By Cassandra Mascarenhas
There is now a growing belief that there should be better representation of marketing experts on corporate boards, both in Sri Lanka and globally. To discuss the importance of a marketer’s role at board level, the Sri Lanka Institute of Directors in partnership with the Chartered Institute of Marketers Sri Lanka Region held a power evening titled ‘Driving Marketing in the Boardroom’ earlier this week.
The panel featured Unilever President Amal Cabraal, Sri Lanka Inventors Commission Commissioner Deepal Sooriyarachchi, Bates Strategic Alliance Chairman and CEO Nimal Gunewardena, Aitken Spence Director Rohan Fernando and was moderated by Overseas Realty Ceylon PLC CEO Pravir Samarasingha. Each panellist tackled a different aspect of marketing, together analysing the importance of this role on a board level and how Sri Lanka can get there.
Brands as an essence of business
First up was Unilever President Amal Cabraal who spoke on the importance of marketing in the business, marketing and brands as the essence of business and driving marketing orientation in the business. He started off by pointing out that when one thinks of a successful business, more often than not, there is a popular brand at the very heart of that business.
Considering refreshment as a business, the name Coca-Cola would come up quite quickly. Taking computing into consideration, then Microsoft and Apple will certainly come to mind. Music, an iPod; social networking, Facebook; information, Google or Wikipedia; fast food, McDonalds; luxury hotels, Ritz Carlton; retailing, Walmart and Cabraal, much to the amusement of the audience, added that if its tea, then it’s got to be Lipton.
“Of course, the product or service absolutely matters. Equally superior technology, strong financials, efficient supply chains, motivated people all combine to contribute to the success of a business but all of these latter aspects can be matched, copied and even surpassed. What is rarely done is to match or surpass the uniqueness of one’s brand, provided you have nurtured that brand to be strong,” he pointed out.
Using the example of tablet computing, he noted that the original technology did not come from Apple but Apple has taken this technology to new heights through its sub-brand, the iPad, which is absolutely consumer-centric, customer focused and has got a strong technology behind it. As for the technology format, many other companies have come up with similar products very quickly but they have not been able to significantly dent Apple’s significance, largely because of the strength of the Apple and iPad brands.
|CIM Sri Lanka Region Chairperson Chitrangani Herat Gunaratne (right) and Sri Lanka Institute of Directors President Ronnie Peiris|
Cabraal went on to define a brand as the critical connecting point between a business, its customers and other stakeholders. While a logo or a memorable slogan helps with awareness and familiarity, the brand goes well beyond this; its role and influence are far broader and deeper.
“In a business, the principal custodians of the brands are marketers. It is also marketers who through training are best able to track and translate customer and consumer trends that are the path to future success. As such, in this fiercely competitive world, marketing and brands cannot remain in the periphery of a business. Empirical evidence also proves that those businesses that have consistently put marketing and brands at the core of its operations are more likely to succeed and more likely to sustain that success,” he said.
Moving onto the third point of driving marketing orientation in the business, Cabraal felt that as businesses evolve, the marketing function must also evolve into the strategic agenda of a business.
“It is imperative that CEOs and corporate boards bring the voice of marketing into the boardroom. In other words, boards and CEOs must be discussing what markets to compete in, what segments to target, what entry mode and strategy to adopt, which partners to strategically ally and so on besides of course all of the financials, the supply chain, the people, the agenda and so on but how many full time marketers represent your boards?” he questioned.
Brand equity has never been as important today, Cabraal stated, and powerful brands can virtually emerge overnight and equally, very powerful and strong brands tend to disappear overnight too. He drew upon the examples of Kodak, Xerox, Yahoo and even Nokia which just lost its number one ranking and Ford and GM in the motor vehicle industry – their equities have declined, brand rankings have declined and with that, the shareholder value of those companies has declined.
A Harvard University study has found out that future growth, especially organic revenue growth, accounts for as much as 54 per cent of a company’s stock value. Commenting on this, Cabraal said, “So investors are increasingly demanding organic growth. Yes, acquisitions and all are fine but they are increasingly demanding organic growth. When marketing activities are tightly aligned with that corporate agenda, it can only lead to driving that growth.”
