Now, unless we seriously believe that this is accepted reality, it cannot be good for any value-seeking firm. The last time we met here, we had explored the importance of having board representation for brands as arrowhead assets for any business. Irrespective of category. If we agree, at least by test of absence, that a brand is a key strategic asset, how can we have uncertainty around the custodian of this asset?
A decade-old global survey suggests that 80% of CEOs do not trust or are unimpressed by their CMOs. This is against 10% for their CFOs. On the other hand, 74% of the CMOs in that study believed that their job design did not allow them to maximise their impact on the business. I don’t know how you feel about these numbers, but over two decades of conversations on both sides suggest that these trends aren’t unfounded. We have often found ourselves mediating between the CMO and CFO, and in some cases even explaining the need for a top-flight CMO as a business imperative. This seems counter-intuitive. If the CMO is indeed responsible for our most valuable relationship, i.e. our customer base, and what customers believe about us, how can we let this situation prevail in our C-Suites?
So who’s to blame? Is it the CEO—unclear about his or her expectations? I’m not so sure, particularly if the CEO is running a good ship, producing results, and understands revenue, finance and share performance. Is it the human resources chief—bringing in the wrong talent? Again, not if the rest of the organization is well resourced, especially the C-Suite itself. Or is it the CMO—generally at cross purposes with the CEO’s expectations? At one time CFOs were referred to as ‘bean counters’ because they always seemed to put quarterly numbers above our ‘evolved consumer lingo’.
This is clearly not a simple find-and-fix issue. It’s just that for decades, our inability to transition out of an industrial-age, asset-heavy approach to capital efficiency was blindsiding us. As a consequence, the ability to look beyond supply-chain performance for creating value was impaired. Our ‘Smile and Belly Curve’ offers an insight into this problem and also its solution. ‘Belly’ firms typically focus on procurement, production, logistics and distribution, and are bloated in these mid-value-chain functions, while ‘Smile’ firms pay far more attention to R&D, retail, marketing and customer relations, at either end of the value chain.
In a value appreciation workshop for a top travel company, I once asked the leadership two questions: If I wake you up at 2.00am and ask for three options for a Bengaluru-Toronto return fare, how long will you take to respond? Most said under 3 minutes flat. Right. Now If I ask you at 11am in your office to share the last three customer complaints that you resolved, how long will you take? Silence in the room. The point sank home.
Most legacy firms in developing markets tend to be supply-side experts. They are ‘Belly’ companies, with margins typically wired to supply-side efficiency. Whereas ‘Smile’ firms tend to mark their margins from demand-side advantages, such as innovations and consumer (brand) equity. Here’s a fun fact: In the league table of the world’s top 100 most valuable brands, only nine countries are represented. These countries also control close to 70% of the world’s economy!
So what does this have anything to do with our missing CMO?
Twenty years in business have underscored one truism: You can only manage what you measure. Every time we have put the CMO out front and at the centre of the business’s value-creation imperative, it has flourished. This, however, will imply a few fundamental changes in the way we structure our thinking.
Here are some pointers for consideration:
One, financially recognize and disclose the material role of your primary brand (however small you are) in driving performance. As we discovered in our last conversation, there are 34 discrete areas of brand impact on performance .
Two, align the company’s leadership to think about your brand (and its value drivers) as the arrowhead for business planning, organization structuring and performance management.
Three, appoint your CMO as the brand’s custodian, from asset protection to return on brand capital. Let his or her bonuses be constructed around these metrics.
Four, ensure that the CMO is a permanent invitee to board meetings, along with the CFO. If the CFO is the top guy’s right hand man, the CMO should be his left hand, at the very least.
I would really love to see our CMO cross double digits in tenure and collect a massive bonus in each of those years.
Just for delivering outstanding shareholder returns.
Ramesh Jude Thomas is president, Equitor Value Advisory
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