CMOs in CEO roles: the case for a new perspective | KPMG | AU

CMOs in CEO roles: the case for a new perspective

CMOs in CEO roles: the case for a new perspective

Few Chief Executive Officers in Australian businesses have come directly from marketing and customer experience backgrounds, but with customer centricity vital to success in the digital age, the time is ripe for a new approach.

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This article was co-authored by Lisa Bora, Partner, Management Consulting, KPMG and Nick Reynolds, CMO, Lenovo Asia-Pacific.

 

There is no question that thanks to technology and globalisation, customers expect more from businesses than ever before. The organisations that survive and thrive will be the ones that recognise this, harness every aspect of customer data they can gather, use it to understand exactly what their customers want, and reorient every step of their operations to align behind a refreshed customer centric strategy.

While Chief Marketing Officers (CMOs) have not traditionally been ‘first in line’ for a Chief Executive Officer (CEO) position, the new demands placed on businesses by customers deem their insights immensely valuable for a major strategic role. They are well positioned to navigate companies through the staggering amount of digital disruption occurring, and to make the links between what customer data tells them, and where they should steer the business.

The CMO is in a predominantly ‘externally facing’ role, different from the COO/CFO/CIO/CHROs, which are often more focused on operations within the company. This means the CMO is well positioned to understand the changes occurring in the digital economy, and to help steer an organisation to deliver on customer expectations. As boards look at their company talent pool for CEO successors, they should see that the CMO is uniquely positioned to leverage these changes to benefit their business.

KPMG’s Customer Experience Excellence Centre US 2017 studies show that the rewards are there for organisations that focus on customer centricity:

  • Revenue growth for organisations with CX leadership in F500 is doubled
  • Organisations in Top 25 with CX leadership have 7x growth 
  • Profit growth in Top 25 with CX leadership is 5x EBITA.

Today, customers still interact with a company brand, product or service via traditional offline platforms such as bricks and mortar stores, call centres and on-the-road sales representatives. However, they are more often interacting with organisations online via websites, social media, apps, e- commerce and Artificial Intelligence (AI, such as voice robotics), and this is only set to grow. Given that growth is paramount to boards, the CEO and its executives should be focused on growth via all channels but with a growing disposition to digitally enabled channels and services – and CMOs can bring deep knowledge of market trends.

Brand is key

InterBrand Best Global Brands tracks the brand value of the world’s top 100 Global Brands. It assumes a link between brand value in the eyes of consumers, and shareholder value – a link CMOs are uniquely accustomed to making. However, many boards underestimate the impact of a powerful brand, and therefore are missing the awareness of the full value the CMO can bring. Because CMOs are brand custodians, they have an important role to play in driving shareholder value by improving brand value. Interestingly, several studies have shown this positive correlation to exist:

  • When analysing European brands for the InterBrand Top 100, Stockholm School of Economics showed that high brand value companies derive more than 12.7 percent higher annual shareholder return than mid to low brand value companies. 
  • KantarMillwardBrown also showed this correlation to exist with their analysis of Top 100 BrandZ, finding that over 10 years the Top 100 Most Valuable BrandZ outperformed the S&P 500 Index by 39 percent.

Brand and customer experience

To compete in the future, organisations must focus on improving the overall customer experience (CX) by stepping up the customer journey at every touch point across all channels. This requires engaging data and technology, changing company cultures so that staff are aligned to the goal, changing the store experience, the online experience, customer communications and service pre- and post-sales, and in some cases offering 24/7 support. It also requires gathering the right customer data throughout every step to help inform business decisions at scale and in near to real time, and building customer advocacy to help fuel growth.

The Net Promoter Score

In many organisations, executive and employee compensation and the focus of daily activities is tied to CX scoring methodologies such as the Net Promoter Score (NPS). This leads to CEOs and companies being increasingly focused on improving the CX. For example, at Lenovo, the employee base has 10 percent of bonus compensation linked to CX NPS, which is comprised of six major elements for targeted improvement across the company covering: brand consideration, time to quote, delivery timeliness, product customer satisfaction, and first time issue resolution.

Therefore to impact the brand value, the CMO must become more involved in many functional areas of the corporation beyond the traditional perceived view of a CMO remit of advertising and marketing communications alone, to what sophisticated CMO’s deploy in taking a more powerful role in influencing customer engagement across the spheres of sales, distribution channels, customer service and post-sales support.

Why are few CMOs becoming CEOs?

Given these examples of the way business is moving forward into a digital and customer-driven world, it makes sense that boards should consider CMOs for future CEO positions. However, there are some roadblocks.

In Harvard Business Review (HBR), July to August 2017, an article The trouble with CMOs by Professor Kimberley White from the University of Virginia Darden School of Business, says that the top marketing job in the company is a minefield where many executives fail. White argues that there is often a mismatch between the expectations of a CEO, and the authority granted to the CMO. Often the CMO role is an important role leading the company efforts to grow revenue and profit, however the traditional CMO scope is limited to or perceived as ‘marketing communications’ such as events, communications, and advertising. When the CMO is not in control or influencing product development & launches, pricing, channel strategy and eCommerce capability, they are disempowered, and are also viewed as less relevant for a CEO role than some of their counterparts.

Another hurdle is the commonly short tenure of CMOs in their roles. According to a 2017 research report by Korn Ferry, it shows CMOs are one of the shortest-held roles in the C-Suite. A CMO’s average tenure is around 4.1 years, versus CEOs at 8 years, CFOs at 5.1 years, CROs at 5 years and CIOs at 4.5 years. This lack of tenure will limit the opportunity for CMOs to be considered for the CEO job.

CMO changes required

The CMO typically needs to:

  1. Understand CX pain and gain points and influence design principles and possess strong digital competency with AI, voice and automation awareness, as these are now central to the CX.
  2. Have ‘carried a bag’, for example held a sales target or run a sizeable profit and loss.
  3. Have strong financial knowledge talking to business value of their operation
  4. Broaden their skills outside of marketing communications, into sales, operations, product and strategy. They need to showcase a qualified growth mindset for the organisation.

Therefore, to be in line to be the next CEO, sophisticated marketers should not limit themselves to marketing communications. Rather, they should be prepared to influence the whole of an organisation in its consumer touch points.

CMOs leading the way into CEO roles

  • Gail Kelly – ex-CEO Westpac, worked in marketing but also gained strategy, HR, commercial and consumer banking experience.
  • Kate Burleigh – Intel Australia Ex-CEO who was Marketing Manager prior to her CEO role.
  • Jason Paris – CEO of Spark Home Mobile and Business who previously held marketing roles at TVNZ and Nokia
  • Gillian Franklin – CEO of Heat Group, who worked in marketing before founding the cosmetic distribution business
  • Mark Lollback – CEO of GroupM, formerly CMO of McDonalds

Further reading

All sectors need to focus on the customer, but banking is one area that has a lot of work to do amid new competition and the need to rebuild trust. Find out more in Banking and the battle for customers.

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