Reinventing the marketing organization.docx
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Reinventingthemarketingorganization
Reinventingthemarketingorganization
Afieldreportonhowleadingmarketersaremovingbeyondtheirtraditionalorganizations
MICHAELGEORGE,ANTHONYFREELING,ANDDAVIDCOURT
TheMcKinseyQuarterly,1997Number4,pp.43–62
Thepastdecadehasnotbeenkindtomarketing.Leadingpackagedgoodscompanies—longviewedasthebestmarketers—havebeenunabletocountontheirmarketingdepartmentsforinnovationandgrowth.Asaresult,theirCEOshavehadtolookinsteadtooperationsandfinancetoincreaseprofitabilitybycuttingcosts,eliminatingmarginalproducts,and"reengineering"thesupplychain.Intheirview,theblameformarketing'sfailureliessquarelyatthefeetofthebrandmanagementsystem—asystemthatmayhavehelpedcompanieslikeP&Gachievespectacularearningsgrowthduringthe1950s,1960s,and1970s,butthathaslongsinceshownitselfunabletocopewithtoday'scomplexmarketinglandscape.
Meanwhile,deregulationandincreasedcompetitioninmanyotherindustrieslikefinancialservices,airlines,andtelecommunicationsconvincedCEOsthattheircompaniesneededtogetbetteratmarketing.Sotheyhiredawayhundredsofthebestandbrightestfromfirmsregardedasworld-classmarketers.Atthetime,thisseemedareasonableidea,butitwasdoublyflawed.First,itwasimpossiblesimplytograftmarketingexpertiseontoanorganizationthatwasnotmarketingoriented.Second,theveryskillsthesecompaniessoughttoemulatehadbecomeobsolete.Bythetimebanksandtelcosgotaroundtoraidingtheleadingpackagedgoodsfirms,thetraditionalbrandmanagementsystemtheyrepresentedwasalreadyonitslastlegs.
Today,however,thereisencouragingnewstoreport.Thelastfewyearshavewitnessedtremendousinnovationsinmarketingorganization—innovationsnotconfinedtothebestconsumergoodscompanies.Indeed,attheforefrontofactivitycanalsobefoundfinancialservicecompanies,retailers,airlines,andhotels.Thisarticledescribestheorganizingprinciplesthatlieattheheartofthenewapproachesandsketchesouthowsomecompaniesarereinventingtheirmarketingorganizations.Theyarenot,however,tryingtorebuildtheirmarketingdepartments.Whenanentireorganizationisfocusedonmarketing,theneedforaseparatedepartmentoftendisappears.
THERISEANDFALLOFPROFESSIONALMARKETING
Forthepast60years,eversinceconsumerfirmsbegantoevolvefrom"makeandsell"organizationsto"marketing"organizations,twobasicmodelsofmarketinghavebeendominant:
productmanagementandmarketingstaff.
Thefirsthastakenmanyforms—amongthem,brandmanagersinpackagedgoods,buyersinretailing,andmarketingmanagersingeneralmerchandise.AsformulatedbyP&Ginthe1930s(Exhibit1),brandmanagersweretaughttobeminigeneralmanagers.Astheirroledeveloped,theybecameresponsibleforworkingwiththeR&D,manufacturing,andsalesfunctions—asthe"hubofthewheel"—tobringproductstomarketandmaximizemarketshareandprofits(Exhibit2).
Thismodelworkedspectacularlywellduringthegoldenageofhighconsumertrust,weakdistributionchannels,growingprosperity,andhomogenousdemand.Insuchanenvironment,massadvertisingofrelativelysimpleproductofferingswasthekeytogrowth.Thus,productmanagers,withtheirintensefocusonanarrowproductsegment,wereabletoachieveunprecedentedlevelsofgrowthandprofitfortheircompanies.
Bycontrast,themarketingstaffmodel,commoninindustrieslikeairlines,hotels,banking,andconsumerelectronics,relegatedmarketerstoastafffunction,wheretheywerespecialistsresponsibleforsuchareasasconsumerinformation(whichtheyoftenguardedjealously)andadvertising/promotionsupportservices.Thismodelworkedwellinfast-growingandoftenheavilyregulatedindustries,wherepurchasingdecisionswererelativelyunsophisticated.Inthebestcases,itenabledcompaniestobuildworld-classskillsthatfarsurpassedthoseofgeneralistbrandmanagers.Butthe"realwork"ofthesecompanieswastypicallydoneoutsidethemarketingdepartment—bythecreditofficerwhomadetheloan,thesalesmanwhocarriedthebag,ortheengineerwhocameupwiththeinnovation.
Consumersincreasinglytrustonlytheirownabilitytoseekvalue
Anewlandscape
Neitherofthesemodelshasshownitselfequaltothechallengesofthe1990s,whentheveryterrainofmarketingisbeingreshapedbyacombinationofslowergrowth,deregulation,andpowerfultrendssuchas:
Sophisticated,demanding,andmicro-segmentedconsumers.Nolongerwillingautomaticallytoplacetheirconfidenceinpremium-pricedbrands,consumersincreasinglytrustonlytheirownabilitytoseekvalue.Thismeansthatmarketerswillhavetodeliversharplyarticulatedvaluetoanevermorecynicalsetofconsumersatthesametimethatfragmentingdemographicsanduserneedsmultiplytherangeofmarketsegmentswithineventhemosthomogenousofproductcategories.
