Spanning silos: a marketing imperative

Virtually all organisations from IBM to HP to Unilever to CitiGroup, are collections of silos – organisational units that have their own management team. Product silos, are business units defined by product or service offerings and country silos, are geographic silos defined by countries or regions. In addition, there are functional marketing and communication silos striving, often in vain, to achieve integrated marketing communication.

Most organisations are proud of their decentralised product and country structure, and with good reason. Decentralisation potentially involves management teams that are intimate with customers and markets, conversant with products and applications, close to competitor strategies, accountable for results, and empowered to act quickly. Strategy can be delegated to contexts that are relatively simple and narrow in scope.

However, especially in periods of financial stress, relying on an unfettered decentralised organisation with highly autonomous silo units, even with all its attributes, is no longer competitively feasible. Success and sometimes even survival requires addressing the silo-driven problems. There is a need to replace isolation and suspicion with communication and cooperation.

One question is, why? What is the payoff for the organisational stress that will ensue? Another is how? If it were easy, it would already have been done.

This article is based on a longer piece 'Marketing in a silo world – the new CMO challenge', published in the California Management Review, Fall 2008. Both are drawn from the book Spanning Silos: The New CMO Imperative published by Harvard Business School Press, 2008.

SIX DEBILITATING PROBLEMS DRIVEN BY A SILO STRUCTURE

In order to identify silo issues and solutions, over 40 people in CMO or comparable positions were asked to describe silo-created problems and what approaches work to alleviate those problems.

The research identified at least half a dozen specific problems or missed opportunities that are created or worsened by the silo structure. Individually and collectively they provide a rationale for harnessing the silo energy so that both business and marketing strategies can emerge and succeed. It is important to understand these problems, not only to motivate change but to provide a change target.

Marketing Resources are Misallocated

Silo teams are organisationally and psychologically unable to make good cross-silo resource allocation judgements. Such judgements require a hard-nosed analysis of the potential of the business of silo units using cross-silo data plus specialised frameworks and methods that will seldom be developed outside of a central marketing unit.

Without centrally driven discipline, allocation is usually made by political forces with each silo telling the best story imaginable in order to retain its own cash flow and earn its share of new investments. As a result the largest and most established silos usually receive the bulk of the resources because they can pay their own way and painful investments of corporate resources do not appear to be needed. Smaller but strategically important and/or growing silos or even product-markets on the drawing board may be superior recipients of marketing resources but tend to be underfunded, to the strategic detriment of the organisation. And white space between silos does not get accessed at all.

Silo-Spanning Brands Lack Clarity and Linkage

Too often a master brand, perhaps even the corporate brand, is shared by many, sometimes all, silo groups. Each silo is motivated to maximise the power of the brand without any concern for the brand's role in other business units. Especially when there is overlap in markets, inconsistent product and positioning strategies can damage the brand and result in debilitating marketplace confusion. Having a mixed brand message also makes it hard to convince the organisation that the brand stands for something and it is worthwhile to have discipline in being true to that message.

Silo-spanning programmes are inhibited

Many potentially effective marketing programmes are not cost-effective for a silo business that lacks the necessary economies of scale. When silo business units are aggregated across products or countries, the economics change. Programmes like the World Cup sponsorship, the cost of which can be spread across countries and/or products, become feasible. Others simply become more efficient and effective. A hotel loyalty programme like that of Starwood or Hilton becomes more efficient when it is spread over half a dozen or more chains than when one must cover the cost. Further, it is more effective because the value proposition for the customer is enhanced. When competitors are exploiting scale economies, you are swimming upstream by clinging to a silo world.

Cross-Silo Offerings are Mishandled

Silo barriers can seriously inhibit the development of cross-silo offerings. That was certainly the case at Sony in 2005 when Howard Stringer as a new CEO attempted to implement a strategy of connecting TVs, music players, PlayStations, and Sony's download network. Sony was described as being 'dys-functional with divisions guarding their territory so fiercely that managers working for one division wouldn't return phone calls from their counterparts in other divisions.' Customers are looking for silo-spanning offerings. Wal-Mart wants to do business with P&G and not with dozens of product divisions. Citibank wants suppliers that interact globally, to avoid country-by-country relationships.

