Driving change and building value

Michael J. Portland

Michael J. Portland Egon Zehnder, Chicago

Dick Patton

Dick Patton Egon Zehnder, Boston

The strategic role of senior marketing executives in industrial companies

While many industrial companies in a business-to-business sales environment have identified superior strategic marketing capabilities as a critical long-term success factor, most are unable to achieve the results they’d like from this increasingly important function. By correctly scoping and supporting their marketing transformation initiatives, focusing their efforts, and empowering the right marketing change leader, these companies can realize significant benefits in their near- and long-term results.

Why marketing?

As global competition increases and industries consolidate, leaving only the strongest competitors, business leaders in even the most traditional of industrial companies have realized that a strong strategic marketing function – one that goes well beyond tactical marketing and sales support – is no longer an unnecessary expense limited to the abstract world of consumer brand marketing, but a critical factor in determining success or failure in the business-to-business environment as well. These companies and their leaders have followed an evolutionary path over the last decade or so, moving from a business environment dominated by sales – in which product differentiation and relationships defined winners and losers – into a much more complex environment of products and services with more consistent quality and functionality from global competitors.

In the past, it was enough to design a better product, arm the sales force with presentation materials and brochures explaining the benefits of the enhancements, and establish a strong presence at the right trade shows to improve sales performance. Today, suppliers are expected to partner in developing integrated components and systems (rather than discrete products), link production planning and order entry systems with their customers, share market knowledge and insights, and provide innovative services to support the end user. In this integrated, highly competitive world, a knowledge of customers’ objectives and economics, and awareness of market trends, emerging technologies, competitive capabilities and strategies, and internal strengths and weaknesses, become absolute requirements for reaching sound product development, business strategy, and investment decisions.

Companies that can harness this type of knowledge in their day-to-day business management can focus attention and resources much more effectively on the most attractive and promising market segments, development projects, and technologies. They are able to wrap products and services together into high-value solutions tailored for a particular customer segment. These companies are also better able to gauge the likely long-term “winners” among their potential customer base, allowing them to focus time and effort on developing deep relationships with these firms. This ability to focus on the areas that matter is a particularly strong driver of profitability, since it impacts both revenues and costs.

Even companies who have not fully completed this transformation begin to realize some benefits in the near-term. For example, improved knowledge of customer needs and how they differ in key segments can allow a crisp, clear, and consistent articulation of a value proposition which resonates well with these customers.

Marketing transformation roadblocks

Realizing the potential benefits from a strong strategic marketing function is more difficult than just listing it as an objective in an annual strategic plan and creating the position of Chief Marketing Officer (CMO). There are many barriers to achieving successful transformation. First, many industrial organizations lack strong supporting skills in marketing, strategy, and analytics. They rely on incomplete market knowledge or inadequate or inconsistent knowledge of internal costs and capabilities. They fail to overcome strong organizational leadership resistance to changes in the decision-making process. They may have a lack of systems to facilitate information gathering, analysis, or retrieval. Or they may have an organizational structure at odds with customer-needs segments. Failure in one or more of these areas can lead to incomplete transformation and the introduction of incomplete or inefficient products into a market unwilling to pay for the changes.

Successful strategic marketing transformation

To realize the benefits of strategic marketing, companies must consider this a transformation of business leaders throughout the organization, not just a transformation of the marketing function. They must focus on changing the way the organization thinks and makes decisions. As one CMO puts it, “Marketing is too important to be left to the marketers.”

As with any change program, this transformation effort needs strong leadership to be successful, starting with direct and visible support from the CEO or business unit leader. This effort also needs a strong CMO or senior marketing executive who can champion the effort throughout the organization. This executive should be part of the senior management team and a peer to business leaders. Ideally, this individual should also be closely involved with (or lead) the organization’s strategy development efforts. This executive must be able to think like a general manager (perhaps having run a business unit previously), to ensure that the marketing changes undertaken are focused on real business results. This leader must be a strong and compelling change agent with excellent communications skills. Executives with broad, cross-functional knowledge and business management experience tend to drive more successful changes than those who have focused solely on traditional product marketing leadership in their past career. To help attract top talent, companies should also think about a clear career path for this marketing leader.

In addition to strong leadership, successful strategic marketing transformations are well-planned and focused. While the general concepts behind the transformation can be communicated early-on to the entire organization, starting detailed work in one specific business unit can help build a deeper understanding of these concepts and demonstrate early business results which reinforce organizational commitment to change. Clear and reasonable expectations established up front and shared across the management team help to reinforce the fact that this type of change is a journey, not a cure-all, and prepare the organization and its leaders for a sustained effort.

This type of change requires an adequate budget for skill-building, initial market research, and basic systems improvements to support the change efforts. In addition, the marketing leader must be allowed to build the skills of the organization – including selective hiring to accelerate organizational skill-building – and provide internal role models for change. On-going and active involvement and support of business unit management is critical to success. If senior executives do not understand the need for a market-focused approach to decisions, and do not require market-based facts to support their investment decisions, they will undermine the change effort throughout the organization.

When an organization really commits to making a change in this area – a change focused on real business opportunities, with targets for revenue and profitability growth – it can have a rapid and meaningful impact on business results for years to come.

Michael J. Portland

Michael J. Portland Egon Zehnder, Chicago

Dick Patton

Dick Patton Egon Zehnder, Boston

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