When Deborah DiSanzo took over as CEO of Philips Healthcare in May 2012, she knew that engineering would continue to drive innovation. But she also realized that the company needed to develop greater marketing muscle to drive a commercial transformation. As she put it, “Our markets are going through dynamic change. Who should lead our transformation? It must be marketing. Marketers need to know where their markets are going and where their customers are going, and then lead the rest of the organization.”
DiSanzo started by consolidating an astounding 600 different marketing titles into eight consistent job areas with specific and clear areas of responsibility. She also took the unusual step of installing three CMOs who could help provide detailed insights into three of the main business groups of the company. And she put marketing in charge of an organization-wide growth program.
The changes in healthcare—consolidation, restructuring, regulation, spending pressures—that are necessitating a transformation at Philips Healthcare are a subset of a series of powerful forces in the business world that have catapulted marketing from an often-isolated support function to a critical capability for driving above-average growth. Marketing has become increasingly essential for discovering meaningful insights, designing strategies and offers based on them, and delivering them to the marketplace. We have seen these forces at work in many different industries around the world, requiring a decidedly closer working relationship between the CEO and CMO.
The CMOs will need to be much more attuned to the business objectives and strategies of the company in general and the CEO in particular, while the CEO must become more immersed in the customer perspective. In our experience, there are specific steps CEOs and CMOs can take to develop a working relationship that is dynamic and useful.
Here are our recommendations for the CEO:
Give the CMO a seat at the executive table. The CEO can raise the CMO’s profile and communicate the heightened importance of marketing in a number of both formal and (often just as important) informal ways. Giving the CMO a clear role in the strategic planning process is a good start. It’s a practical way not only to inject a customer perspective into the core planning activities, but it also provides the CMO with the big-picture business perspective. The CEO can also make it a point to elicit marketing’s point of view on customer issues during strategy discussions, and carve out time for one-on-one meetings. “We are always on the agenda of the executive team and are a significant part of the leadership meetings,” says Bert van Meurs, CMO of Philips Healthcare Imaging Systems.
Tariq Shaukat, CMO for Caesars, agrees. “One thing that [CEO] Gary Loveman has done is make it clear to me and to others that he views marketing as a core driver of the business. And as such, marketing is involved with the business reviews, strategy sessions, and financial reviews too.”
Informal practices can be even more helpful. At Essent, the Dutch energy company, CEO Erwin van Laethem provided practical guidance to his CMO. “My CEO could read the company like a book,” says Dorkas Koenen, Essent CMO. “He’d warn me at the right time and place, and say, ‘Hey Dorkas, look out. This will probably happen if you don’t do that.’ That was very helpful.”
These actions alone, however, aren’t enough. While marketing budgets have been steadily rising as a percentage of firm budgets since 2011, many CMOs still lack real authority over decisions that most affect the customer, since most are delivered through touch points not owned by marketing. The CEO can help by putting the CMO in charge of important initiatives and granting veto power on certain decisions that impact customers. For example, at Essent, the CEO changed the reporting structures so that all people in the company with a marketing role reported to the CMO, which in one fell swoop provided the CMO with a significant set of resources. In yet another example, Caesars took the step of centralizing marketing and sales budgets, as well as decision rights, under the CMO.
Make the CMO the “bonding agent” that connects the organization. When making a purchase decision, customers use an average of six different channels, which are often managed by different parts of the organization. That series of interactions – or “customer journeys” – highlights a crucial issue in today’s business world: brands need to work across multiple functions to deliver a coordinated and consistent experience. Companies that excel in delivering on those customer journeys can increase revenue growth 10 – 15 percent and lower costs to serve 15 – 20 percent.
The CEO must establish a method that lets the CMO work effectively with other executives. Phillips Healthcare’s DiSanzo addressed this issue by developing a process that takes a product from concept to the marketplace. That process incorporates operations, customer service, R&D, clinical specialists, sales, supply chain operators, and service teams. Marketing is the “glue” that integrates those elements across the entire process by providing consistent oversight, expertise, and guidance.
Become an active marketer. ”So much of the CEO’s job is actually marketing the company,” says Shaukat of Caesars. “They’re one of the primary people defining the company to consumers, investors and the business community.”
