<br><h3> Chapter One </h3> <b>RUN MARKETING LIKE A PROFESSIONAL SERVICE <p> <i>"Gettin' good players is easy. Gettin' 'em to play together is the hard part."</i></b> —Casey Stengel <p> <p> Lauren Flaherty lived among scores of other IBM executives in Darien, Connecticut, and, like them, she had driven herself to Westchester airport hundreds of times. But for the first time in twenty-five years, she was traveling neither on IBM business nor on a family vacation. In fact, she had left her husband and two children at home. After more than two decades at Big Blue, Flaherty had succumbed to a headhunter's call and was seriously considering moving to another company. <p> <p> <b>LAUREN FLAHERTY</b> <p> As IBM vice president of global marketing, Flaherty's name was on several headhunters' lists. She knew both technology and marketing, which in itself is a valuable credential. More intriguingly to CEOs suffering through the burst of the dot-com bubble, she had helped the computer giant through a major transformation in the early 1990s. When CEO Lou Gerstner taught the elephant of a company to dance, she had a major role in the orchestra. Like Gerstner himself, Flaherty is direct, forceful, and stubborn—all of which helped when the chief marketing officer Gerstner installed, Abby Kohnstamm, decided to narrow IBM's roster of ad agencies from more than eighty to one. Under Kohnstamm, Flaherty managed the global brand advertising that resulted, including its iconic "e-business" campaign, and eventually moved through a series of other senior marketing jobs. <p> Flaherty loved IBM and enjoyed her job. But, "When you do what I do for a living," she says, "you're really attracted by the prospect of taking a company with potential to the next level." That prospect put her on a plane to Chicago to meet with another company's chief executive. He had only had the job himself for about a year and still hadn't moved his family to the company's headquarters city. If that gave Flaherty pause, she didn't show it. <p> <p> <b>TURNAROUND CANDIDATE</b> <p> The company itself had recently sold its million-square-foot corporate campus, complete with 2.5 kilometers of walking trails, basketball court, Zen garden, and indoor climbing wall in Toronto's suburbs and moved down Canada's Highway 427 to an industrial park on the outskirts of the city. About seven miles from the airport, the company's new headquarters was a boxy eleven-story building that might have been an IBM warehouse. In fact, the matching building next door was a food warehouse. The company was Nortel and it's a toss-up whether the "potential" Flaherty saw was the product of her optimism or of her supreme confidence. <p> Once a high-tech darling, Nortel had suffered more than most through the bursting of the dot-com bubble and the industry meltdown that followed. Nortel's previous CEO and CFO had been charged with accounting fraud and fired. It had laid off two-thirds of its workforce, paid $2.5 billion to settle a shareowner lawsuit, and seen its market capitalization plummet to one-fiftieth of its peak just six years earlier. The new CEO, a veteran of GE and Motorola, was changing out most of the company's top leadership, and he was looking for a world-class chief marketing officer. <p> Flaherty was intrigued. On the surface, she thought, Nortel and IBM seemed to share many characteristics—both were high-tech companies dominated by (largely male) engineers. Both were iconic companies that "had gone off the tracks and had to be rebuilt." Like IBM in the 1990s, Nortel had brought in an outsider to rebuild it. And, as at IBM, marketing would play a big role. Flaherty was excited at the prospect of applying all the lessons she had learned at IBM, this time in the top marketing job. But first she had a few questions. <p> "What's your marketing budget?" she asked Nortel's CEO. "I don't know," he replied. "I hope you'll tell me." <p> "Well then," she went on, "how many people are in Nortel's marketing organization?" "Wish I knew," he said. "Could be 500. Could be 3,500." Pause. "Still want the job?" <p> Flaherty ultimately took the job and even managed to outlast the average CMO in an industry suffering the equivalent of a nuclear winter. But the financial crisis of 2008 pushed Nortel's board to hunker down in its three most viable business units, eliminating most corporate staff positions, including the chiefs of technology, sales, service, and marketing. Some analysts suspected the move was intended to make it a more attractive acquisition target. In any case, within two months, in early 2009, the company filed for bankruptcy protection. But even though Nortel's transformation was less successful than IBM's, marketing executives can still draw a number of lessons from Flaherty's experience, whether they are joining a new company or have been in the same place for decades. <p> <p> <b>GET IN SYNC WITH THE CEO</b> <p> Chief marketing officers used to promise TV commercials that people would talk about at the country club. In a hypercompetitive world, that's hardly meaningful anymore. Executive recruiter Jane Stevenson has helped some of the nation's leading CEOs find marketing talent. She says, "The biggest complaint CEOs have these days is that marketing isn't practical, isn't focused on relevant business issues—who are our customers, what do they want, how can we get out there first, and how can we differentiate ourselves from the competition." <p> The Association of National Advertisers' Bob Liodice is continually amazed by how many top marketing people "don't know how to link what they do