Look beyond numbers to grow – Chief Marketing Officers

by | Jun 11, 2009 | Uncategorized

"The Evolving CMO" is the Brandweek headline.  According to this article, increasingly CMOs (that's Chief Marketing Officers) are becoming quite nerdly.  Whereas top marketing folks were once seen as "big idea" folks, now recruiters like Heidrick & Struggles (quoted in the article) are looking for top marketers to be analytical types who pour through on-line data to discern ad effectiveness and response rates.

It's not at all clear this is a good trend. 

Ever since marketing has been around it's been an easily derided function.  Unlike Sales, which has hands on daily contact with customers, marketers were considered more staff-like.  And much more easily let go.  Especially in companies that aren't consumer goods oriented, the first people let go in a downsizing are usually marketers.  Some companies, like Computer Sciences Corporation in services and many manufacturers of industrial products, don't have any marketers at all!  There are a lot of executives that believe marketing is a waste of money – you just need to focus on Sales.

So how should marketers deal with this lack of respect?  Increasingly, they are turning to numbers.  It appears that marketers want to overcome their Rodney Dangerfield position by being more like other parts of the company.  Product Development and engineering tend to be loaded with engineers, who like to push around numbers.  Operations folks like to analyze the plant output and quality numbers to death.  And everybody in finance tends to use numbers to make their argument.  Strategists and planners obsess over trend numbers.  Even salespeople talk about salescalls, orders, total revenues, margins – numbers.  So it seem marketers are starting to think that to gain respect they need to adopt personal, or role, Success Formulas much like others in the organization.

The problem is that numbers tend to focus you on the past, not the future.  Yes, on-line ads and click-throughs offer us a bounty of new numbers on the efficacy of ads, placements, messages, hits – all kinds of things we can run through the same analytical tools used by the rest of the company.  But does studying the recent behavior, upon which we have numbers – such as ad clicks – or of links to facebook pages – or the volume of tweets – or the respondents to a Linked-in group query — do these things tell you what big trends are emerging?  Do they tell you whether your product line could be made obsolete by a new competitor?  That is far less likely to happen. 

All this number crunching may make marketing look more scientific, but the important question is whether it helps the company grow.  Unfortunately, most trend numbers tell us what worked well in the past.  Yet knowing that still doesn't tell you what will work in the future.  Number crunching is great for execution of a designed plan.  Midway through an ad program, analysis can help you tweak it in order to catch more viewers and grab a few more sales.  Midway through a promotion, analysis can help you understand the impact of a price change, or a product pairing, or a sales blitz so you can tweak it for maximum results.  Analysis is great for understanding what to do right now.  But we have to run our business not just for right now.  We have to run businesses to position the company where the market will be in a year, two years, five years and beyond.

There's a tendency to think that the person who has the most numbers, or does the most analysis, is the better businessperson.  I don't know how this proclivity developed, but it did.  The desire to "engineer" a business so that it has no risk, and will generate ongoing growth and profits is a powerful desire.  But reality is that we live in a highly dynamic world.  We cannot predict the future.  Most 3 to 5 year forecasts aren't off by 2% or 5% – they are off by 50%!   Having all the numbers imaginable about the past won't give you much help for dealing with a market shift.  And that's the big problem in business today – dealing with these radically shifting markets and the changes they bring so quickly.  Analysis depends too much on the future being like the past, and that just isn't so.  The world keeps changing.

Lehman Brothers, Merrill Lynch, Bank of America, Chrysler and GM were/are full of peoples deeply skilled in how to "run the numbers."  Business training the last 30 years has given us thousands of skilled analysts, deeply ingrained in how to dig up and analyze vast amounts of data – using newer and more powerful computer tools every year.  Yet, for all this analytical skill we aren't producing more revenue growth, nor more profits.  Throughout the last 30 years growth rates have declined, and profit rates have dropped.  And recently we fell off a business cliff into an amazingly deep recession.  Yet, we're drowning in a sea of data and Powerpoint slides full of analysis.  The link between running numbers and improving performance appears broken – if it ever existed at all.

Marketers should be all about growth.  And growth comes from moving beyond executing static promotional programs on existing products.  To grow you have to be flexible to enter new markets, pioneer innovation and generate new solutions.  Somebody has to lead the charge to do scenario planning that opens the collective vision to doing new things – things not visible in the numbers.  Somebody has to understand the behavior of competition to recognize the holes they are unable to address because of their Lock-in to past practices.  Somebody has to reach beyond the numbers to offer Disruptions which allow the company to move from making computers to making consumer electronics (like Apple), or from making cars to making airplanes (like Honda).  Somebody has to be willing to manage market tests that teach you how to create new markets where you have fewer competitors and higher profits as growth takes off.  And all of this work is well beyond analyzing the numbers.

I advocate that all executives pull their heads out of the numbers to undertake these tasks for growth.  Many CEOs of now defunct companies  could memorize pages and pages of financial and market numbers.  They could recite market shares, product margins, product variable costs, plant fixed costs, employee costs and segment profits from the top of their heads.  Yet, the businesses are now gone (Multigraphics, AB Dick, Wang, Digital Equipment, Western Auto and TG&Y are just a few that no longer exist).  Having a deep understanding of the numbers means you know the past.  But unless you use that to be adaptive, to prepare for and launch Disruptions, all those numbers simply get in the way of being successful.  You can know all the trees, but end up unable to save the forest.