Multimediatechnologies. Althoughtheworldoffullyinteractivemultimediaisstillseveralyearsaway,multiple-channelmediaandsophisticateddirectmarketingprogramshavealreadyenhancedtheabilityofmarketerstocommunicateefficientlywithsmallerandsmallersegmentsofthepopulation.1 Asinformationprocessingcostscontinuetofallandnewdecision-supportsystemsbecomeavailable,thisabilitywillgrow—butatthecostofincreasinglycomplicateddecision-makingprocesses.
Newdistributionchannels.Providersofpackagedgoods,apparel,durables,andfinancialservicesareallexperiencingaproliferationofavailablechannels.Inmanycases,thesechannelsaredominatedbylarge,powerful,andprofessionallymanagedfirms,whichaddsstillfurthertothecomplexityofthemarketingtask.
Thebrandmanagementsystemisjustnotuptothiskindofchallenge.AsCEOshaverecognizedforyears,brandmanagersarenotreallyminigeneralmanagersatall.Theyareusuallytoojunior,tooinexperienced,andtoonarrowlycenteredonmarketingtoprovidethecross-functionalleadershipandstrategicthinkingrequiredtonavigatethroughtoday'scomplexmarketinglandscape(Exhibit3).Theyarealsotoofarremovedfromthesourcesofvalue-added(whicharenolongerjustadvertisingbased),toooverwhelmedwithday-to-daytasks(likedevelopingtradepromotionsinpackagedgoodsorstayingonstockplanandtakingmarkdownsinretailing),andtoofocusedonimplementingquick-fixsolutionsthatwillgetthempromotedin18months.
Ifanything,thestaffmodelisevenlesswellequippedtodealwiththenewenvironment.Incompaniesthatfollowit,literallynoonebelowtheCEOpossessesanintegratedconsumer-drivenperspective.Nooneisresponsibleforunderstandinghowtoextractprofitsfromacompleteindustrychain.Nooneprovidescross-functionalleadership.Andnooneisfullyaccountableforanticipatingconsumerneeds,respondingquickly,andtargetingeffectively.
Thereis,ofcourse,nomagicsolutionthatwillfixalltheseproblemsormakesenseforeverycompany.Buttwokeyprinciplesoforganizationarebeginningtoemerge.First,successfulcompanieswillrelyprimarilyon—andorganizethemselvesaround—integratorsandfunctionalspecialists.Theformerwillberesponsibleforservingeachdistinctconsumer,channel,orproductsegmentsuperbly;thelatterwillcreatecompetitiveadvantagebyhelpingthecompanybuildworld-classskillsinthetwoorthreemostimportantfunctionalareasofmarketing.Andsecond,inafundamentaldeparturefromtraditionalorganizationalthinking,successfulcompanieswilllinktheseintegratorsandspecialiststogetherthroughteamsandprocesses,ratherthanfunctionalorbusinessunitstructures.
INTEGRATORS
Intomorrow'smarketingorganizations,integratorswillplaythecriticalroleofguidingactivitiesacrossanindustry'sentirevaluechaintoensurethatacompanyismaximizingitslong-termprofitability.Theywillbechargedwithtearingdownthewallsthatdividefunctionfromfunction,productmanagerfromproductmanager,andsupplierfromretailer.Andtheywillbeexpectedtobringalltheresourcesoftheirorganizationtobear—seamlessly,quickly,andefficiently—onservingeachconsumerandbusinesschaincustomerbetterthanthecompetitioncan.
Inpractice,theseintegratorswill:
• Understandtherealdriversofprofitabilitythroughoutanindustry'schaininordertoidentifywhichmarketsegmentstocompeteinandwhicheconomicleverstopulltomaximizeacompany'sshareofscarceindustryprofits.
• Workacrossthevaluechaintodevelopgenuinelyconsumer-focusedstrategies.
• Leadcross-functionalteamsresponsibleforexecutingthesestrategiesdaybyday.
Integration,inshort,istheoppositeofthefunctionalismthathasalltoooftenstoodinthewayofservingconsumerssuperbly.Itwaseffectivewhenhighgrowth,unsophisticatedconsumerdemands,andweakdistributionchannelsmeantthateachfunctioncouldmakerealprogressbyitselftowardimprovedconsumersatisfactionandgreaterprofitability.Onitsown,manufacturingcouldcutcostsandboostquality;marketingcoulddevelopbetterads;andsalescouldimprovecallpatternsandenhancecustomerpresentations.Inmostindustries,however,theopportunitiestomakeprogressagainstsuchnarrowlydefinedfunctionalcriteriahaveaboutruntheircourse.
Integrationistheoppositeofthefunctionalismthathasalltoooftenstoodinthewayofservingconsumerssuperbly
Limitationsofthetraditionalmodels
Today'sproductsandserviceshavetooffersimultaneousimprovementsonmultipledimensions:
g