The real measure of marketing effectiveness, and how to deliver it.

The real measure of marketing effectiveness, and how to deliver it.

Aug 7, 2017 | Governance, Leadership, Marketing

Marketing is a functional silo on an organisation chart, as is Sales, Operations, Finance, HR, but unlike the others, marketing deals with unknowns, the future, whereas all the other functions deal with the past, or what is immediately in front of them.

Marketing is about the future, long term commercial sustainability, and its effectiveness is really hard to measure, other than in hindsight. There are lots of measures for things that have happened, which are the result of often many combinations of actions taken some time ago, so the measures are unable to change anything, just give insights to what worked and what did not.

As the senior marketing person in a very large business 30 years ago, I found myself often talking about advertising, segmentation, positioning, graphic design, and all the rest, around the board table, which either put others to sleep, or elicited opinions, usually uninformed, about the detail. However, when I talked revenue I had their attention.

Marketing is all about revenue, particularly future revenue. The other stuff is the paddling under the surface that enables the generation of the revenue, but the real measure of marketing effectiveness is revenue and margins over time.

In every business I have ever had anything to do with, marketing expenditure is treated as an item in the P&L. By definition, items in the P&L are expenses or past sales revenue. This is inconsistent with the notion of marketing being about building the foundations of future revenue.

The closest analogy is a piece of capital equipment, they are always purchased to fill one of two roles, sometimes both:

  • To increase the volumes too be sold, or,
  • Increase the productivity of the processes.

Those purchases are recorded in the cash flow statements, and the balance sheet, not the P&L. The greater irony is that capital items are depreciating assets, whereas marketing  investments, when done well are appreciating assets, unrecorded anywhere until the business is sold, then the accountants start talking about ‘Goodwill’ being the difference between the realisable value of the physical assets, and the liabilities on the books.

There is a structural paradox here. We treat a potentially appreciating asset differently to one that can only depreciate, just because it is hard to measure.

This challenge of measurement is the biggest one marketing people have to hurdle. The turnover of marketers in senior roles is the fastest amongst the functional heads in large corporations because we generally do not recognise the essential long term business building nature of marketing investments. We treat it as an expense to be cut at the slightest cloud on the profitability horizon, and the marketing people with it.

One of the challenges here is that to achieve these long term outcomes, marketing requires the co-operation and  collaboration of all the other functions, without the organisational authority to direct. The CMO has to be a leader across functions. He/she has to build the respect and co-operation of other functional leaders, often at odds with their short term function specific performance measures.

25 years ago, I and my marketing team, failed to convince the board of the then Dairy Farmers Co-Operative to invest the required capital in new equipment to launch a new brand of flavoured milk. It was to be packaged in plastic bottles, with a screw cap, to be sold at a very considerable premium to the products then only available in the gable top cartons, and we proposed to sell it to different consumers. Nobody had done this before, we were banking on tapping into a market completely under-serviced by existing packaging and branding. The Operations Manager at the time believed in the project, and put his neck on the line by committing  his R&M budget to refurbish some older gear in the absence of capital approval, and I ‘stole’ the required advertising funds from another brand.  We launched Dare Flavoured milk, and it delivered the fastest return on investment I have ever seen, and 25 years later, it is still going strong, delivering revenue and margins to the now overseas owners of the business.

If marketers started talking about revenue generation, rather than the more common ‘marketing-speak’ like positioning, segmentation, and all the insider jargon generated by digital, they will be taken much more seriously around the board table. Building support amongst other functions to acknowledge the long term impacts of intelligent marketing, is necessary for long term prosperity, and the only real measure of marketing effectiveness.

 

Why Operational improvement and change initiatives usually fail.

Why Operational improvement and change initiatives usually fail.

Aug 2, 2017 | Change, Leadership, Lean, Operations

How do you make short term operational and process improvements ‘stick’ for the long term?

Most change initiatives fail to deliver on their early promise. You get some short term improvement, some changes made, but the effectiveness of the process dwindles with time.

I often see failed improvement initiatives, usually labelled ‘Lean” or ‘6 Sigma’ by those involved, that leave a pile of paper, some awareness and knowledge, and from time to time some useful results, but nothing like the promises of the expensive consultants as they signed you up.

