I didn’t see THAT coming.
What just happened?
Despite ample warning signs, most employees are still surprised (angry, sad, in disbelief, panicked) when a reorganization is announced. And most find themselves unprepared, scrambling and in reactive mode.
The worse part? It doesn’t have to be this way. There are early warning signs and steps marketing leaders can take to prepare for the unexpected, yet inevitable, shifts that are coming.
Factors that can disrupt a business journey
What are some of the factors that disrupt a business journey? Obviously, there are external forces—a global pandemic, a technology disruption, a competitive advance, entry of a new market player, market consolidation. There are also internal forces—success, complacency, inertia, not taking action quick enough. Each of these can spark a business transformation and subsequent reorganization.
In this article we’ll focus on the external forces that can spur a company transformation. I call these the 4Ms of organizational change: a change in model, a change in market, a change in management or a change in metrics.
|1| Change in Model
Sometimes, changing your business model is the only way for a company to survive. It could be as part of a company’s natural evolution from startup to IPO to maturity. It could be as an outcome of an acquisition, merger or divestiture. Or it could be a conscious decision to shift away from your flagship product, as IBM has repeatedly done.
IBM is one of the rare companies to have thrived over a century after it was founded by continually evolving its core product offerings. The company first sold commercial scales and punch card tabulators and, later, massive mainframe computers and calculators. Starting in the late 1990s, IBM began focusing on software, consulting and IT services. And, just this month IBM announced it is shedding another one of its legacy businesses to focus on faster-growing businesses like cloud computing and artificial intelligence.
In the past, many brands lived to be 100 years old. Today, according to McKinsey, the average lifespan of companies listed on the S&P 500 is just 18 years, down from 61 years in 1958. Companies can increase their odds of survival by evolving their business model. And when they do, it’s an early warning sign that a reorganization will surely follow.
|2| Change in Market
Transformations are often sparked by a fluctuation in market conditions. A global pandemic, competitive advance, entry of a new market player, market consolidation, or a technology disruption can each necessitate an organizational change. But perhaps the biggest market driver is appealing to a new audience or generation of customers.
In 2008, Old Spice was a 70-year-old brand, predominately associated with the past and elderly gentlemen. But it became a cultural phenomenon and overnight success after a now-legendary advertising, social media and video campaign. Sales shot up 125 percent year over year by the end of July 2010, and Old Spice had become the #1 selling body wash brand for men in the United States.
KFC has had similar success appealing to a new generation of consumers while also rekindling nostalgia in an older generation. The company has embarked on a multiyear revitalization strategy, which includes not only a new Colonel and less messy menu items for a generation that wants to eat something on the go, but also a return to its Southern hospitality roots. Part of the plan is to appeal to older adults who no longer frequent the chain but have fond memories of KFC before it became associated with fast food.
These are just a few examples of the success stories. Sadly, other brands have not been as successful in appealing to new markets or new generations of consumers. Remember EF Hutton, TWA and General Foods? How about Borders, Circuit City and Blockbuster? These brands were once household names, but not anymore.
When there is a change in one or more of these market dynamics be forewarned that a reorganization is being discussed.
|3| Change in Management
A management change can also prompt a reorganization, especially if the new chief is brought in from the outside. It’s often a signal that the company has lost its way, needs to grow in a new direction, or requires a reset. Turnover at the top almost always sparks upheaval. But it could also lead to opportunity.
Sometimes it takes a new leader, with a fresh set of eyes and a change mandate, to right the course. Most always, a change in management leads to a re-examination and a change for the marketing organization. If you’ve built an agile marketing team, being able to pivot at a moment’s notice might be your opportunity to shine.
Executive outplacement firm Challenger Gray & Christmas reports that 2019 had the most CEO departures on record, with 1,640 heads of U.S. businesses leaving their positions. Demonstrating that companies are increasingly turning to outsiders to replace past CEOs, 784 replacement chief executives came from outside the company and 620 were internal replacements in 2019, the firm said.
|4| Change in Metrics
The fourth trigger for reinventions is misaligned metrics resulting from a new direction. As a marketing leader, you may be focused on brand awareness, marketing effectiveness and customer experience, and have built your team and allocated budgets accordingly. Based on shifting priorities, senior management may now expect marketing to drive incremental revenue, share of wallet and customer advocacy. This usually requires a reset of marketing programs and a redistribution of people and budgets.
Procter & Gamble (P&G) is an example of a company who has very consciously shifted its marketing programs and budgets over the years.
In 2012, P&G chairman and CEO Bob McDonald told analysts in an earnings call that the company was looking to lower promotion costs, which had historically run 9 to 11 percent of revenue. With earnings softening and under fire for its bloated promotion budget, the company was turning to social media to improve its return on investment.
Then in 2015, P&G announced a multiyear agency consolidation initiative expected to save $500 million annually in agency fees and production costs, incremental to what the company had already accomplished through belt-tightening efforts of recent years. In 2018, the company announced a further round of cuts to its agency roster—an effort to “reinvent” its relationship with agencies and automate and in-house more media planning, buying and distribution. The move would cut agencies by another 50 percent, saving an additional $400 million.
Change in metrics led to fewer agencies and programs as P&G consolidated its agency roster and moved programs and budgets to social media. Only the most flexible and adaptive marketing organizations could survive these transformations and emerge unscathed.
Change is inevitable. Preparation is a choice.
The unspoken truth is that there will always be a change in model, market, management or metrics. It’s the new reality in today’s hypercompetitive fast-moving world. We had better get used to it and prepare ourselves to stay one step ahead of the transformation curve. Don’t waste a good crisis by being unprepared.
Here are three ways to prepare for inevitable business transformation and the marketing reorganization that quickly follows.
Hone your skills.
Experts predict by 2025, AI will power 95 percent of all customer interactions. 85 percent of the jobs that today’s students will do in 2030 haven’t been invented yet. By 2022, 54 percent of all employees will require significant reskilling and upskilling, which in certain cases could take months or years. The marketing prowess that landed you your current role will likely be outdated when you are vying for your next one. Commit to being a lifelong learner.
Invest in yourself.
Investing time and money in yourself is one of the best return on investments you can make. Not only will it better prepare you for an uncertain future, but there is often a current payoff in terms of career readiness. Whether it’s becoming more strategic, more creative or more agile, take lessons that continue to push you forward and move you out of your comfort zone.
Become more agile.
Fortunately, there are simple steps you can take, starting today, to maximize your personal and professional agility. I call these actions power moves and I’ve summarized the top nine in a marketing agility guide which is available as a free download.