Genuine innovation too is a natural outcome of a business fully in touch with the market’s needs and behaviour. This requires being fully informed about what people are doing and what product categories they are into and why customer insights are important – in other words, a strong marketing orientation is a must, he added. “Unfortunately in too many companies, marketing is poorly linked with strategy. Companies must create the organisation where marketing can thrive and the marketing input is taken seriously into the boardroom deliberations. Building such a culture will surely give those companies a competitive advantage. To do so, the board and the top leadership must show that commitment.”
When a board turns its attention to any particular aspect, it soon follows that the rest of the company pretty much aligns with that, Cabraal observed. Equally when a board turns its attention to brands, to customers and consumers, surely the rest of the company will align behind that board and that’s what makes a truly marketing oriented or customer focused organisation.
“Marketers also have to push the envelope. Just being on the sidelines wouldn’t help. For marketers to rise to the boardroom level, marketers must understand the strategic imperatives of the company across all its functions and be able to speak the boardroom language. Arguably, businesses that integrate marketing brands into the core strategic agenda and drive it with executional excellence will succeed and those that don’t will probably be left behind,” he concluded.
Marketing – strategic or functional role
When we talk about directors, Sri Lanka Inventors Commission Commissioner Deepal Sooriyarachchi stated, it’s about those in big companies. The role of directors is defined in the acts like the Companies Act and if you look at it, the whole emphasis is on governance and things like that. For example, there are a lot of personal responsibilities and accountabilities expected from directors but are not held accountable for making a mistake in marketing, he noted.
“Marketers won’t enter the boardrooms because accountants and others have gone before them and there have been problems but I think this overemphasis on the legal and financial aspects tend to dominate boardroom agendas whether you like it or not. For example, if you are in a regulated industry, your primary thing is to make sure that your regulators don’t question you so that becomes the primary agenda in your boardroom,” Sooriyarachchi observed.
“Although the boards tend to look at mergers and acquisitions, you tend to think that is where you create value but the real value of business is created through brands. At the end of the day, it is the customers who pay extra for that value. So in that case, marketing should be the strategic focus,” he added. “The question is how do we see the marketing function in companies doing this? Marketers need to improve their product before we perfect our communication but I know there is pressure to produce good quarterly results and quick solutions.”
At the board level, a lot of risk factors are taken into consideration. Marketers, he said, are very optimistic which is a good thing but he questioned if they really look at the risk factors involved in this particular strategy – it is very important to understand the risk appetite of the company. When talking of marketing strategies, are marketers also concerned about the capabilities of the organisation, he questioned. The whole structure of the market has changed and today, it is those who have invested in the brands and distribution capability that are doing very well.
“Organisational capability is something we must constantly be aware of. When I say organisational capability, it is what you as an organisation can do at different levels. Marketers don’t focus on this as they are so preoccupied with the brand and advertising. Do they really demonstrate consumer insights? Because you are sure of your consumer insights, then you can convince the board. The other important aspect is aligning the entire organisation to a marketing strategy. This you can’t do by being on the periphery,” Sooriyarachchi said.
When marketers present their marketing strategies and actions plans, sometimes they are not that strong in justifying what they are proposing in a manner that clearly articulates what they are trying to put across, he added. The boardroom is a place where in a way you are a custodian of trust. Therefore he advised that marketers should have a more holistic view and look at the impact of their marketing activities on the rest of the organisation. “I don’t think we have a problem with coming up with big marketing ideas. What we need is for marketers in the boardroom to appreciate that whatever they do from a marketing point of view has an impact on every other area of the company. Therefore it is important that we as marketers go beyond simple functionalities, looking at how it affects the rest of the organisation and how the entire organisation is aligned to the marketing strategy.”
Brand sustainability and reputation
Bates Strategic Alliance Chairman and CEO Nimal Gunewardena commenced by sharing his insights from a CIM chartered marketer task force which he chaired. Initiated a couple of years ago, it found out that while Sri Lanka has created thousands of financial professionals who are certainly on boards and heading companies, looking at the number of marketers showed that there was just a very few.
“The whole objective of the chartered marketer task force was to develop a strategy to profile the chartered marketers and build a calibre of marketers who could aspire to boardrooms. I hope that has been happening over the years; at least this panel demonstrates some of that and I hope that it will be. The numbers were about one to 10 when we looked at it and I hope that the gap is closing up,” he said.
