REPRINT - Global CMO™The Magazine - www.theglobalcmo.com April 2013 | 1Implement Or DieAndrew Vesey ggmnThe Chairman’s ReportIan Derbyshire fgmnThree RequirementsFor CMO LongevityLaura PattersonIssue 2 | Volume 1April 2013 - REPRINTMarkus Pfeiffer:Are You ReadyFor A Digital-FirstFuture?50 Marketing LeadersOver 50Alan SeeTrend Report:Clean Slate Brandstrendwatching.comGlobal CMO™is the Official Magazine of Global Marketing Network, theGlobal Body for Marketing Professionals. www.theglobalcmo.comMeet GMN’s‘Digital Doctor’
42 | April 2013 REPRINT - Global CMO™The Magazine - www.theglobalcmo.com Are You Ready For A Digital-First Future?How To Make Customer Agility A Key Success Driver For Your OrganisationMarkus Pfeiffer fgmn & Vincent AydinIs your organisation experiencing the impact of increasingdigitisation? Most likely. Have you noticed your competitorsemploying digital tools to communicate with theircustomers and market their products? Probably. Have youthought you have to tag along and also “go digital”? Doesyour company have a Facebook and Google+ profile, aTwitter and Instagram account and maybe even a YouTubechannel? Sure thing, you’re mastering the digital world. Thetruth is – you still have a long way to go.Employing digital tools as a form of marketing and brandpresentation is just the initial stage on the path to DigitalReadiness, the starting point where most CMOs andtheir co-executives are stuck not utilizing digitisation’sfull enabling power. Many executives fail to understandthat there is much more Digital has to offer beyond justpresenting your brand to customers in a unilateral fashion.This article will familiarize you with the importance ofbecoming digitally ready – as it is essential for developing
REPRINT - Global CMO™The Magazine - www.theglobalcmo.com April 2013 | 43Customer Agility, which constitutes the pinnacle offully utilizing digitisation’s enabling power, offering bothbenefits for your customers and satisfying your businessgoals supported by an organisational strategy. It’s thenew battleground for success in the fight for customer’sattention, their satisfaction and ultimately loyalty.Digital Readiness:The StudyIn order to explore the background behind the vastdifferences that still exist among organisations regardingtheir utilization of Digital, Bloom Partners conducted abreakthrough study in 2012 to evaluate Digital Readinessacross leading brands in Germany. Our goal was toanalyse the underlying organisational drivers and successfactors that allow some firms to better take advantage ofdigitisation and reap its benefits than others. We employeda hybrid study approach, consisting of qualitative interviewswith C-level executives from blue chip brands operating inthe German speaking markets that were validated throughquantitative questionnaires entailing more than 300 upperand middle managers from a total of eight industriesincluding FMCG, Telco, Automotive, Banking & Insurance,Retail, Healthcare, Travel and Energy allowing us to drawcross-industry conclusions.Our findings support our initial notion: There is still muchconfusion and insecurity regarding how to trim and prepareone’s organisation for the increasing digitisation, steer ittowards Digital Readiness and create value for customerswhile building on one’s business goals. More than halfof all participants can identify barriers to successfullyundergoing digital change – however those listed soundmore like excuses than true roadblocks hindering managersto get their organisations fit for the digital world. Or wouldyou consider “technology and security issues” as the realreason why many organisations are not yet making full useof digitisation’s opportunities?The items we used in interviewing participants revolvedaround three major organisational drivers that can lead afirm to achieve Digital Readiness and eventually let it profitfrom higher firm performance. Across the board DigitalLeaders manage to outperform Followers and Laggards onevery major KPI – ranging from market share to profitabilityto customer satisfaction. Regarding the latter category,90% of Leaders state their customers are more satisfiedand loyal to them than to their strongest competitor. Thesame is only true for 40% of the Digital Laggards.Top Management As A Key Driver ForDigital ReadinessFirst, we found that strong top management advocacyis needed to kick-start an organisation’s transformationtowards digital change – it explains 88% of organisations’adoption of “Digital” by their Marketing departments.Often times the real reason behind the gap in attemptingto adopt Digital is a lack of commitment but also a lack ofknow-how on top management level to actually drive thetransformation that is needed. From the examples we haveseen we believe that full top management commitment
