Marketing in a Silo World: The New CMO Challenge

Problems Driven by a Silo Structure

A silo is defined as a tall, self-contained cylinder usually sealed and used to store
commodities. Farmers use silos to store grains after a harvest. It is also a metaphor for
organizational units that have their own management team and lack the motivation or desire to
work with or even communicate with other organizational units.

1. Marketing Resources are Misallocated

The silo structure nearly always leads to the misallocation of resources across product and
country silo units, functional teams, brands, and marketing programs. Correcting
misallocation is the first priority.

Product and Country Silos

Silo teams are organizationally and psychologically unable to make cross-silo judgments.
Further, such judgments require a hard-nosed analysis of the potential of the business using
cross-silo data plus specialized fi·ameworks 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 appear to be able to pay their own way. Smaller silos may be superior
investments of marketing resources but tend to be underfunded to the strategic detriment of the
organization.

The Brand Portfolio is not Prioritized

Without the discipline of a process managed by a central marketing group, product silos (and
sometimes country silos as well) will tend to attach a new brand to new offerings. With the silos
in charge, it is unrealistic to expect any discipline that would curb brand proliferation and
encourage a small set of master brands. The result is a dispersion of marketing budgets, an
absence of priorities; and an accompanying dilution of marketing impact.

Marketing Programs
With silo autonomy there is also an inability to look closely at the actual and potential returns of
the marketing programs. Even strong silos may waste marketing resources if they have weak
marketing programs. Without a marketing effectiveness measurement system and a common
database, organized by the central marketing team and applied across silos, the allocation is
likely to go to marketing programs that will have inferior returns.

2. Silo-Spanning Brands Lack Clarity and Linkage

Too often, a master brand (perhaps even the corporate brand) is shared by silo groups. Each silo
is motivated to maximize 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 organization that the brand
stands for something. Therefore, it is worthwhile to have discipline in being true to that
message.

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3. Silo-Spanning Offerings and Programs are Inhibited or Missed
An organization with many product and country silos should have a huge advantage because of
the potential synergies available by creating cross-silo offerings or by developing marketing
programs that are shared by multiple silos. Sadly, when the silo barriers are in place, it becomes
difficult to realize these synergies.

Marketing Programs Shared by Silos

In to day's fragmented media environment, many of the marketing program options for building
brands or a customer base are infeasible and many of the rest 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. Programs such as 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 program such as that of
Starwood or Hilton becomes more efficient when it is spread over a half-dozen or more chains
than when only 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,
they are swimming upstream by clinging to a silo world.

Cross-Silo Offerings
Silo barriers can seriously inhibit the development of cross-silo offerings in part because the
cross-silo collaboration needed to execute may not be in the DNA of the silos and in part
because autonomous silo units tend to look at the market with a narrow perspective and can
often miss changes in the market-place that are making their siloed offering less relevant. Yet
many customers are drawn to silo-spanning products or services. Wal-Mart, for example, wants
to do business with P&G and not with dozens of product divisions. Customers can be frustrated
because they are looking for systems solutions and service back-up that span product silos. The
movement from products to systems solutions has become a tidal wave and requires cross-silo
offerings. Global customers are increasingly demanding global services and offerings. Citibank,
for example, wants suppliers that can interact and deliver globally to reduce the inefficiencies
that are associated with a country-by-country offering.

4. Marketing Management Competences are Weakened

The quality of marketing talent, specialized support, and management sophistication tends to be
dispersed and weak when silos are ru1ming their business autonomously.

Today marketing needs to draw on specialized skills in multiple areas such as digital marketing,
CRM programs, marketing effectiveness modeling, 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 opportunities for career opportunities and specialty growth. At Dell
Services, one of two major reasons that global marketing was centralized was to create a
stronger, more professional marketing team that would operate without redundancy.

Silos operating autonomously are often lacking in not only functional expertise, but also
planning process sophistication and seasoned advice. Too often, silos are vulnerable to
management mediocrity or worse. Rather than having an advantage for being a part of a multi-
business firm, the businesses will more likely be at a disadvantage competing with other firms
that are capturing firm-wide management capability. A central marketing unit can help by
creating a common marketing planning process by which all business units will be not only on
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 the same page, but will be required to impose professional judgments about the markets, the
strategic options, and the supporting programs. Central marketing can also provide guidance for
both strategy and tactics and, particularly, how these can be linked to other silos, generating
synergy for all.

