GetOut of Silos
May
4
Written by:
5/4/2009 4:09 PM
To succeed in today’s global arena, marketers must learn to appeal to consumers whose interests transcend individual products and regions.
Successful marketing in an era of globalization and the corresponding rise of large, multinational and multiproduct corporations requires that chief marketing officers become more strategic, more connected to overall business strategy, as opposed to being tactical—the guy who merely generates sales leads or creates advertising or builds Web sites. As soon as you become strategic, you can start tearing down silos.
While decentralization made it feasible to manage larger organizations, these autonomous silos aren’t working anymore. Brands, customers, and media are spanning products and countries now. Decentralized silos don’t talk to one another because they have no incentive to talk to one another. And they foster a culture in which the incentive is to maximize the performance of the silo rather than that of the organization.
Companies can improve their marketing efforts by making sure the firm has the capability to develop and implement marketing programs that will scale. Second, develop an objective resource allocation process that has the power to fund the products, countries, and programs that have merit and defund those that don’t. Third, find ways to create silo-spanning offerings that are desirable to customers who respond to silo-spanning brands, not individual products. Finally, create a brand management system that ensures brands offer a coherent, consistent vision while still being adaptable enough to support the business strategies of individual silos.
In the consumer packaged goods industry, resource allocation has been a big problem. A key to the turnaround at Procter & Gamble Company was the ability for company executives to focus resources on the businesses of the future and the really large brands, rather than frittering away resources on small brands.
Many high-tech electronics companies, on the other hand, continue to be bound by their product silos, and struggle to move toward the kinds of silo-spanning, integrated systems solutions customers are looking for. When Louis Gerstner arrived at IBM in the early 1990s, he found an entirely product-driven silo culture. It had gotten so bad that executives were considering breaking the company up into seven separate firms. So Gerstner did some dramatic things. He changed the central marketing budget from 10 percent to 50 percent of the total marketing budget. He slashed 70 ad agencies down to one. He started to measure how collaborative the people in the organization were. He changed compensation so that it was driven by employees’ contribution to the company as whole, rather than to the individual silo. And he got rid of people who couldn’t adjust.
But most importantly he changed the organization from being product-oriented to being customer-oriented. Salespeople had always had the budget to talk about their newest devices. But their customers weren’t interested in buying devices, their customers wanted integrated systems solutions. It was a huge disconnect. But after the changes, teams of marketers and sales people started selling all of IBM into a particular customer sector — the service sector, for instance, or government — wherever they were located. All these moves were dramatic and culture-changing.