Why is that?

Nobody goes into a change process expecting it to fail

In my observation, the single most common reason these initiatives fail is because they ignore one of the basic tenets of Lean: respect for people.

Lean gets a start because management sees problems they have failed to solve, or do not know how to solve. So they bring in some Lean consultants who reach into the tool box and come out with some of the common tools, go through an education process, implement, and get some quick and sometimes impressive wins, and victory is declared. After that declaration, the focus moves elsewhere,  and the process slowly deteriorates.

Why is that?

Everyone was so committed, excited at the early results, the consultants were paid a shedload, so it should have worked.

In 30 years of doing this stuff, there is always one dominant reason they fail.

The initiative is top down, not bottom up.

Those at the top see problems manifest in the P&L. Their motivations are financial, operational and strategic. They talk about alignment, and people being the most valuable asset, then ignore them.

By contrast, building initiative from the bottom, asking those doing the work how to improve it, then giving them the tools to improve, and rewarding them with acknowledgement as well as a more secure job and maybe a pay rise, is where the action is.

However, for managers, they are trained to see their job as managing. Having some stuff bubbling up from the factory that has not gone through the formal approval processes and subjected to the discipline of  the accountants mandatory NPV  and ROI analysis is uncomfortable and challenging to their authority as managers.

This is where the distinction between managers and leaders comes in.

Managers, usually unwittingly, kill off the grass roots enthusiasm to make their workplace safer, more interesting, and more productive because it makes them uncomfortable, less in control.  By imposing rules, they interrupt the productive flow evident in successful initiatives. By contrast,  leaders encourage and promote the ambiguity that sometimes results, and works with it.

Which are you, Manager or Leader?

 

 

4 essential questions for the new leader to ask

4 essential questions for the new leader to ask

Jul 17, 2017 | Governance, Leadership

Taking the top job in a new organisation is a stressful experience. No amount of planning and research can properly inform you of the cultural  DNA of the organisation you will be taking over. That knowledge will only come over time, and only if you go actively looking for it.

In many cases, new leaders do  not go looking, and as a result usually do not know what it is they are changing by their presence, and often do not care, to their cost.

Nothing is as resilient as a culture that perceives itself to be under threat from a new leader who ignores it.

In the course of coaching leaders, I encourage them to be absolutely transparent, to never shy away from those often difficult but clarifying conversations that are the daily menu of leadership. For the new leader taking a role in a new organisation, I encourage them to act like a sponge in the first few weeks, and understand the nuances of what they are really getting into.

Four simple questions can be very useful, and I encourage you to ask them of every senior employee you can in that very first familiarisation encounter, and if possible to communicate the questions beforehand, to allow them to think about the answers.

  • What three things do you think we should change.
  • What three things should we leave absolutely alone
  • What three things do you most want me to do
  • What three things would you encourage me not to do.

After you have asked as many of the existing employees as practical the same four questions, you will have a pretty good picture of the way things are around the place, and what the pressing issues are.

It is a bit like learning to swim.

You cannot do it from a book, you have to get into the water to experience it for yourself, and in this case the four questions are similar to learning to dog paddle, and to stick your face under water for the first time.

Cartoon credit: Hugh McLeod @ Gaping Void.

Sustained Marketing success requires managed mindset change

Sustained Marketing success requires managed mindset change

Jul 12, 2017 | Change, Leadership, Marketing

We marketers, and usually sales people talk endlessly about putting ourselves in the shoes of those to whom we are communicating, and seeking to serve. It is absolutely right that we do, but then we stuff it up.

We do that by the way we define the industry we are in.

Go to any network meeting, and I (almost) guarantee nobody will define the industry they inhabit from the perspective of those they are seeking to serve.

They are lawyers, or Architects, or Insurance brokers, and so on. None will define what they do by the outcome for their customers.

Examples of the great miss-definitions abound, but two stand out.

Kodak was in the late nineties one of the great successful companies sitting on a mountain of cash, dominating an industry they defined as ‘Film’. They were so successful their advertising slogan persists to this day, we all know what a ‘Kodak moment’ is, well all over 40 do anyway. In 1975 Kodak engineer Steven Sasson invented the first digital camera, which Kodak patented, and later collected billions on the royalties until expiry in 2007. They even commercialised the technology for Apple under the brand ‘Apple QuickTake’, and even then failed to see the writing on the wall. In 2012 Kodak was made bankrupt, although it has since emerged as a different company.

