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5 ways CMOs can create an agile operating model for sustainable growth

Authors

  • Sylvain Maquet

    EY US TMT Consulting Principal

  • Steven Bailey

    EY Americas Commercial Excellence Leader, Consulting, Ernst & Young LLP

  • Shubu Mitra

    Co-founder and Chief Operating Officer (COO), MarCaps, LLC, United States of America

Contributors

10 minute read 24 Aug 2024
Related topics
Consulting

Today’s CMOs face myriad challenges. But if the marketing operating model hasn’t evolved to reflect new demands, challenges are multiplied.

In brief
  • CMOs must tightly align marketing goals with their organizations’ growth agenda to drive the full funnel.
  • To be successful, marketing must establish standard KPIs across brands, channels and geographies.
  • Marketing must be data fueled, technology enabled and agile in processes to create an intelligent and nimble organization that can keep up with market conditions.
  • CMOs need to invest in ways to streamline and scale capabilities to create capacity for higher-value activities focused on innovation and growth.
  • To boost capabilities, CMOs should prioritize talent, upskilling, innovative structures, and external partnerships.

For marketing organizations, what it takes to succeed looks substantially different these days. This era of perpetual transformation requires agility and vision. Key challenges include steep customer expectations, the emergence of new marketing channels and abundant, ever-expanding data. As a result, the role of the chief marketing officer (CMO) is becoming more complex and strategic. Expectations such as driving efficiencies in cost and agility have never been higher. And the number of activities has never been greater. Central to all of it is the necessity to rethink the relationship with agencies and the organization at large.

This increase in responsibilities leaves many CMOs feeling overwhelmed. The challenges of the role grow exponentially if the organization’s operating model isn’t evolving or adapting to respond to the new demands of the business environment. How can CMOs succeed without the appropriate processes, capabilities, technology and talent? MarCaps, LLC, a marketing consultancy firm, polled marketing managers from 493 companies and found that only 20% of them are satisfied with the effectiveness of their departments.1

How EY can help

There are several reasons why crafting the right operating model is now more critical than ever, including:

  • CMOs have always had accountability for the brand. The challenge has been to deliver that brand promise across a customer journey owned by many other functions — from supply chain to customer care. Marketers have adapted as leaders and become strong integrators of experience across the organization.
  • Technology is evolving fast, and the operating model needs to evolve with it so the organization can benefit from novel technological capabilities. Integrated and automated processes must be built (e.g., AI-generated marketing content), and technology roles that traditionally weren’t part of marketing are now integral to the function (e.g., data scientists, software engineers and creative technologists).
  • Consumers expect experiences to be relevant and contextual. Marketers must have the capability to deliver personalization at scale leveraging technology, such as customer relationship management (CRM). This will impact the operating model in different ways, from scaling the size of certain functions (e.g., creative and audience management) to automating processes.
  • Creating centers of excellence to expand the impact of limited talent or embracing new partnering models to scale faster are two of the main strategies in the marketplace.

If architected correctly, the marketing operating model can help organizations adapt to market disrupters and serve as a competitive advantage. However, a poorly designed or misaligned model can have implications beyond marketing — it can impact an organization’s overall effectiveness and success.

 

The marketing function is at a crossroads where its role in the organization, the value it brings and how it operates must be redefined. CMOs need to transform their operating models to increase the impact on the organization, drive growth and win in the market. This article explores how we help CMOs approach the design of their operating model. 

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1

Chapter 1

Ground marketing in your organization’s ambition and purpose

How can the marketing function advance the strategy of the business?

According to the new report that Ernst & Young LLP commissioned from MIT SMR Connections, companies have laid out wide-ranging agendas for near-term growth, expansion and innovation.

Goals that marketers identified as their top investment priorities in the next three to five years:

Other significant  priorities:

These goals, as well as changes in the market and consumer habits, are forcing CMOs to revisit their mission and vision and to anchor them so that they support the overall business strategy and priorities of the company. Without this alignment, the marketing function and the CMO can’t fully succeed or meet expectations.

