McKinsey recently pointed out that Marketing has become less effective.
It is also clear that Marketing is no longer as obvious a path to the CEO’s corner office as it once was. There are a number of reasons for this. For a start, Marketing has become more complex, with greater technology and specialization. Twenty years ago, Marketers were generalists, and they had involvement in all aspects of the business by the time they reached top management. Now, most marketers are more specialized, and by the time they reach top management, they may not have had exposure to all elements of marketing. This means that while the CMO (and even today, only about half of Fortune 500 companies even have CMOs), has greater responsibility, he or she has narrower business experience and is no more likely to be part of top management than 20 years ago.
In many companies, the CMO does not report to the CEO, whereas the CFO always does. When the time comes to look for the next CEO, the Marketers are nowhere to be found. Yet, as Peter Drucker famously said, the purpose of a business is to create a customer. The implication being that a well rounded Marketer is best qualified to lead a business. As he said: ”because the purpose of business is to create a customer, the business enterprise has two — and only two — basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.” However, what he meant by Marketing may not be the way it is often understood today. Over time many CEOs came to believe Marketing was too important to be left to the Marketers, so that today, CEOs and CFOs who were not formally trained as Marketers have more control over Marketing as defined by Drucker than the CMO does.
As Marketing has become more specialized, it has also become more technical and tactical. Many a smart B-school graduate who studied corporate strategy becomes an expert in a narrow field which results in (slightly) greater job security but less likelihood to become a CEO or even a Division Head. Marketing itself is being seen as a technical specialty more akin to logistics than it is to Finance. So, while Marketing still has some attractive qualities, the most ambitious enter Finance. In addition, as Marketing has become more specialized and technical, Finance has become more all-encompassing and attuned to the enterprise.
So, the first question is whether it is even desirable for Marketing to broaden itself again and for Marketers to aim for the corner office, or is business better off if Marketing becomes more of a ghetto? For most of business history, Marketing was not a respected discipline, if indeed it was thought of as a discipline. Much as Victorian mothers shuddered at the thought of their daughters going on the stage, so did many parents hide the fact that their children were in Marketing. However, thinkers such as Drucker and Ted Levitt brought Marketing to the forefront of business in the 60s and 70s. They enabled Marketers, for the first time, to run companies as long as they also had expert knowledge of the key ways in which we measure the success of a business – the financial data.
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Much of what we now are calling Marketing, such as “email marketing,” “online marketing,” or “marketing communications,” would have been defined by Drucker or Levitt as Sales rather than Marketing. They would also have defined Sales as very different from Marketing, rather than two sides of the same coin. As Drucker said, “Sales and Marketing are antitheses. If Marketing were to do its job perfectly, Sales would not be needed.” Marketing’s main function is to fit the product (and its presentation, price, and place of purchase) to the customer’s needs so well that it does not need to be sold. Drucker believed that what a company has to do is based on its “theory of the business.” When the assumptions on which the business is based — e.g. regulation, technology or competition — change, then the theory of the business has to change. This is what Marketing is all about, according to him.
So Marketing has lost its way. In order to re-establish itself as a key element of running a business in more than a tactical role, it has to change. Some of the ways in which it has to change include:
- Step back from tactics and understand the “theory of the business.”
- Understand what are the ways to measure performance which drive market value.
- Understand which levers in the business will increase market value.
- Regard tactics as components that can only be used with an understanding of the entire business plan.
- Understand the customer and end user intimately.
- Focus on Product, how it is priced, presented, and where it is available to customers.
So in the trade-off between the job security of the specialized expert and the greater risk of the business builder, we each have choices to make. I know what mine is, but in today’s world, it can be argued that job security is the wiser personal choice.