Management Competences are Weakened

Today marketing needs to draw on specialised skills in multiple areas such as digital marketing, CRM programmes, marketing effectiveness modelling, social technology, blog management, sponsorship management, PR in an internet world, and on and on. Further, all of this needs more than ever to be integrated and guided by brand and marketing strategies. It simply does not make sense for a silo group to attempt to create these kinds of assets and skills; in fact, it usually is not feasible because the silos lack scale. Further, redundant marketing staff results in costly inefficiencies and limits career opportunities and speciality growth. At Dell Services, one of two major reasons that global marketing was centralised was to create a stronger, more professional marketing team that would operate without redundancy.

Success is Not Leveraged Across Silos

With a multi-silo organisation, pockets of brilliance may result but they will tend to be isolated and rarely leveraged. It is not enough to have a success here and there. Maybe and occasionally are not good enough. The key to moving from good to great is to develop an organisation that will identify marketing excellence within the silos and be nimble enough to leverage that excellence.

Excellence can take many forms. It can be offerings that work. The Dockers clothing line, which became a huge success for Levi's, for example, originated in South America. The innovations at Dryers Ice Cream, such as DIBS (bite-size chocolate-covered ice cream) were rolled out into other countries by Nestlé's central ice cream global marketing group. It could be best practices involving positioning, advertising, promotion or sponsorships. Pantene's position around the tagline 'Hair so healthy it shines' was developed in Taiwan. In any case, market experience that helps one silo and fails to be leveraged is a missed opportunity.

ENTER THE CMO

Recognising that autonomous silo organisations are no longer a viable option, there are a host of firms that are developing, expanding or energising the corporate CMO position, and creating or enhancing the supporting central marketing group. The task is not easy for sure. Efforts by a CMO and his or her team to gain credibility, traction and influence represent a formidable task in the face of silo indifference or, more likely, resistance. Succeeding and even surviving in this effort is at best uncertain. As result CMOs last only a few years; in one study the tenure of CMOs was found to average 23 months. This amazingly short window reflects the difficulties of the new CMO's job even when the assignment is labelled to be a strategic imperative. The CMO faces several barriers.

First, silo managers perceive any move to centralise marketing management to be a threat to them. They resist any effort to restrict their ability to control all the levers around marketing and the brand, believing that their performance, to which they are held accountable, will suffer and that they know the market best. Removing degrees of freedom from the silos is perceived as being not only unwise but also unfair given that it could affect results that determine their compensation, recognition, and career path rests on the performance of their silo operations.

Second, silo managers are not motivated to undertake silo-spanning activity. Their reporting structure and performance evaluation system, both of which are tied to personal advancement and compensation, are silo defined. In most cases, there is simply no incentive for them to collaborate across silos or even to reach out with ideas or information.

Third, the resources, talent, authority, and top management resolve to make the CMO integration task successful is often missing. There is lip service given to silo-spanning brand building but the CMO group is too frequently left without the tools to actually do the job. Ultimately, the CEO has other priorities and is not willing to support a group that, by necessity, has to be organisationally disruptive.

FROM SILOS TO SYNERGY

How can silo barriers to the creation of great marketing and marketing organisations be reduced or eliminated? How can silo power be converted from an inhibitor to an enabler of effective and efficient marketing? Our research reported fully in Spanning Silos suggests a wide variety of paths and tactics. The following represents some of the most effective best practice findings.

Realise That Non-Threatening Roles Can Be Powerful Change Agents

The CMO can take control of elements of strategy and tactics from silos, and that can be the right course in certain circumstances. However, there are other less threatening roles with reduced risk of failure or even flame-out that can have significance influence. In particular, the CMO can assume the role of facilitator, consultant or service provider. In a facilitator role, the CMO team can establish a common planning framework, foster communication, encourage and enable cooperation, create data and knowledge banks, and upgrade the level of marketing talent throughout the organisation. In the consultant role, the CMO would become an invited participant in the silo strategy development process. As a service provider, the silo business units would 'hire' the CMO team to provide marketing services such as marketing research, segmentation studies, training, or marketing activities such as sponsorships or promotions.