Marketing is currently viewed as a functional activity and it is delegated not at the board level but lower down in the organisation, he observed. It is given to marketing managers and brand managers – they run the marketing and the board talks about something else. Marketing is generally considered to be a functional activity – 4P marketing – but strategic marketing has a lot of other interesting aspects that should be discussed at boardroom level.
“Marketing in essence is about building brands. If you are building brands, what exactly are you building? You are building corporate equity. You are building shareholder wealth. If that is the case, is that not what boards are concerned about and therefore shouldn’t boards look into this whole process of building brands and creating corporate equity?”
The intangible value of Coca-Cola is about 40 per cent of the market capitalisation of the company so even if something happened to their tangible assets, they would still have $70 billion in terms of intangible value. That is what marketers do – build brand value and intangibles. In comparison, there are six banks in the top 10 brands in Sri Lanka and the brand value to enterprise value is two to three per cent which raises questions.
A global study of CEOs and CMOs looking at what are the kind of challenges that they perceive most difficult, found that market factors comes at number one, then technology factors, environmental factors and so on. Gunewardena suggested that these perhaps should be the kind of things that should be talked about on our boards.
On the same survey, they asked marketers what they felt were challenges and how prepared they were and most of them felt they were unprepared to deal with things like the data explosion, social media, changing consumer demographics, decreasing brand loyalty and so on.
“In corporate regulation management, again the case is the same. I don’t know how much of this is discussed in the boardroom until a scandal hits because I think that most boards have a do-it-yourself mentality about this. They don’t believe in professional resources or in a PR company. It’s only when something happens do you start scrambling around for a PR agency to control the damage. Again, there is a lack of understanding between advertising and PR,” he stated. Gunewardena noted that one of the problems is that in this country we have yet to build up the capacity of PR professionals. The other reason is perhaps the fact that most companies’ corporate brands are not their balance sheets. Increasingly, image and reputation and honesty and integrity has risen and quality of management has taken a lesser importance in making a judgement about a company. This trend is on the rise after the financial meltdown. A company’s good name is its most important corporate asset and managing that is the business of the discipline of public relations. “On sustainability, it is featured less and is still quite new. Of course we think that Sri Lankans don’t care about green, they have other things to worry about. I was told that only 23 companies applied for the ACCA Sustainability Awards. Companies catering to export markets, overseas travellers are waking up to green compliance with our green apparel factories as well as our green hotels which are soon coming up. Sustainability is about ensuring the longevity of a company by ensuring the longevity of the planet through good operational management and marketing practices,” he said.
How can marketers get on boards?
The final speaker for the evening Aitken Spence Director Rohan Fernando addressed two topics: the importance of marketing orientation for directors and boards and those in senior positions, essentially at the board level and the importance of general management for marketers.
“There are very few marketers or a lack of market-oriented thinking at the boardroom level – why do you think there is such a situation? Is it that marketers lack competence, qualifications or performance or on the other hand, is it that those boards with very eminent people do not understand or appreciate the role of marketing at the main board level? I would imagine that it is neither but instead a lack of focus or overriding emphasis to other matters,” he stated.
Drawing upon an example, he noted that he has always noticed that a company has a CEO or leader who has a marketing background or a CEO with a finance background, the tendency seems to focus on his area of comfort. Naturally, today most boards are bottom line focused, looks at ROIs, cash flows but the looking at a business from the lens of one’s customer seems to get relegated to second place. This is even more apparent in businesses that are a monopoly which sit pretty and don’t see the need to look at their customers or how they can enhance the value delivered to their customers.
“I would imagine that looking at marketing or a customer oriented focus is simply identifying what your customers are looking at, anticipating what they are looking for and developing your marketing mix to satisfy those customers. We all know that a customer is a moving target so it means that you are always looking at your business from the lens of the customer. While all this is good in theory, in practice there are so many other things that take precedence,” said Fernando.
How do you give the customer something that your competitor is not giving them, he questioned. If a company could do that in a sustainable manner, the business would be a success.
“Another area we tend to ignore when we talk of customer orientation is the internal customer. Every one of us focuses on the external customer little realising that there is an internal customer who has to deliver value to the external customer. Unless you satisfy the needs of your internal customer, how can you ever satisfy the needs of your external customer?”
This is a twin focus and he stressed on the need for a cohesive integrated strategy developed right from the main board of directors that focuses on both areas in a sustainable way while adding that he has always noticed that marketing gets precedence when profits are declining.
Pix by Upul Abayasekara