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The Deep Dive

CMOs are in trouble - some lazy, some stuck. But there's hope, says the Institute for Real Growth

By Paul McIntyre - Executive Editor

23 September 2019 8min read

By Paul McIntyre - Executive Editor

23 September 2019 8min read

Marc de Swaan Arons says marketers have lost their way in the past decade. CMOs have a reputation and credibility problem inside their organisations and some of the world’s biggest marketing-driven companies are replacing them with chief growth officers. Agencies, media and technologists take note. But the non-profit Institute for Real Growth hopes to change all of that. Listen here for a pressing and ultimately promising plan.  

Listen here to the Mi3 Audio Edition for an unedited and challenging conversation on the big issues hitting marketing. Marc de Swaan Arons outlines how overperforming CMOs are planning their return to business and board-level relevance.  It affects the entire marketing supply chain. It's 20 minutes of fast insights.    

 

Marc de Swaan Arons spent ten years as a Unilever marketer, and almost two decades as a senior marketing consultant at Kantar. Now he is spearheading the Institute for Real Growth, a marketing think tank-cum-elite marketer training programme. His mission is to save marketing from irrelevance. 

The clue is in the name, but the Institute’s remit – backed by founder members WPP, Spencer Stuart, Facebook, Google, LinkedIn, Kantar, the New York University and the University of Oxford – is to re-engineer marketing for a digital age. de Swaan Arons was a hit last week as a keynote at the Australian Association of National Advertisers (AANA) annual Reset conference and a series of forums convened by WPP with about 200 of Australia's top blue chip marketers unpacking how they can drive unconventional growth for their companies. The broad consensus from the Australian marketing community attending the WPP briefings was de Swaan Arons had identified the critical challenges in this market and a blueprint for how marketers can advance their enterprise growth agenda - and fix marketing.           

A central theme from de Swaan Arons is that industry has to deliver gains not just for business but also society.  For that to happen, de Swaan Arons says marketing needs to make itself more credible, and more relevant.

That means redefining marketing, redefining markets themselves, and reevaluating the value chain. (Clue: It’s bigger than shareholders)

“I think a lot of marketers are frankly being caught … with their pants down for lack of true business and commercial acumen.”

- Marc de Swaan Arons, Institute for Real Growth

The definition problem

Marketers have two fundamental problems: an inability to define the role of marketing within their own organisation and how to redefine the markets in which they play.

Failure to solve those problems, says de Swaan Arons, results in diminishing CMO tenure and stagnant top line growth. Without effective treatment, he thinks tenure and growth will continue their sickly spiral.

While presenting unprecedented opportunity, ‘digital marketing’, he says, is also the heart of the problem: Chief marketers have become focused on “how to win” at digital. That is, fetishising efficiency and hygiene metrics because they can, in theory, finally demonstrate which half of their spend appears to be working.

But ‘winning’ the small stuff clouds the bigger picture, which is “where to play, where are we actually going to build the market?” he suggests.

In other words: hunting growth and adding value. But in many cases, de Swan Arons says that is not happening, because marketers have become distracted.

“Digital was first a communications channel; we could push the message out, we could reach new people,” he says.  “Now digital is actually creating discussions around what market are we in, what business are we in?

“I think a lot of marketers are frankly being caught … with their pants down for lack of true business and commercial acumen.”

While there are many marketers who want to think beyond their category and drive growth, a lack of credibility means “they aren’t being given the time of day by their colleagues to engage in those discussions.”

 

Marketers that are just selling products have not gone far enough. The question is, what is the underlying need and how can we, through our own core competencies and through an ecosystem of partners, provide most if not all of that?"

- Marc de Swaan Arons, Institute for Real Growth

Getting punted for chief growth officers

De Swaan Arons says digital has come full circle and that it is time for “comms people” who became CMOs during the first wave of digital to hand back to people who understand marketing.

As a result of communications trumping marketing in the rush to new digital channels, “there’s a diluted population of chief marketing officers that are [genuinely] traditional marketers.  I’m sure many feel that creating markets is what they’re in business for,” says de Swaan Arons. “But others are quite frankly communication leaders and perhaps it’s better to just say that.”

Failure to revert to proper marketing, and define its role, says de Swaan Arons, will lead more corporates to ditch the CMO role for a chief growth officer.

He has no beef with that title per se, but believes that a chief marketing officer should already be the chief growth officer. The shift to CGOs, he says, “is a testimony to somehow the [CMO] job not being filled the way that the company was expecting”.

