Organizationally Increasing the Customer Focus – Brad McLane at the Chicago GSB Marketing Roundtable

On Tuesday, 29 October 2002, Brad McLane of Russell Reynolds Associates, an Executive Search Firm, offered his insights into the growing importance of the Chief Marketing Officer in Industrial and B2B corporations. His talk, entitled “The Role of the Strategic Marketing Executive in Non-Consumer Driven Companies”, was both attentively received and critically examined by the audience of 60 at the University of Chicago Marketing Roundtable.

Russell Reynolds Associates has had an increase in their search business for finding Chief Marketing Officers (CMO) for major non-consumer goods companies. The Chicago GSB audience of mostly professional sales and marketing people were highly interested in the subject as it affects most of their careers and companies. Given his direct experience with hiring CMOs, Mr. McLane is in an excellent position to remark on some of the shifts in the competitive frontiers of industrial and B2B firms.

Hiring a CMO is usually a reaction to increased competitive pressures within an industry. Without the competition, sales and operations can usually turn a profit for the company. According to Mr. McLane, the drivers behind corporations hiring CMOs are an increased desire to (1) get closer to the end user, (2) conduct better channel management and customer segmentation, (3) become less product centric/manufacturing centric, and (4) recognize the value of their Brand. Each of these drivers originates from the understanding that creating revenue is a business process to be managed and that customers are decision makers in the process.

In adding the CMO to B2B or Industrial companies, the organization charts must be redrawn. In their absence, the typical B2B silo organization would have a functionally driven organizational structure. Operations, Sales, and Corporate Services would each have a direct reporting responsibility to the CEO. Marketing, if it exists, would fall under Corporate Services alongside Legal, IT, Accounting, and HR. In adding a CMO, Strategic Marketing joins the corporate ranks alongside Sales, Operations, and Corporate Services. Often, a dotted line reporting responsibility will exist between Sales and Marketing.

Making this structural change can cause significant internal strife within a corporation. CMOs are brought in to be change agents for the company. Their authority equivalence to Sales and Operations can threaten both of these groups. As such, successful CMOs tactically must undertake early initiatives that produce measurable results early in their tenure. In doing so, they are building coalitions and alliances with other executives within the company and demonstrating their value.

One of the difficulties for many companies is differentiating the CMO role from what is often seen as the marketing role. The CMO is a strategic corporate role. Their responsibilities would usually include Strategic Planning, Customer Messaging, Leverage Partnership Programs, Segmentation/CRM, Transformation Drivers, Market Research/Customer Insights, and Quality Management of Customer Interaction Touchpoints. To meet these responsibilities, CMOs will manage the informational loop of (1) gathering customer Information through market research, (2) conducting market analysis and planning, (3) implementing new customer management campaigns, and (4) facilitating customers learning and information gathering. The loop is closed when the effectiveness of a campaign and customer learning is measured through market research. As such, the CMO is not simply a PR, Advertising, Market Research, or Promotional role. While these may be tools at their disposal, the CMO is fundamentally a strategic role responsible for improving the corporate profit and revenue position.

As a strategic decision maker, the CMOs of non-consumer driven corporations would have the necessary authority and resources to meet their responsibility. Mr. McLane reported that most of his clients recruit CMOs at salary ranges of $200,000 to $400,000 plus bonuses of 50% to 70% and stock options, in line with other “C” level positions.

In recruiting a potential CMO, Mr. McLane reports that the typical requirements are for someone with a CPG (Consumer Packaged Goods) background who had made the switch to industrial marketing at some point in her career and is currently underutilized in a #1 or #2 marketing position. Usually, the CMO would have been training earlier in her career at a marketing “academy” corporation such as Quaker, Pepsico, P&G, etc.

After laying out his case, the floor was opened to discussion. While many discussion points were raised, there were two lines of questioning that went to the core of the reported trend.

First, where are the examples of successful CMOs that have made major transformative changes within industries? The antidotal conversation offered few examples of successful marketers that had transformed a company or industry but included Michael Dell of Dell and Lou Gerstner of IBM, both of which are CEO’s. As a point of clarification, it was mentioned that Lou Gerstner relied upon a corporate marketer to implement the restructuring of IBM from a product company to a service company. Other corporations that have had successful marketing operations include Dupont with their chemicals division or UPS with their shift to logistics management, but the audience could not recall specific individual’s names. They also mentioned some major failures in corporate marketing. This left us with the conclusion that, just like other corporate hires, there are successful matches and failed matches. Furthermore, successful marketing strategy requires CEO support and executive level buy-in.

Second, why is the CPG background considered important for industrial marketing? At this point, it became clear that Mr. McLane’s clients were not a representative sample of B2B and Industrial firms. Many people in the audience noted the number of successful marketers in industrial companies that had developed their careers within that industry in sales or product management roles. In doing so, they had gained deep customer and competitive insights through prior roles. It was suspected that the bias in Mr. McLane’s observations was related to a low exposure of Russell Reynolds Associates in hiring CMOs within companies with technologically complex products or services.

Most everyone in the room agreed that strategic marketing is of increased importance in B2B and Industrial companies. There was also a high consensus that strategic marketing is not PR, Advertising, or Graphics Design. Also many individuals were able to report of corporate structures similar to that mentioned. Mr. McLane’s insights provide us with an excellent opportunity to re-examine our companies, their missions, and how strategic marketing will manage all the decision points necessary to fulfill those missions. Clearly B2B strategic marketing is of growing importance.