These modest roles, by stimulating and enabling communication and synergistic programmes, have had a major impact on strategy, programmes and even on the culture of many firms. It is not necessary to be in control of budgets and programmes in order to effect change and results. Further, pursuing these roles can lead to building credibility and relationships that will be the key to the establishment of more influential roles.

Get CEO/Organisational Support

To make progress, the CMO team needs credibility and buy-in throughout the organisation. A key is to obtain visible CEO support providing authority and resources. One route to getting the CEO on board is to align the role of marketing with that of the CEO's priority agenda. Focus on growth objectives instead of brand extensions; on efficiency and cost objectives instead of marketing synergy or scale; and on building assets to support strategic initiatives instead of brand image campaigns. The objective is to reframe marketing as strategic, a driver of the business strategy, instead of being a tactical management function, and to avoid having the CMO be positioned as another functional area advocate (every slot needs more resources). Another route is to use hard numbers in showing the relationship between marketing and financial performance. When the CMO teams can demonstrate an ROI or its absence, their stature will be enhanced, and their image of being soft and unanalytical will at least be reduced.

Use Cross-Silo Organisational Devices Like Teams and Networks

The CMO should look toward, employing some of the available organisational devices, such as HP's Customer Experience Council, DowCorning's Global Marketing Excellence Council, IBM's Global Marketing Board or P&G's Global Marketing Officer's Leadership team. These are powerful vehicles to create consistency and/or synergy. Perhaps more important, teams also provide vehicle for cross-silo communication and relationships to develop.

The issue is not whether to use teams but how to make them effective. To succeed, research has shown that the team needs to have members with good group skills as well as the right expertise, leaders that can deal with multiple cultures, and clarity of mission. P&G, with a lot of experience in cross-silo teams, engages in the 'relentless pursuit of clarity' so that there is no ambiguity about the team task.

Formal and informal networks, another key organisational tool, can be based on topics such as customer groups, market trends, customer experience contexts, geographies, or functional areas like sponsorship or digital marketing. Nestlé, for example, has developed information networks around global customers such as Tesco or Wal-Mart, and silo-spanning interest areas such as the Hispanic market and 'mom and kids'.

Install a Common Marketing Planning Process and Information System

A standardised prescriptive brand and/or marketing programme – one that is virtually the same across country or product silos – is rarely optimal. What is optimal is to have both a planning process, including templates and frameworks, and a supporting information system that are the same everywhere.

Having a common planning process provides the basis for communication by creating a common vocabulary, measures, information and decision structures. It also leads to a minimal level of professionalism throughout the silo units.

Unless there is a clear, accepted planning process with understandable and actionable components, every unit will go its own way and, inevitably, some will as a result be mismanaged, strategically and tactically.

Adapt Brands to Silo Contexts

To avoid having a brand that spans silos becoming confused and inconsistent, a best practice organisation will have brands that are adapted to silo contexts while still maintaining the consistency of the brand character. ChevronTexaco, for example, has a core brand identity that consists of four values-clean, safe, reliable, quality. The silo markets are free to interpret the core elements in their marketplace. So what is quality in the context of a convenience store? Or in a lube business? Or in Asia? In addition, the silo business units have the flexibility to add one additional element to the four-element core identity. The lube business could add 'performance' and the Asian group 'respectfully helpful'. The result is more ability to link with the silo customer.

CONCLUSION

The all too common instinct of forcing centralisation and standardisation on the organisation can be dysfunctional, even resulting in a flame-out of the CMO team.

The objective, rather, should be to address silo-driven problems to enhance cooperation and communication among silos.

This will lead to stronger offerings and brands, and more synergistic marketing strategies and programmes. The result can be an organisation that retains much of the decentralised structure that has served it well, but with silo units that work as team members.