44 | April 2013 REPRINT - Global CMO™The Magazine - www.theglobalcmo.com to digitisation would entail assigning a designated role ofChief Digital Officer (CDO), which combines knowledge andexpertise from both fields of the Chief Technology Officer’sand the Chief Marketing Officer’s responsibilities. The CDO,running his own cross-functional group of experts, canbecome a key driver for identifying digital opportunities formarketing but more so innovative new business modelsthat create real value added for customers.With top management’s support backing it up, theorganisation will then be more open to adopt digital toolsand processes and their implementation across the entirevalue chain. Top management needs to put a digitalstrategy on the top of its agenda and build the know-howand awareness for the related challenges in the boardrooms. The first challenge lies within acquiring necessaryknowledge and expertise around digital topics. But: youwon’t be able to acquire that externally by hiring toptalent from the pool of digital natives if you aren’t digitallyready yourself. These potential employees tend to flock tocompanies that match their digital enthusiasm and skills:Our research shows that 81% of Leaders find it easy toattract and retain qualified human resources, while only24% of Laggards can say the same.Although Digital Laggards are the ones that most badly needtop management to step up, kick off and advocate DigitalReadiness, only 28% of them state that digital topics areregularly part of their management agenda. By contrast 98%of Leaders make these topics a recurring theme on theiragendas. Their differences regarding top management’sreadiness to tackle the subject become even more evidentwhen analysing its know-how of digital topics: 98% ofLeaders compared to a mere 15% of Laggards claim theirtop management can draw on valuable know-how regardingDigital. Without top management support, Digital remainscommunication 2.0 sitting in the marketing departmentonly – instead of being a central driver for growth.Most importantly top management needs to radiate andinstil this digital spirit into their organisations, act asrole models, give guidance for change and foster theimplementation of digital tools and processes. That wayemployees sense the true importance of the topic, feelmotivated to tag along and feed back into an organisationalculture fostering digital change.Building on this, we define Digital Readiness as the extentto which an organisation combines top management’sawareness for digital topics with the adoption of digitalmarketing tools and processes which are effectively usedto increase customer agility and drive digital change acrossthe entire value chain.Exhibit 1: Stages of Digital Media utilization
REPRINT - Global CMO™The Magazine - www.theglobalcmo.com April 2013 | 45Increase Your Customer AgilitySecondly, our research suggests that Digital Readinessin marketing is a major driver for a key competence wecall Customer Agility. This potential, however, can only beleveraged when your marketing and sales departmentshave significantly altered their processes to make fulluse of the information from and about customers thatis gathered through digital channels like the Web andespecially social media interaction. Unless marketing andsales departments are able to translate the informationthey gather from customer interaction into relevant insightsfor product and service development, digital communicationstays on the campaign level.Therefore, marketing and sales both need to be awareof the impact that digitisation will have on their own andthe organisation’s operations and thereby influence largeparts of their business. We have learned that 92% ofDigital Leaders state that digitisation has already alteredtheir processes substantially compared to only 31% ofDigital Laggards. This is much more than using the digitalchannels “just” for communication and campaigns.Amazon for example devotes great attention to carefullymonitoring users’ shopping patterns and usage behaviourand subsequently analysing and evaluating gathereddata. Moreover, in an almost start-up like fashion, isAmazon not afraid to trial a variety of new products andservices which application by customers the company thenspecifically examines. Employing these efforts to attain adeep understanding and sense what their customers longfor allows Amazon to respond with relevant products andservices supporting the optimization of its entire valuechain – from category management to payment to logistics.From Communication 2.0 To NewDigital-Enabled Business ModelsOverall, we see three stages of development in this context(see exhibit 1). A first sample of companies is still usingdigital as a playing field, trying different approaches withouthaving a clear perspective on the ROI of different activities.They apply the most well-known digital tools “becauseeverybody is using them” and run Digital for its own sake.Companies in the second stage utilize Digital with a clearROI in mind. This means being able to differentiate betweendigital strategies that entail a positive payoff in form ofbrand awareness, sales or new customers and strategiesthat simply create fans or awareness that does not translateinto brand equity, thereby drain marketing resources anddo not exhibit attractive organisational benefits. Finally, atthe prime stage of development regarding the utilization ofdigital strategies, organisations are able to take advantageof digital media as an enabler for new business models.These firms understand the potential that lies within theconnecting power of digital tools and support their activitieswith a concise content strategy clearly defining how digitalopportunities are utilized in order to benefit both customersand the top line of the company likewise.In order to achieve this level of development marketingdepartments need to understand that having dedicatedExhibit 2: Application of digital strategies