How EY can help

There are many different potential “missions” for a marketing organization. Some may be mandated to generate revenue or to improve customer experience, while others may focus on driving insights through data or creating brand awareness. The breadth of value that marketing can bring to an organization is broad, and it is up to each CMO to align their mission with the company’s goals and to identify high-impact areas.

 

According to MarCaps, CMOs should aim for clarity on how marketing will create value for customers (areas that impact the customer experience and journey) and for the business (areas that drive organizational success). Their research indicates that winning marketing organizations (WMOs), which are businesses that drive top-line growth 2.5x higher than others, have a more balanced footprint of responsibilities across different types of activities.⁴ For example, on the experience side, marketing organizations may improve customer service, enhance customer buy-flows and redesign the web experience. From a company value perspective, marketing organizations may collaborate with sales to boost conversion rates, extract customer insights for product iteration or weigh in on industry trends such as artificial intelligence (AI).

 

How should we position the role of the CMO?

The role of the CMO is becoming more complex and inherently more strategic. CMOs are frequently challenged to lead with a more tactical approach, drive revenue and adapt to the complexity of customer behavior, all of which are only feasible through adept data analytics. With newfound pressures, the CMO role has evolved to become highly visible and influential and is a role that requires a leader who is well equipped to drive growth, leverage data and have a strategic impact. Unfortunately, many CMOs aren’t elevated in a way that enables them to play that role and don’t interact closely with other executives.

 

To optimize the impact of marketing, companies should elevate the role of the CMO. Working closely with the rest of the leadership team helps the CMO to better understand the overall strategic focus and adjust priorities in real time. More CMOs are now part of their company’s executive committee, though some may not report directly to the CEO.

 

Taking these steps can help CMOs demonstrate their strategic impact:

The marketing vision shouldn’t be developed in isolation, nor should it remain static. Defining the mandate of the marketing function is critical to positioning the organization to reach its potential and to aligning with the company’s overarching strategic goals. Without intention, the marketing function can slip into a supporting or operational role, where its true potential is lost. CMO responsibilities must be elevated, and marketing should be threaded into the strategic fabric of the organization to drive growth, uplift the brand and enhance customer experience.

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2

Chapter 2

Define your desired outcomes, strategically and operationally

How can performance metrics add up to success?

How EY can help

  • Strategy consulting

    EY-Parthenon professionals recognize that CEOs and business leaders are tasked with achieving maximum value for their organizations’ stakeholders in this transformative age. We challenge assumptions to design and deliver strategies that help improve profitability and long-term value.

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Success of the marketing function must be directly aligned with, and designed to deliver on, the vision of the organization. It’s crucial to clearly define the outcomes expected from a successful marketing team and to identify the elements essential to success. Grounding the function in data-driven outcomes clarifies the often-ambiguous concept of “success” and makes it more focused, achievable and actionable. For example, a primary successful outcome for the marketing team could be to generate more data-driven insights about customers. Activities that advance this outcome include upgrading the CRM system to collect and consolidate data from the customer journey and generate a single view of the customer across platforms and channels. A best-in-class CRM, underpinned by maturing customer data platforms (CDPs), will not only provide marketers with the ability to view and analyze customer data, but it will also begin to automate processes based on data insights, further enabling a personalized customer experience.

 

What are the critical measures needed to track against the CMO’s mission?

 

Many companies face challenges related to tracking KPIs, including inconsistency across business units and geographies, variation in tools and technology platforms, and lack of a time horizon and benchmarks. Organizations should think carefully about the ways in which they track performance, especially in geographically distributed and operationally complex companies.

 

When choosing which KPIs to track, CMOs should measure performance at three levels:

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3

Chapter 3

Challenge the efficiency of your processes

How can marketing organizations become more agile?