Marketers are not given their due.  Usually they see market shifts before anyone else.  They are able to generate scenarios that are possible, but often ignored because they require change.  They know the limits of a product, and they realize when the variations and derivatives are getting long in the tooth – causing margins to
slip as the cost of sales and new launches keeps rising.  They also know the company weaknesses and how they must be addressed if the company is not to become irrelevant.  They shouldn't retreat to the bastion of numbers to try and make themselves more likable.  Rather, they should lead the charge to make sure planning is about the future, not the past.  They need to keep executives paranoid about competitors.  They need to constantly bring up company shortcomings left vulnerable due to Lock-in.  And they need to champion test after test after test to keep the company growing.  In these roles, they are more important than anyone else in the company.  And vital to growth and viability.  Without marketers and the application of their skills all companies become out of step with shifting markets and inevitably fail.

So many good die young – SGI, Sun Micro, DEC, Wang, Univac, etc.

by | Apr 1, 2009 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Lifecycle, Lock-in, Web/Tech

How many of these company names do you remember — Sperry Rand? Burroughs? Univac? NCR? Control Data? Wang? Lanier?  DataPoint?  Data General? Digital Equipment/DEC? Gateway? Cray? Novell?  Banyan? Netscape?

I'm only 50, yet most of these companies were originated, became major successes, and failed within my lifetime.  Now, prepare to add a couple more.  In the 1980s Silicon Graphics set the standard for high-speed computing, using their breakthrough technology to open the door on graphics.  There never would have been a PS3 or Wii were it not for the pioneering work at SGI. The company invented high speed graphics calculating methods that allowed for "real-time" animation on a computer, as well as "color fill" and "texture mapping" – all capabilities we take for granted on our computer screen today but that were merely dreams to early GUI users.  But now SGI has disappeared according to the Cnet.com article "First GM, Now Silicon Graphics.  Lessons Learned?"  The company that expanded the high-speed computing market most on SGI's early lead was Sun Microsystems, building the boxes upon which the first all-computer animated movie was made – Toy Story.  But 2 weeks ago we learned Sun will most likely soon disappear into the bowels of IBM ("Final Chapter for Sun Micro Could be Written by IBM" at WSJ.com)

When Clayton Christensen wrote The Innovator's Dilemma he said academics like to talk about the tech industry because the product life cycles are so short.  Actually, he would have been equally accurate to say their company life cycles were so short.  For business academics, looking at tech companies is like cancer researchers looking at white lab mice.  Their lifespan is so short you can rapidly see the impact of business decisions – almost like having a business lab.

What we see at these companies was an inability to shift with changes in their markets.  They all Locked-in on some assumptions, and when the market shifted these companies stayed with their old assumptions – not shifting with market needs.  Like Jim Collins' proverbial "hedgehog" they claimed to be the world's best at something, only to learn that the world put less and less value in what they claimed as #1.  Either the technology shifted, or the application, or the user requirements.  In the end, we can look back and their lives are like a short roller coaster – up and then crashing down.  Lots of money put in, lots spent, not much left for investors, vendors or employees at the end.  They were #1, very good (in fact, exceptional), and met a market need.  Yet they were unable to thrive and even survive – because a market shift emerged which they did not follow, did not meet and eventually made them obsolete.

Today we can see the same problem emerging in some of the even larger tech companies we've grown to admire.  Dell taught everyone how to operate the world's best supply chain.  Yet, they've been copied and are seeing their market weaken to new products supplied by different channels.  Microsoft monopolized the "desktop", but today less and less computing is done on desktops.  Computing today is moving from the extremes of your hand (in your telephone) to "clouds" accessed so serrendipituously that you aren't even sure where the computing cycles are, much less how they are supplied.  And software is provided in distributed ways between devices and servers such that an internet search engine provider (Google) is beginning to provide operating systems (Android) for new platforms where there is no "desktop."  As behemoth as these two companies became, as invincible as they looked, they are equally vulnerable to the fate of those mentioned at the beginning of this blog. 

Of course, their fate is not sealed.  Apple and IBM both are tech companies that came perilously close to the Whirlpool before finding their way back into the Rapids.  When businesses decide their best future is to Defend & Extend past strengths they get themselves into trouble.  To break out of this rut they have to spend less time thinking about their strengths, and more about market needs.  Instead of looking at similar competitors and figuring out how to be better, they have to look at fringe competitors and figure out how to change with emerging market requirements.  And just like they disrupted the marketplace once with their excellence, they must be willing to disrupt their internal processes in order to find White Space where they can create new market disruptions. 

Today, with change affecting all companies, it is important that leaders look at the "lab results" from tech.  It's important to recognize past Lock-ins, and assumptions about continuation (or return to) past markets.  Markets are changing, and only those that take the lead with customers will quickly return to profitability and emerge market leaders.  It's those new leading companies that will get the economy growing again, so waiting is really not an option.