46 | April 2013 REPRINT - Global CMO™The Magazine - www.theglobalcmo.com strategies for their website, social media, mobile or brand-building is not enough. Only if marketing can support thewhole organisation in better sensing of customer needsand actually use the information gathered to improve theirproducts and services, the investments will pay off. Thislevel of value creation uses co-creation and customisationtools as a highly efficient way to create valuable and lastingconversations with customers. Our study has shown thatmost organisations have strategies to define what theywant to achieve with their website or social media. However,what really differentiates Digital Leaders is the way theyuse co-creation and customisation tools (from online-votingto crowdsourced innovation) to really alter their existingproducts and services (see exhibit 2).Defining Your Digital StrategySo what are the success factors that Digital Leaders seemto have a better grasp on than firms trailing in DigitalReadiness? What makes these Leaders fitter for utilizingDigital to develop Customer Agility?As a guideline for developing a successful digital strategy,you need to think in terms of three dimensions thatneed to be aligned to successfully act in concert. Firstallow yourself to think of your own business goals andhow a digital strategy is supposed to go about achievingthose. Do you want to win new customers? Do you wantto increase loyalty of your existing customers? Or do youwant to increase cross- or up-selling opportunities amongexisting customers?Secondly, you need to create clarity about how you canactually create benefits for your customers through digitaltools. Think about the scope of potential benefits that adigital strategy can offer your customers. Do they want tobe rewarded or enticed through motivating features? Dothey want to engage through social interaction or can youprovide them with a positive feeling about playing on andstrengthening their identity? Ultimately you need to supportthe match of both spheres, your business goals togetherwith benefits for your customers, with an appropriatecontent strategy. Decide whether the best way to achievesuccess in both areas is by employing a strategy that isrevolving closely around your core product or whether itmakes sense to develop ideas that drift away from your corebusiness, go beyond and open up entirely new possibilitiesand business opportunities. Each matchup of businessgoal, customer benefit and appropriate content strategycan then be supported through digital opportunities, whichare defined by relevant channels as well as accordingactivities.Look at Nike for example and its well-known Nike+ scheme.Nike’s real achievement with the Nike+ iPod is using socialnetworks’ connective and interactive power as a basis forsetting up a new business model entailing an entirely newand overarching ecosystem of complimentary products.The hardware consisting of a chip built into your runningshoes (Nike or any other shoe brand) would transmit yourworkout data to your smartphone and subsequently enableyou to share your daily workout log and achievements withan online community of fellow runners. The communitywould then give each other feedback on their respectiveperformance and motivate each other to achieve theirfitness goals. This is the perfect example of setting up awhole new business model mounted on social media –selling running shoes and complimentary hardware thatallows for and invites social interaction with fellow runnersfrom the digital community. Its success speaks for itself –runners in the community that were using the Nike+ chipwith non-Nike sneakers are 40% more likely to switch toNike running shoes upon their next sneaker purchase.This example clearly articulates the difference betweenExhibit 3: Nike+ ecosystem | Sources: www.stadt-bremerhaven.de www.wired.com