Blockbuster, what a Lulu of failed strategic sight that is, although it is always easy with the benefit of hindsight. At their height, Blockbuster had 50 million members worldwide, thousands of stores, and were a critical link in the movie money making chain. In 2001, the fledgling  Netflix approached Blockbuster, seeking to sell their business into them, and run the online part of Blockbuster, for just $50 million. CEO John Antico had been looking at ways to experiment with on line delivery, and supported the idea. He had made some changes to blockbuster,  like removing the profitable late fees that penalised customers, but failed to get the deal with Netflix through his board, and it ultimately cost him his job. His successor led the business into oblivion by bowing to  the board, reintroducing the hated late fees,  and allowing the power of incumbency, and the aversion to change, to prevail.

You do not have to be a huge business to be caught by this definitional challenge that pervades the way you think, unconsciously driving the decisions you make. A client of mine is a printer, a modest sized family business that has been around for 60 years. They see themselves in an industry that has been significantly disrupted by digital, and while there is still plenty of printing being done, the volumes are modest compared to those of a decade ago, and  the prices and margins are very slim. They acknowledge they are printers playing a role in the communication industry, but they still think and act like commodity printers. At least however, they have made a start in the mindset change which drives behaviour, and which eluded Blockbuster and Kodak.

Blockbuster saw themselves in the video rental industry, not as a part of the entertainment industry to the end, and Kodak was in the film industry, not the memories industry, until they weren’t.

Marketing Myopia, a term coined in 1960 by Theodore Levitt in his seminal HBR article of the same name remains alive and well, just harder to recognise.

 

 

 

 

Are you pushing rope?

Are you pushing rope?

Jul 10, 2017 | Leadership, Management

Activity for the sake of activity, ‘busywork’ that does not contribute to an objective associated with creating value for that ideal customer group, is as useful as pushing rope.

Ever pushed rope?

No matter how hard you push your end, nothing happens at the other end, all you get is rings of rope somewhere close to your hand.

Useless.

The only way to move rope is to go to the other end, and pull it towards the objective.

In most organisations there are barriers to grabbing the end of the rope:

There is no budget

The boss will not like it (worse, the boss’s wife will not like it)

We have not done it before

I am too busy

It is not my job

There are a thousand reasons people push rope, and there is really only one way to change that.

Empowering every employee to stop doing non-productive activities in favour of doing stuff that counts.

Then we need to celebrate the changes made, or the elastic nature of ‘the way it has always been done’ will kick in, and you start pushing the rope again, as it is usually more comfortable than pulling it.

 

10 point leadership framework for reviving SME manufacturing businesses.

10 point leadership framework for reviving SME manufacturing businesses.

Jun 26, 2017 | Governance, Leadership

The Modest sized manufacturing sector in Australia has  a huge problem. It is being wiped out like an insect  pest at your backyard barbie. The problem with that is that they provide the bulk of employment and training in the economy, and without them, we will become a nation of baristas.

Perhaps it is not that gloomy, there are some exceptional little businesses out there, intensely competitive on the world stage, aggressive, and innovative, but they are a rarity.

For the average manufacturer, the task of just surviving is daunting.

In 20 years of advising these sorts of businesses on change and improvement there are some leadership lessons that seem to crop up time after time, in one form or another.

The survivors learn them, rarely an easy path, the others just go the way of the Dodo.

Management of people and their capabilities.

Successful leaders manage their people and their capabilities on an individual basis. When you have a bunch of people performing well and growing individually, you get  groups of them doing the same as the group, and then the enterprise benefits. For the person at the top of an enterprise, even if it is a small one, this aspect of managing cannot be left to chance. This is first on my list, as it is the most important by a long way.

Identifying the molehills early.

Every enterprise has more than its fair share of molehills that need attention, The challenge is to address them, smooth them out before they become mountains, or even little hills that get in the way of performance. The impact of even a tiny molehill on the performance of an enterprise is like the ripples in a pool when a rock is thrown in. They radiate out, and when meeting up with ripples from elsewhere, there is rough water. The job of everyone in a business  is to remove the molehills as they emerge, before any ripples can be sent out.