The Real Growth Institute, he says, aims to help redefine the role of marketing to remove that ambivalence, in turn increasing longevity of tenure.

 

"Remember, it is always the short-term people that are the loudest. But most of the money in the markets is pension funds – and they want sustained, repeatable long-term results."

- Marc de Swaan Arons, Institute for Real Growth

Define the need, not the category

Redefining markets – understanding where real growth lies – is also critical to the future of the CMO, says de Swaan Arons.

Removals firm U-Haul, he says, providers a literal example of thinking outside the box:

“I recently had to move furniture from New York City upstate to my weekend cottage. I went to the U-Haul site.  What really impressed me was that not only could I rent the truck there, as I did, but there was a whole spectrum of services which included, for example, them sending me boxes a week in advance so I could pack the stuff that I wanted to move.  Very smart; through the mail; arrived a week before.  Plus, dollies, blankets and all that stuff that you would expect.  But also, direct links in the U-Haul app to people that I could rent for two hours in New York and completely different people for two hours upstate in Woodstock to pack and unpack the boxes.”

De Swaan Arons says that is how every marketer should be thinking.

“Here’s a marketer that has gone through the trouble to elevate themselves from giving customers a truck. Because I don’t need a truck, I need my furniture moved.”

Ikea striking alliances with furniture assemblers is another example of smarter marketing, he suggests: People don’t want a flat-pack box of components. They want furniture in their room.

“It is this exercise of elevating yourself above the product category and [addressing] the underlying consumer need – and then figuring out what else you can do to satisfy that bigger need,” say De Swaan Arons.

“That may be a digital video of how to do use your product.  It may be a digital connection to a completely different service provider. But ... that says to me marketers that are just selling products are lazy. You just haven’t gone far enough.”

 

Springing the category trap

In a nutshell, The Institute for Real Growth believes the fundamental principle of marketing should be:

“What is the underlying consumer need and how can we through our own core competencies and through an ecosystem of partners provide most if not all of that,” suggests de Swaan Arons.

“That is every marketers job in the world. So if you are not doing that, sit down and draw out that journey and start to think about where else we can play a role."

 

“If you’re increasing market share, you’re obviously doing something better than your competitors, so that’s good.  I’m just saying it’s not enough.”

- Marc de Swaan Arons, Institute for Real Growth

Why market share is a false flag

Using market share as a measure of success is misguided in a digital world, de Swaan Arons suggests, because opportunities are bigger than any niche.

“If you’re increasing market share, you’re obviously doing something better than your competitors, so that’s good.  I’m just saying it’s not enough.”

De Swaan Arons says the Institute’s interviews with 500 CMOs and CEOs - plus thousands of online surveys – found marketing “overachievers” are those that “elevate” and define their category “based on a real understanding of deeper consumer needs”.

He provides a simple example.

“There was a hair care company. They sold shampoo and conditioners like almost every other hair care company and they were in negotiations with Amazon.

“They are one of the biggest in the world, with about 30 per cent market share, which is what their leader of e-commerce told Amazon in their negotiations.

“An interesting discussion followed because the Amazon contact looked down at their numbers and said, “We actually have very different numbers. According to our books, you’re about an 11 per cent share”.  And of course,” says de Swaan Arons, “there was a lot of confusion. 

“It turned out that Amazon did what makes complete sense. It said hair care is shampoos and conditioners but it is also blow dryers and hair curlers. 

“There’s no way that you can argue with that. It’s just that this company had created their definition with guidelines.  But to their credit, they went back and said, “Okay.  If we start playing that game and really start defining the hair care market, what else is included?”

De Swaan Arons says the company’s definition now includes pretty much everything, including YouTube video channels “where people are invited to upload their hairstyle of the week”.

They subsequently define market share as three per cent, a reset that leads to a fundamental shift of mindset, he suggests.

 

Think much, much bigger

“When you drive to work everyday and you have a 30 per cent market share, you think about defending that share, it is a closed mindset … which is the market share discussion.

“Whereas if you have 3 per cent, no one would argue that you can’t take that to 5 per cent. You’re restless.  You’re excited about the growth opportunity and you start looking for partners that can help get you into the channels that you’re not active in and so forth.  It’s a completely different mindset.”

Mars is a concrete example of that mindset shift – investing billions to go from pet food to the broader category of pet care.

“They sell pet food and used to define their category in terms of food - until research found that what keeps us awake at night is not what we feed our pets, but the health of our pets,” says de Swaan Arons.