to what their CEOs care about." Unless it's going to cause some kind of consumer backlash, CEOs most definitely <i>don't</i> care about ads and commercials. They care about the sales those ads are supposed to produce. The dullest CEO knows that a brand is more than the company logo, but he or she doesn't really care about the brand as an end in itself. CEOs care about the benefits that are supposed to flow from a strong brand—greater customer loyalty, willingness to pay a premium, getting the benefit of the doubt in tough times, and so forth. <p> As her interview with Nortel's CEO suggested, the company was essentially a blank slate when Flaherty joined. But she made it her business to understand her boss's expectations and to get aligned with them. <p> Nortel's CEO understood that the company couldn't possibly grow again until it won permission to put the past behind it. That's how he and Flaherty defined her job. "The work of the CMO has to align to the CEO's objectives," she says. At first, that attitude created some consternation within the company. After she had been in the job for about four months, people inside the company started asking where Nortel's new ad campaign was. "You can't advertise your way out of this situation," she told them. "You have to show sustained positive results." <p> Flaherty also skipped two other changes new CMOs typically make. Most radically, some change the company's name or at least its logo. Most often, they at least change the ad agency. Flaherty ultimately consolidated the company's advertising at a single agency and she briefly considered the benefits of a name change. But both moves were far down on her list of priorities. Before considering those moves, Flaherty decided to change Nortel's marketing <i>system</i>. That meant answering the very first questions she had asked of her new boss— what's the marketing budget and how many people are in the department? <p> <p> <b>GET THE RIGHT TEAM</b> <p> The answer to the first question—what does Nortel spend on marketing?—should have been fairly straightforward. Every company codes its expenditures by function. Go to the general ledger, look under "marketing expenses," and there's the answer. It turned out that Nortel's marketing expenditures were consistently 50 percent higher than budgeted. It seems that any of Nortel's 30,000 employees could authorize spending on marketing. Working with the purchasing department, Flaherty quickly reduced the approval authority to fifteen people. <p> The answer to the second question proved more slippery. Human Resources said there were 2,200 marketing people on the company's organization charts. Finance said that marketing was paying 2,700 people. And the marketing leaders themselves counted 500 people in their organizations. Flaherty brought in some outside consultants to survey the troops. They came to the conclusion that Nortel had 3,500 marketing people, more than 10 percent of the company's total workforce. <p> Flaherty decided both the consultants and the marketing leaders were right. There <i>should</i> have been only 500 people in marketing, but an additional 3,000 people thought they were marketers. Flaherty took those 3,000 people off her books, sending them back to their original organizations, and turned her attention to the 500 with legitimate business cards. She put the entire marketing department through a skills assessment, which led her to replace virtually all her direct reports. "When you're going through a recovery, time is not your friend," she says. "You have to make decisions quickly." Once she had the right people in place, she moved to the development of standardized job descriptions, work processes, and metrics. She partnered with the company's information technology (IT) department to develop an online system for setting goals and tracking results across the entire organization. <p> <p> <b>MEASURE EVERYTHING</b> <p> Flaherty is a big believer in measurement. "You have to measure whatever you can and benchmark against best-in-class operations," she says. But the goal is not to document the past. "It's about the headlights, not the taillights," she says. "You've got to measure real time, looking at the future, not historical data." Nortel now uses market tests and real-time analytics to measure everything from customer satisfaction to global communications capabilities. <p> Unlike in finance, where both the <i>R</i> and the <i>I</i> of return-on-investment calculations are measured in dollars, the "return" on marketing investments is a mix of qualitative and quantitative measures that vary by industry and company. Highly differentiated consumer goods tend to use awareness and image-related forms of measurement, in addition to market share. Capital goods with long purchase cycles rely more on measures of lead generation and customer lifetime value. The key is to identify the few key measures that truly drive the business and to get the whole senior executive team to buy into them. Then make sure that all the I is pointed in the right direction and has sufficient critical mass to make a difference where it matters—in the marketplace. <p> <p> <b>MAKE A DIFFERENCE</b> <p> In fact, Flaherty launched her first marketing campaign for Nortel in just four cities within each of the company's sales regions—Chicago, London, Mexico City, and Singapore. Flaherty explained the unorthodox approach to a marketing trade magazine: <p> When you're at Nortel, and a lot of your competition is bigger and mightier in terms of scale and size and investment, you've got to execute better. When I