REPRINT - Global CMO™The Magazine - www.theglobalcmo.com April 2013 | 47utilizing digital channels for their own sake, like settingup a Facebook fan-page vs. creating entirely new revenuestreams that utilize the power of social media only as anenabler.Therefore, it is critical to make yourself aware of themultidimensional nature of digital strategies. Throughdigitisation you are much closer to and better connectedwith your customers allowing you to involve them much morein your development processes. Integrate and motivate yourcustomers to create ideas, innovations and products jointly– together with you and their fellow communities! A greatexample are the crowdsourcing activities employed by CotyInc., a New York based fragrance and cosmetics firm. Inshort Coty in Europe applied the crowdsourcing concept byusing the power of the crowd to develop innovations. Thiswas achieved by letting customers, mostly female fashion,beauty and lifestyle aficionados, decide for themselveswhat nail polish colours and designs they would like to seedeveloped and introduced to the market next season. Thiswas done based on a special software package provided byInnosabi in Germany that lets companies create Facebook-based product development environments in an utmost easyand reliable way. Select participants of Coty’s contest wouldalso receive their very own nail polish creation kit whichallowed them to mix colours, invent new designs and finallyproduce their very own customized nail polish at home. Thefinished and final colour design would then be submittedinto a design contest and published on Coty’s homepagewhere users could vote for their favourite designs that theywould like to see mass produced next season.Within 14 days more than 800 colour designs werecreated, more than 5000 comments were posted on theevent homepage, more than 10,000 ratings submitted and20 “winning” colours selected for final production. Thisco-creation strategy achieved three tasks: On a businessgoal side, Coty was provided with a massive amount ofideas coming straight from existing and new customers –allowing the firm to win future customers, create upsellingopportunities for their existing ones and likely even promotetheir loyalty. In terms of customer benefits, users couldExhibit 4: Coty nailpolish design contest | Source: www.unseraller.decydonna/photocase.comFind out more at www.digital-readiness.com
48 | April 2013 Exhibit 5: Digital Readiness ModelMarkus Pfeiffer fgmnFounding Partner, Bloom PartnersDr Markus Pfeiffer is the GMN Programme Director of Digital Strategyand Innovation and Founding Partner and CEO of Bloom Partners (aGMN Strategic Partner).Markus brings a combination of strategy and Marketing experience,deep knowledge about research methodologies, and expertise inworking with top-level executives across many industries.Recently, he has led major growth initiatives for consumer brandswithin the Nestle portfolio, the energy conglomerate EDF, electronicsgiant Philips, and many others. His experience from working for largeorganizations as much as start-ups is vital for the tool developmentand expertise about digital business models at Bloom Partners. Asan angel investor and serial entrepreneur Markus is also involvedwith several startup companies in the social commerce, fashion,telecommunication and media sector.He is a regular invited speaker to industry conferences and a visitingprofessor at the University ofCologne, Germany.He holds a diploma in BusinessAdministration from Munich Schoolof Management, Germany and adoctorate degree from the Center onGlobal Brand Leadership, ColumbiaBusiness School, New York. Hispublication list includes over thirtypapers and books.express their identity through their very own nail polishdesign. They could interact with other users and discuss thelatest trend colours of the upcoming season and obviouslypost their ideas and inventions across their social graph.They would be rewarded for submitting their personalizeddesigns to the event homepage by positive ratings andpotentially become one of the winning designers. The co-creation activity on Facebook allowed the firm to directlyutilize its results by incorporating winning designs into nextseason’s production cycle.The lesson (marketing) executives need to learn is thatDigital Readiness is not an easy task to master, buta highly rewarding one nonetheless. Advocacy fromthe executive level has a huge impact on achieving atransformation towards Digital Readiness. As you willnotice in the following exhibit depicting our study model,Top Management Advocacy is responsible for 88% of thesubsequent adoption of Digital by organisations’ marketingdepartments. Once you have adopted digital tools andprocesses and implemented them into your organisation,the challenge lies within realizing the scope of opportunitiesthat digitisation enables you to take advantage of.Executives need to become channel-agnostic, forget aboutFacebook Pinterest, Instagram etc. for a second andinstead focus on the possibilities you are offered beyondone-way communication, display ads and other campaigns.Simply employing digital marketing tools is not enough, asthis merely drives 25% of firm performance. Instead utilizeDigital to build deep relationships, open and adapt yourprocesses to the new environment and fundamentally buildCustomer Agility. It is by far the most important catalystfor achieving higher firm performance. Utilizing digital toolsadopted by the marketing department to better sense andrespond to ever changing customer needs is the drivingforce behind becoming a Digital Leader, as better CustomerAgility drives 45% of today’s firm performance.Join The Discussion:Do you think most Marketers areDigital Ready?