“They changed their remit to pet care. They bought the biggest veterinarian chains available, $6 billion worth of investment just with one acquisition in the US and now they are a big player.  They’re developing innovations like collars that actually monitor pets’ behaviours and predict health problems,” says de Swaan Arons. “It’s just really exciting to see.”

 

“You show me a big company that doesn’t need to change fundamentally in the next five years and I’ll buy you a pint.”

- Marc de Swaan Arons, Institute for Real Growth

Appetite for disruption?
 

Buying disruptive start-ups is one way to secure growth and drive positive organisational change. But only if corporations have the appetite to rethink what they have always done, says de Swaan Arons.

Unilever, his former employer, is one firm that has resisted crushing acquisitions within the corporate embrace.

“There are hundreds of case studies of big companies buying small companies and smothering them to death. But Unilever has taken a really different track, by saying “we want the founders of these small companies … to stay around and actually change our company, help us change, become smarter, more entrepreneurial, more diverse in our thinking”. So they have invited lots of people over to the organisation and made them important – and given them roles where they are pairing up,” says de Swaan Arons.

“Putting the people at Pukka Tea or Sir Kensington’s Mayonnaise with the owners of multi-billion dollar brands and getting to learn from them.”

The result, he suggests, is that “Unilever has become a better, more entrepreneurial, more innovative company over the space of about five years,” says de Swaan Arons. “You’re talking about more than 100,000 employees being affected by the few hundred employees of these start-ups that they bought.”

It seems an obvious approach, but de Swaan Arons says in many years as a marketing consultant since leaving Unilever, it is the exception rather than the rule.

“The number of companies that basically start their partnership conversations with “we want to be the main partner, you’re going to do things our way”. No good things come of that,” he says.

“You show me a big company that doesn’t need to change fundamentally in the next five years and I’ll buy you a pint.”

 

“Only companies that embrace colleagues, customers and the communities we serve - as well as investors - are going to be growing in the future.”

- Marc de Swaan Arons, Institute for Real Growth

Humanised growth: What the biggest investors want from corporates

The need to think longer-term is a perennial marketing issue, but has been consistently overridden by the pressure to deliver short-term shareholder returns.

De Swaan Arons says that is starting to change – and that marketers and their boards need to recognise that their stakeholders go far beyond investors. That, he says, is a central tenet of the Institute for Real Growth’s mission.

“Across all of our building blocks, the concept of ‘humanised growth’ is the umbrella.”

He returns to the ‘overperformers’ identified in the Institute’s surveys and interviews with CMOs and CEOs.

“’Overperformers’ move very firmly beyond solely financial metrics of success. They [recognise] that capital markets are not the only investors - it’s also our colleagues, our customers and the communities we serve. They are key stakeholders of our success.” 

“We see that only companies that embrace all four of those stakeholders are going to be growing in the future.”

That view, says de Swaan Arons, is backed by BlackRock, the world’s largest institutional investor, with $6.8 trillion under management.

At the end of 2018, BlackRock CEO, Larry Fink, urged companies to concentrate on “sustainable, long-term growth”, underlining that “purpose and profits are inextricably linked”.

As a result, “the world’s top 200 CEOs, [members of] the Business Roundtable, declared publicly a few weeks ago that they are restating their purpose as companies to not just serve shareholders – but also those other communities,” says de Swaan Arons.

 

Australia: Get with the programme

Given trillions of dollars of long-term investment capital is publicly telling corporations to think and act responsibly and inclusively, de Swaan Arons thinks the Australian government is misguided in telling CEOs to pay no heed to “social fads”, and suggests the Business Council is wrong to agree with government.

“The research here in Australia says 75 per cent of consumers think companies, with all their influence, can help make a better place to live, learn and work. So I think political and institutional reservations about this may need to change.”

Failure to grasp reality will result in a poorer society and economy, suggests de Swaan Arons. But he says changing that mindset is a key opportunity for marketers.

“Remember, it is always the short-term people that are the loudest. But most of the money in the markets is pension funds – and they want sustained, repeatable long-term results,” he says. “That means taking the perspective of all stakeholders, not just shareholders.”

That shift presents a “huge opportunity for all chief marketing officers – and marketing in general,” suggests de Swaan Arons.

“Companies must now truly understand the underlying needs of all of those stakeholders - and they’re going to have to create value propositions for all of them.

“Now, who is best equipped to help companies think that through? I think it’s the marketers. They are the natural leaders in this area. It’s what we’ve always done and hopefully, it’s what we’ll always be doing.”

 

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