Caesars CEO Loveman participated in a two-day quarterly marketing council session, which brought together all the senior marketers in the company. “It is critical for the CEO to be a part of the creation of our marketing strategies and not just be a recipient of them,” says Shaukat. “He has to invest the time and energy not just reading documents but really problem solving.” Loveman worked with marketers to break through issues, brainstorm solutions, and provide thoughtful feedback on various marketing initiatives.
At Essent, van Laethem took a personal role in finding marketing talent and in many cases interviewed people for senior roles. At Philips Healthcare, DiSanzo meets with her CMOs every two weeks.
While the onus is on the CEO to create the environment and structure that puts the CMO in the best position to succeed, we have found that CMOs can do three things specifically to support his/her CEO and drive above-market growth.
Develop—and stick to—a marketing blueprint. Most companies have a marketing plan; surprisingly few have a plan for marketing. Done well, however, a marketing blueprint details how marketing will deliver against the company’s business goals. It specifies what gets done, by whom, in support of what, over what period of time, and makes explicit connections among marketing activities, target goals, and corporate business goals. The marketing plan also has explicit links to business and operating plans within the organization so that, for example, manufacturing is prepared to support the volume increase that marketing is planning to spur, or sales forces are staffed and trained to handle new product launches.
When properly formulated, the plan not only tracks progress on near- and medium-term goals but also tracks long-term corporate health. Using brand equity trackers and marketing mix models, for example, the CMO can deliver reasonable estimates of long-term brand effects. This insight is critical in helping the CEO understand corporate health over the longer-term. For new CMOs, we recommend putting this blueprint in place within 90 days of taking office.
Connect the CEO to the customer. The CMO needs to provide a deep and detailed understanding of the customer to the entire organization based on rigorous analytics. Key performance indicators (KPIs) that integrate customer insights relevant to growth need to be incorporated into the executive dashboard. In particular, we’ve found that focusing on the consumer decision journey (http://mckinseyonmarketingandsales.com/winning-the-consumer-decision-journey) allows CMOs to develop a clear picture of behaviors, moments of influence, and battlegrounds. That level of insight is invaluable to the organization and particularly to the CEO.
Some CMOs take this notion of connecting the CEO to the customer a step further by making it a point, for example, to include the CEO in at least one customer visit per month—whether at a retail store, or listening in on a call center operation. Ford decided to create a mechanism that lets the head of social media connect directly to Ford’s CEO, Alan Mulally. One day, this Tweet caught the team’s attention: ”I’m a Volkswagen/Audi guy and I’m driving this new Edge Sport, and I think it’s pretty cool.” The social media head asked the Tweeter for his phone number, and he was still taking the test drive when he received a call from the CEO himself, thanking him for considering Ford’s Edge Sport.
Expand marketing’s influence across the organization. While the CEO can establish the cross-functional mechanisms across the organization that set the CMO up for success, it’s up to the CMO to make them work. Since the CMO often does not have authority over relevant functions (e.g. sales, operations, IT), it requires being able to work well with other leaders to influence outcomes. That can sometimes be an uphill battle.
Whether deserved or not, marketing often has a reputation as something of a luxury, with an indeterminate “value add.” This is largely because marketing’s contribution to a company’s success is not well understood. “Marketing too often is a black box,” says Essent CMO Koenen. “You should bring all the leaders in and make them owner of a marketing program. It was particularly important to work with Patrick Lammers, my CCO (Chief Customer Officer), to turn around the organization. I think that’s probably the most important thing that we’ve done here at Essent.”
The marketing team at Starwood Hotels & Resorts Group also offers a good example of cross-functional cooperation in action. The group set out to design the ideal customer experience across its brands (from the St. Regis to Sheraton Four Points) and touch points, from the concierge stationed in the hotel lobby to social media. By coordinating the brand experience across functions, assigning which departments would control the different touch points, customizing content delivery across the company website and mailings, and most importantly holding themselves accountable for the results, Starwood was able to substantially increase share of wallet from their customers.
The C-suite can seem like an unstable place – just look at the high CEO and CMO turnover rates, and the recent proliferation of new roles such as Chief Digital Officer and Chief Customer Officer. But the demands of the business remain unchanged: delivering above-market growth. While roles will need to adapt to the needs of each business, the CEO-CMO partnership should form the foundation of any company’s successful growth strategy.
Special thanks to Tim McGuire, Tim Koller, Liz Hilton Segal, Harald Fanderl, and Jesko Perrey.