
these people benefit from an important media coverage and thus will be “living
commercials” for the brand. The problem is that these people also have money
and therefore can afford expensive and skillful lawyers to protect them and
break the deal. And a broken deal was anything but good advertising.
As a result, Mephistopheles
envisioned a new structure for the branch. In fact, there would be three
sections in this branch: one would deal with celebrities, one with students and
one would dedicate itself to legal issues (a growing and time-consuming part of
the business). Mephistopheles thought that students may be the most profitable
segment in the market since they are much more careless. Most of them just want
to have fun, drink and “fling”. They do not really care about religion and thus
are not GOD’s loyal customers.
In order to assess the viability of
this strategy, Mephistopheles decided to use the University of Pennsylvania as
a test market. Many students there were ready to do anything to succeed and a
few deals had already been made. As a rule, Mephistopheles did not target
students in law – they would manage to get a deal they could break in the
future – and finance people since the latter were already doomed.
Still, the first experience was
relatively discouraging. He had personally approached a international business
student called Tiam Labu Hitter. This exchange student just wanted to be the
best foreign student ever and had signed a pact to reach his goal. Ironically
enough, this student chose Dr Richter’s class – The Devil’s Pact in Literature,
Music and Film – and Mephistopheles found the challenge amusing. Nevertheless,
a few weeks later, Mephistopheles received a mail saying that he had not
honored his part of the contract which had brought the contract to an end.
In fact, there were two issues here.
First of all, Dr Simon Richter suspected the Devil’s work behind the student’s
creative project and decided to give it a B+ instead of the A it truly
deserved. Furthermore, this student applied for internships but had not
received any positive answers and therefore could not fulfill his academic
requirements. As a result, the contract got cancelled and Mephistopheles lost
his first customer.
Nevertheless, Mephistopheles thought
it was a useful experience.
“Whenever you enter a market you do not really know, the odds are high
that you will make mistakes. In this case, I just did not know what the
implications of the contract were. From now on, I will work with several
consultants before designing the contract in order to make sure that we are
addressing every possible extension of the contract. Moreover, I strongly
believe that this student will need us in the future, for whatever reason. We
will get him back, this is just a matter of time.”
Mephistopheles decided to expand his
test market to a few other universities such as Harvard, Yale and Princeton
since he was convinced that students would be the future of the firm. Some
details had to be worked out but the overall frame was there. But
Mephistopheles felt that this segment would have to be reached differently and
more cleverly, reason why he asked some of his engineers to come up with new
ideas.
The Internet
Revolution
Mephistopheles was aware that the members of Generation X were less
sensitive to traditional marketing techniques. They are more cynical and more
tech-savvy than the previous generations. As a result, the good old black
Cadillac showing up at the crossroads would probably not work any longer. Not
to mention the fact that these people are always in a hurry and thus hate
wasting their time. And going to the crossroads in the middle of nowhere takes
a very long time.
With these key insights in mind,
Mephistopheles started designing his new communication campaign. He wanted to
find a way to attract these customers but did not want to tell them directly
what they would commit to. He wanted to secure the deal before they got a
chance to understand that they had technically sold their souls. This was anything
but an easy task since these prospects were more demanding than predecessors.
In the past, people would just sign the contract whereas now, they would read
it – can you only imagine that? – and discuss every single clause.
Mephistopheles took a look at
hundreds of thousands of magazines, newspapers, TV shows, websites and finally
came up with the following idea. He had a deal with the creator of Kazaa who
had sold his soul to win over Napster. Since Kazaa installs a lot of spy wares
on the user’s computer, it was technically possible to know what kind of user
he was (age, occupation, most visited websites…). Then, pop-ups would appear on
the target customers’ screen and simply ask them “Got soul?”. All they would
have to do is to click on the icon and they would be taken to the website.
And this is were Mephistopheles got
his “big idea”. While surfing on the Internet – mainly on sites the access to
which is forbidden to people under legal age – he discovered that many sites
required an electronic signature from the user in order to enter the site. With
this signature, the user admitted that he was aware of the content of the site
and that he agreed to take the full responsibility of his acts. But most of the
Internet users just did not read the whole contract and clicked on the “I
agree” button, not to mention the “sign in” button when one became an active
member of the site. The trick was to include the Devil’s pact within these
agreements.
Since people cannot argue that they
did not know – the information was available, they just did not read it – and
since electronic signature has become has legal as a traditional signature,
this was a great opportunity. The legal department of the Devil’s Pact branch
would probably have to face a lot of complaints but Mephistopheles was
confident in the judicial system. After a few cases, the Court of the Damned –
the legal institution in charge of such complaints – would automatically rule
in favor of HELL.
Engineers started working on the
website and it was to be ready in March 2001. However, Mephistopheles did not
want to present Lucifer his new strategy before he had everything ready with an
alternate – yet complementary – plan. The idea was to advertise in the Yellow
Pages and in several newspapers using the classifieds. Using the same tagline –
“Got soul?” – people would be enticed into calling a toll free number
(1-800-33845) and could ask for further information concerning the products
offered. By pushing buttons on their phones to talk to an operator, they would
digitally sign the pact.
With all these ideas in mind,
Mephistopheles finished his glass of Medford Rum and started eating his lunch,
a hard-boiled egg with veal’s liver. He was not sure that his strategy would
succeed and he was not even sure that Lucifer would accept to implement it. But
he somehow felt that if he wanted to revive the business, he had to break with
the Devil’s Pact folklore and turn it into a more sophisticated business.
Though risky, this strategy seemed to be the only way to stop the steady
decline in market share. As he leaned back in his leather chair, Mephistopheles
decided to take a nap. And just before falling asleep, he heard the horses
scream…
