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The Treacherous Innovation Hammock

We’re seeing a paradigm shift in the role of the Chief Marketing Officer.

Up until the great recession, quality, mass production and sales were drivers for growth, meaning CEO’s came from the ranks of heads of sales or production. After the financial crisis, when companies focused on cost efficiency and financial governance, the CFO became the heir-apparent. We are now entering the era where the CEOs are going to come from a marketing background.

Why? Because CMO’s, more than any other function in the business, have all the data, insight and understanding of what consumers want and where the market is heading. Thanks to data and technology, and support from the best agencies, they hold most of the cards needed to create value for consumers, building winning brands and increasing growth. The field is open for the CMO to become the hero.

But that requires a shift in how CMOs see themselves and what their responsibilities should be.

Research shows that traditional marketing responsibilities are the focus for today’s CMO: improving brand position, digital communications and finding the right media mix.

But 8 out of 10 marketing directors, globally, cannot explain what value marketing creates for the company according to a study from the English analysis and consulting firm Fournaise Group. They interviewed 1,200 CEOs and marketing managers worldwide about marketing impact and ROI. And in Sweden, almost half of sales and marketing directors believe that marketing has no or a small impact on sales as stated by a survey by PMP Marketing consultancy. They looked into how Swedish listed companies look into sales effects from marketing. Telephone interviews with 100 sales and marketing managers reveal that 48 % think that marketing has little or no impact at all in sales.

CMOs seem lost. And that is understandable, as markets and industries are changing exponentially and disruptively.

Uber for X

The story of how the game of chess was invented is a good illustration of our “zeitgeist”. As the inventor of chess unveiled the very first game for the ruling emperor back in the 12th century, the emperor became so enamored that he offered the inventor to choose a gift.

The inventor replied, “All I want is rice to feed my family,” and suggested that they use the chessboard to determine how much rice he would get. “Put a grain of rice on the first square, two on the second, four for third, and so on, so that each new box doubles the previous.”, suggested the inventor. The emperor approved without understanding what he was getting into. Had the emperor granted the wish fully, he would have been obliged to give the inventor 18 trillion grains. The pile would be larger than Mount Everest and consist of more rice than has ever been produced on Earth.

In the technological transformation of today’s world, we are somewhere on the middle of the board now. We can still count and grasp the amount of “rice”. But all the information, web, digitizing and transparency are now growing exponentially towards unpredictable and unimaginable levels and locations. It is no longer possible to predict the future based on the past. Because every step we take is so much longer – and often in a new direction. As a company, not to act on the change increases the risk of becoming a loser.

Today there is talk of “Uber for X”; who will be the next disruptor to foil entire industries and markets, as Uber has done with the taxi industry, AirBnB with the hotel industry and Instagram with photo industry.

Market Driven Innovation

To meet this, firms need to invest in market driven innovation. That means shifting away from old ways of working.

From sales responsive – delivering what the market has decided are the relevant products – to shaping markets through the creation of new products, categories, services and experiences.

From organizational set-up determining where the next sale will be made, to letting unmet demand from consumer-customers drive resource allocation to where the largest growth is.

From building strategy inside-out – letting today’s capabilities and market position decide our offering – to outside-in: letting market changes and demands decide what products and services to produce and sell.

An example of this kind of approach is Electrolux and their Grand Cuisine product series. The marketing director was given the assignment to take Electrolux out of the ”mid market squeeze”: the unstable position of being neither premium nor low price, with brand preference too weak to drive consideration. The ambition was to move up and become more premium.

The marketing director could have said ”Sure, give me X million dollars and I’ll advertise us out of this position.” Instead, they created a new product line: Grand Cuisine, the most exclusive kitchen series in the world, specifically designed for the best chefs and restaurants in the world. Marketing this new product line not only moved up Electrolux brand toward higher premium, but created revenue.

Marketing went from a cost to revenue.

This requires the ability to drive innovation and R&D through market vision and larger contextual insights, making sure consumers’ and customers’ needs drive the development of the business.

The Innovation Hammock

However, this has not fully been understood by the C-suite. We call this the innovation hammock.

The company rests comfortably as responsibilities seem clear. One anchor point for the suspension is strategy, business development and growth. These are the CEO’s responsibility. The other anchor point is brand, market analysis and market activities. These are the CMO’s responsibility.

Suspended between these two sets of responsibilities are the responsibilities for R&D, innovation, product and service development. Neither the CEO nor the CMO takes full responsibility for these areas.

 

Based on a survey conducted by United Minds in May of 2015, with over 200 C-suite representatives as respondents.

It might seem inviting and restive to plant yourself in this hammock. The anchor points appear stable. As long as you have the right strategy and objectives paired with the right brand and market activities, you are good, right? Wrong. Your “R&R” might make you lose the game.

Market driven innovation and product/service development is crucial to stay competitive over longer period of time. And as the CMO is the stakeholder in possession of the best data and insights in to market changes, the CMO needs to take the lead. Companies need to strengthen their ability to evaluate the potential for growth through an analysis of context and market.

A process towards winning the game

There are many ways to becoming better at market driven innovation and growth. But at times larger strategic pushes are required. We suggest a four step process which will enable you to act on the opportunities created through changes in consumer and customer behaviors, market, industry and society.

Build a case for change that evaluates the potential for growth through an analysis of context and market. When markets and industries change disruptively, old definitions and perspectives need to be challenged.

Basic questions include:

  • ”What industry are you really in?”
  • ”What new industry would you like/need to shape?”
  • ”What markets can you create with the capabilities you have?”

Create a position for growth through a business concept that captures new market opportunities through the use of the firm’s resources. This business concept drives and permeates all parts of the business: brand/positioning, HR, sales, organization, distribution.

Execute a transformation plan that involves all internal and external stakeholders. Make it impossible for them not to buy in to the new business concept.

Accelerate the transformation through Iconic moves. Change can only happen through powerful initiatives that accelerate the change, and that organize and measure the best of the firm’s energies and skills. Iconic moves are moves that take you not one step further, but that change the board.

To be able to make it long term every firm needs to have the audacity to change the game. Sometimes, the only way to win the game is to change it.

Kerem Yazgan
kerem.yazgan@unitedminds.se