go into a market I want to go in with full force. I want to go in with my sales team fully enabled, my channel partners fully enabled and engaged, and every cylinder of the marketing engine firing: PR, communications, direct marketing, events, basically a consolidated hit into a focused market. That's just not something that was happening here, and as a result we had a lot of tactics spread very thinly. So up front we did the media relations, the analyst relations, then we started to come in with the sellers and the channel partners to pump the leads and opportunities, then the air cover with the advertising and the events. And what you got was mobilization and momentum, and that's what marketing should be. <p> <p> Greg Welch, who leads the marketing practice at executive recruiter Spencer Stuart, says that having a shared vision with the CEO is necessary but not sufficient for CMOs. "We often find a disconnect within the chief marketing officer's peer relationships," he says. "It's not unusual to find situations where, despite what appears to be an ironclad relationship between the CEO and the CMO, the CMO's peer group is not always as enthusiastic about the CMO's chances of survival." Part of the reason is the job's growing importance and difficulty. "It's no longer simply about driving marketing programs. It's about creating a truly customer-centric mind-set across the enterprise," Welch says. "And the data suggest that fewer and fewer CMOs have been able to drive such a massive shift in thinking. Today's top performers must have an extremely strong grasp of adjacent functions like IT, finance, and customer service, not to mention sales and supply-side management." The masters of marketing understand business goals from the perspective of a general manager. They can interpret those goals into marketing programs that deliver results. And they can win the support of their colleagues on the executive team. <p> <p> <b>PARTNER INTERNALLY</b> <p> One of the reasons so many marketers feel like their company's Rodney Dangerfield is because they sometimes act as if they have a higher calling than the drones in sales, finance, or operations. They think of themselves as "creative" people and wear their innumeracy like a badge of honor. The most significant contact they have with other organizations is to argue about the marketing budget. <p> The problem is not limited to companies or industries where marketing doesn't have much of a track record. Marketers face a different, but equally difficult, challenge even where they appear to rule the roost. Booz Allen Hamilton's Ed Landry quotes the vice president of marketing at a consumer packaged-goods company: "Everybody thinks they are a marketer, and therefore they value the function less." <p> Whether companies market to consumers or to businesses, practically anybody feels perfectly free to criticize or meddle with a marketing program in a way they would never attempt with the latest IT or human resources initiative. The engineers won't hesitate to tell you that your ads seem to be written for twelve-year-olds. The sales department thinks the ads would be even better if they focused on the particular deal they're trying to close. The "bean counters" see the marketing budget as a large pool of discretionary expenses with an uncertain tie to revenue. <p> At many companies, marketing is not only disconnected from functions like finance and sales, it's in an adversarial position. When growth is anemic, the marketing and sales departments point fingers at each other. When earnings are sinking, marketing and finance battle over budgets. <p> Ironically, in today's hypercompetitive world, nearly everyone agrees marketing has never been more important. Booz Allen Hamilton's Landry has surveyed senior executives on both sides of the divide. "Across the nine industries we studied," he says, "a surprisingly high percentage of respondents said marketing's most important contributions are in areas such as driving innovation and encouraging cross-functional collaboration." It seems that marketers are pushing through an open door. They just need to reach out and form strong partnerships with these departments—listening to them, educating them, and finding ways to accommodate their needs and goals. <p> <p> <b>MARKETING AND OPERATIONS</b> <p> At IBM, Flaherty had learned how much other departments tend to dislike the marketing organization. Operating units especially resent the "tax" they pay to fund corporate marketing. They covet its advertising budgets, and wish they could redirect it to their own goals. The problem was even worse at Nortel. "When I got here most of the executive team told me they weren't really sure what the role of corporate marketing was in Nortel," she says. "Corporate marketing was pretty disconnected from what mattered to Nortel's business and regional sales leaders." <p> In fact, when she arrived at Nortel, the marketing people in the business units didn't report to her and the marketing leaders in the regions, who did report to her, didn't have marketing backgrounds— they were PR people focused on generic, "big picture" issues. "That wasn't too surprising," she says, "given that the CMO role was considered a 'corporate staff' position." <p> <i>(Continues...)</i> <p> <!-- copyright notice --> <br></pre> <blockquote><hr noshade size='1'><font size='-2'> Excerpted from <b>SECRETS OF THE MARKETING MASTERS</b> by <b>DICK MARTIN</b> Copyright © 2009 by Dick Martin. Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.<br>Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.