This article is by Greg Paull, Principal of R3 — a global consulting firm focused on improving the efficiency and effectiveness of marketers and their agencies.
I was fortunate recently to attend the recent Brite Conference at Columbia Business School in New York. For ten years, some of the world’s best CMO’s and industry leaders have generously given their time to share best practice and help cascade some learning.
What struck me in the end, is that too many marketers are looking at latest Uber, Airbnb or Snap Inc as inspirational high points — when the reality is, they collectively represent the only logical way forward. Marketing has gone through such a fundamental change in the last five years.
Transform — or die. The Hunger Games is on.
90 Of The Top 100 CPG Brands Declined In Shared Last Year
If you take nothing more away from this little piece, take away this. I had to re-read and re-check this data several times. It is the one signboard of marketing insight that current business models are not just under pressure, they are under threat of death. It’s why Unilever bought a $200 million revenue shaving business for $1 billion. It’s why Amazon is predicted by some to become the world’s first trillion dollar company — even though it trails Apple and Google in market cap, and has years and years of losses. Dave Knox wrote about this eloquently in his recent book Predicting the Turn. A domino can knock over another one in front of it that is 1.5 times its size. Based on this, you can walk to Fifth Avenue in New York and line up 29 dominoes — and knock over the Empire State Building. As you read the 100 brand CPG Report, this is the clearest year yet the dominoes are falling.
Innovation Needs The Right Investment
One of the main drivers for this decline is the lack of investment in real R&D. Most CPG firms have used SKU proliferation as the core driver for incremental growth. I personally have never tried a Salt Watermelon Kit Kat, but I am sure it is delicious. Mark Ritson made a great analogy with Hollywood movies and the sequel trend. When 2% of your SKU’s represent 50% of your revenue, you need to more carefully rethink your marketing strategy. We’re working with a large global CPG leader right now, who literally has no investment in brand driven marketing (that’s about to change), despite having truly iconic brands. Knox identified four key areas for the future
1. Invest in Change — see what Caterpillar did with YardClub
2. Innovation Driven Acquisition — as Under Armour and Unilever have done
3. Find Partners in Innovation — as Nestle is now doing with Henri
4. Disrupt the Disruptors — see what Shane Smith and Vice have done to media
The Digital Transformation Playbook
David Rogers, the founder of the Brite Conference and the final speaker of the two day event, gave the clearest insights possible for marketers as they move forward on this journey. Every CMO needs to stop what they are doing and take a day out of their lives with their team to see if they are delivering.
1. Digital Transformation Is A Strategy, Not A Technology — It might sound like a Black Mirror episode, but when Alibaba decided to issue 400 million credit scores for all of their customers, the wonder wasn’t just in the technology, but in the financial leadership.
2. An Enterprise Is Not A Big Start Up — While we can all quote Mark Zuckerberg from his youth of “Running Fast and Breaking Things”, a large consumer marketer needs to “fail smart” . Few companies have been through as tough a set of challenges as Samsung recently — yet market shares are up and the stock has almost doubled in the last twelve months.
3. Reimagine Your Competition — Dollar Shave Club’s launch mission was not to sell razors, but to “the world’s best online CPG company”. Many companies will tell you they want to gain X percent market share of a Y million dollar market. Only the great companies change the Y, not the X.
4. Disruption Is Coming — even for disruptive companies. A shock statistic from 2016 was that Google and Facebook represented 103% of digital advertising growth. That means that the thousands of other Adtech firms collectively declined by 3% — many of them failing faster than any brick and mortar firm. Go beyond the glass and look for a sustainable advantage.
5. Every Business Must Be A Digital Business — iterate and innovate more rapidly. If you were to answer the question of which stock grew more in the last ten years — Google — or Domino’s Pizza — you might be surprised. They have achieved this through honest and innovative marketing — even offering stock now to their customers.
Around the same time as Brite, we held a private R3 CMO Roundtable for a number of our clients and other marketing leaders. In the room was both a sense of nervousness, combined with braggadocio. For those with the right spirit, this is a special time to be building brands.
For CMO’s the Digital Transformation Journey is no longer about investing more in Facebook and Google Advertising. It’s not about the next app or the next mobile promotion. It requires some big discussions on the whole consumer journey and business opportunity. It needs fresh eyes, fresh thinking and fresh legs. A journey of a thousand miles begins with a single step.