Get it right first time.

The fundamental lesson of ‘Lean’ can be summarised as getting it right first time, every time. While this is hard to achieve, but every corner that is cut, every expedient decision and compromise that is made, will come back to bite you hard, some time, in some way. Never settle for less than the absolute best that can be done, every time, and improve the processes that deliver that  outcome to increasingly demanding specifications, relentlessly.

Focus, Focus, Focus.

The 80/20 rule works every time in every circumstance I have ever seen. Do a limited range of things for those who really care, and do it better than anyone else. Anything else means you are compromising the things you do by spreading them too widely, and as a medium business, you simply cannot afford to do that. Be opportunistic only if it can be done from within the existing narrow definition of  what you are great at doing.

Team alignment.

Alignment has unfortunately become a bit of a consulting cliché, which must be some indication that it is right. Having everyone pulling on the same direction is essential, but you never get there without hard training and robust debate on the way through. The metaphor I always like is of a rowing eight. The best team always wins, but to get the best team in the boat on race day, and working in that absolutely coordinated way that seems so fluid and natural, is really hard, the result of training, mutual respect, and the subordination of the individual to the performance of the team.

Right, not popular.

It often happens that the right decision is not always the popular one. That is why business is  not a democracy, someone always holds the right of veto. It is the responsibility of that person to make the right decision, best made after robust debate amongst those affected, what I call ‘Due Process’. At the end of the debate, the leader has to make the call, and those who may not have agreed with the decision need to line up behind it and support it in every way. Any ongoing dissent needs to be behind closed doors, and between the parties involved only.

Humility and Agility.

Having made the point about right not popular, not every decision taken will be the right one, so the really good leaders amongst us moderate their right to the veto by  being able to acknowledge mistakes, change course and get on with it. Managers are usually loathe to admit they are wrong, as they consider that it shows weakness, the leaders amongst us know  that being able to admit they were wrong shows strength of character, which is what we follow.

Balance the competition between today and tomorrow.

Taking the short term easy route at the expense of the longer term good rarely pays off. The urgency of the immediate often outweighs the importance of getting the foundations right for tomorrow, and while doing so may make for an easier weekend, it usually makes for a crap year.

Write it down, and create a rhythm.

Documenting your plans makes them available to everyone else who needs to know, and provides the framework for decision making, without which, there can be no chance that everyone will be working off the same hymn sheet, another worthwhile cliché.

A really effective plan is a combination of a number of elements that add to the clarity of the plan, which makes it something that can be effectively implemented, managed and improved.

Your ‘why’ or business purpose, or Mission, however you choose to describe it will only evolve slowly over time.

Your strategy also evolves, but over a shorter period, a few years. it used to be that 5 years was a reasonable evolutionary period, but the speed and aggression of competitive pressures have shortened that to three in most cases.

Operating plans, usually called budgets are the financial expression of what you will and will not do over the next 12 months. Allowing the numbers to determine the activities is a common mistake. It is way better to manage activities by the objectives that need to be achieved and then measure the outcomes and adjust as necessary by the numbers. Having your sales, marketing, and operational plans in place that have been derived from a combination of the objectives and zero based budgeting , rather than fitting the activities to some vague notion of the acceptable cost, is the way it should be done.

Unless you measure the outcomes of what you are doing, you will have no idea of the effectiveness of your activities and investments. Having said that, you cannot measure everything, and trying to do so will tie you up in administration, and compromise the learning that comes from having a few key metrics where you understand clearly the cause and effect chains in place.

Learn and adjust. Plans that do not change in the face of contrary outcomes are worse than  no plans at all. Therefore your metrics need to drive adjustments in your activities and costs as you cycle through the year.

Someone is the driver.

That leader, the one with the veto, is the one doing the directing, the cox if you like in the  rowing eight metaphor. They are the ones with the overall view of the progress, both in the scull and across the competitive arena, and should be the one most sensitive to the changes necessary to achieve  the optimum return from the assets, financial and otherwise, invested.

When you, as the leader get all that stuff right, or close to it, the performance improvement will be considerable.