5. Cross-Silo Communication and Cooperation is Weak or Non-Existent

The lack of communication and cooperation between silos is a basic problem that can directly
affect organizational performance. When insights into customers, marketing trends, channels, or
technologies that could affect strategy are not shared, an opportunity may be lost. When
cooperation is not considered or is difficult to implement, successful synergistic programs are
unlikely to emerge. Further, communication and cooperation failures are an underlying cause of
many of the other silo-driven problems. Fixing them requires not only using methods and
processes, but changing the culture that inhibits communication and cooperation.

There seems little doubt that the absence of cross-silo communication and cooperation at Sony
had affected its performance. When Howard Stringer became CEO in 2005 the silo problem was
a baJTier to the strategy of connecting TVs, music players, PlayStations, and Sony's download
network. Sony was described as being "dysfunctional with divisions guarded their teJTitory so
fiercely that mangers working for one division wouldn't return phone class from their
counterparts in other divisions." One of Stringer's priorities was to change the culture and
processes.

What C:<t.:n CMOs (Chief Marketing Officers) Do?

1. Realize: 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 organization. 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 programs, have
had a major impact on the strategy and culture of the organization in many firms. It is not
necessary to be in control of budgets and programs in order to effect change and results. Fmiher,
pursuing these roles can lead to building credibility and relationships that will be key to the
establishment of more influential roles.

2. Get CEO/Organizational Support

To make progress, the CMO team needs credibility and buy-in. It is impmiant 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, efficiency and cost objectives instead of marketing synergy or scale,
and building assets to support strategic initiatives instead of brand image campaigns. The
objective is to reframe marketing as strategic and as a driver of the business strategy, instead of
being a tactical management function. The goal is to avoid having the CMO be positioned as
another functional area advocate (every slot needs more resources). Another route is to use hard
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numbers in showing the relationship between marketing and financial performance. When CMO
teams can demonstrate an ROI (or its absence), their stature will be enhanced and their image of
being soft and non-analytical will at least be reduced. In this era of financial accountability, the
C-suite team is often uncomfortable when performance is not measured.
Credibility also comes from customer knowledge- in fact, it is the ultimate source of influence.
The "customer is telling us that..." is a powerful and hard to refute argument. When the CMO
team has a better grasp of the customer than the silos, or at least has the same level of customer
understanding, the discussions can proceed without the "you don't understand this market"
overlay. Having first-hand lmowledge of a segmentation study, ethnographic research,
satisfaction research, or tracking data will create credibility. If the CMO inputs are based on the
emergence of a new segment, a new application, a systematic dissatisfaction with the product, or
a declining brand, they will be hard to ignore.

3. Use Cross-Silo Organizational Devices such as Teams and Networks

The CMO should look toward employing some of the available organizational tools that will
advance cross-silo communication. Teams-such as HP's Customer Experience Council, Dow
Corning's Global Marketing Excellence Council, IBM's Global Marketing Board, or P&G's
Global Marketing Officer's Leadership team-are powerful vehicles to create consistency and/or
synergy. The issue is not whether to use teams but how to make them effective. Fortunately,
there has been considerable research on what makes teams perform effectively. The problem is
to translate that lmowledge for the executives who charge, lead, or participate in teams. It is
clear that to succeed, 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 organizational tool, can be based on topics such as
customer groups, market trends, customer experience contexts, geographies, or functional areas
(such as sponsorship or digital marketing). Nestle, for example, has developed information
networks around global customers such as Tesco and Wal-Mart and silo-spanning interest areas
such as the Hispanic market and moms-and-kids. The network members are motivated to keep
in contact with counterparts in other countries by the relevance of the topics. A formal network
will have assigned membership, a leadership structure, and a supporting infrastructure (such as
knowledge banks).

4. Install a Common Marketing Planning Process and Information System

A standardized brand and/or marketing program, 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.

Source: "Marketing in a Silo World: The New CMO Challenge" by David A. Aaker (California
Management Review, 2008).