Once performance can be accurately tracked and data analyzed in real time, the marketing operating model must be agile enough to capitalize on the insights gleaned. CMOs must prioritize data-driven decision-making over storytelling and creative preferences. For example, integrating powerful analytics tools that measure engagement and conversion metrics can help marketers optimize campaigns and cater more effectively to target customers. Additionally, implementing a robust KPI and measurement framework enabled by data captures the success and failure of marketing campaigns, which will yield powerful insights as to how funds should be allocated. An agile marketing organization will be able to utilize this information and respond accordingly, rather than waiting for a future funding cycle or navigating overly complicated processes to adjust in-flight campaigns. Consider these examples of how agility can be leveraged to maximize benefits:

What can be automated?

Automation can help shift capacity to more strategic, and high-impact, activities. A marketing team can gain speed and capacity with two useful tools:

  • Robotic process automation (RPA) is best applied to high-volume, repetitive, rules-based processes with few variations. Tasks such as data entry and consolidation, report generation, email marketing, and social media management are generally well suited for RPA. 
  • Generative AI (GenAI) is a powerful tool that marketing professionals can leverage to improve the speed and scale at which they produce content. Perhaps the most standout use cases are content generation and personalization at scale. Integrating data solutions with GenAI capabilities creates a competitive advantage for marketers, as they can mass-produce content but tailor it to specific individuals and their preferences.

Marketing organizations can generate original, personalized content in seconds by training their generative pre-trained transformer (GPT) model on existing content and providing it with prompts and desired parameters. This enables the model to create content that aligns with the organization’s brand and target audience. For example, a large media company uses GenAI to conduct a live interview and then to transcribe and remaster the interview in real time to quickly create a unique article, a social media post with image and text, and a post. Organizations can then pair the generative content with customer segmentation data to push the best content to specifically targeted customers, enabling omnichannel personalization at scale.

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4

Chapter 4

Strategically balance your marketing activities between new functions to launch or scale, and traditional activities to optimize

Are your decisions striking the right balance?

Objectives that are in sync with the organization’s vision will inform two categories of activities and capabilities: (1) those that the marketing function should own, prioritize and allocate resources to and (2) those that it should merely support, delegate or outsource.

CMOs must strike the right balance between foundational activities and activities that drive innovation and growth, based on the organization’s overall goals. For example, to enhance the impact of marketing on revenue growth, a CMO would prioritize investments in lead generation and lead scoring. The CMO would also redesign the operating model to work more effectively with sales and the entire ecosystem of channels. But if elevating the brand is the priority, the focus would be on developing a solid brand strategy, establishing robust guidelines and compliance, enhancing the customer journey, and developing appropriate customer sentiment measurement.

Investing in ways to streamline and scale foundational capabilities is crucial for CMOs to create capacity for higher-value activities focused on innovation and growth. Doing so improves efficiency, strategic focus, competitive advantage, resource optimization and adaptability, enabling organizations to succeed in the dynamic marketing landscape.

How does the CMO prioritize the scope of services and associated talents?

Under budget and resource constraints, CMOs will have to make decisions between functions to build, scale or even terminate. For this reason, identifying critical capabilities and their ultimate value to the organization is essential. MarCaps has developed a comprehensive framework and tool to help organizations prioritize their capabilities.

From its extensive research, MarCaps has found that areas related to customer experience (e.g., product performance enhancement, experience strategy and customer service) and growth (e.g., strategy and value proposition design) are the most critical for marketing organizations and should be funded and staffed accordingly.⁴

Recently, CMOs have been building and scaling their organization in these areas:

CMOs also have an opportunity to reconsider some low-value activities, particularly in support and operations. Activities around hospitality management (e.g., team-building, office events, culture and community activities) sometimes fall to CMOs, but they can easily be moved to finance or HR.

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5

Chapter 5

Design the right organization by taking your talent into account

Which functions should be centralized and which decentralized?

CMOs of multi-business units and multi-brands must find the right balance between centralization and decentralization of activities. While centralization allows for economy of scale and greater consistency, decentralization is required to stay relevant with channels and consumer or market nuances. Tasks should be assessed based on several dimensions, including:

How EY can help

Traditionally, activities such as brand management, communications and marketing operations remain centralized, while services such as demand generation, marketing insights and channel enablement can be decentralized.

 

A leading model has emerged for new and complex activities, such as new media and data-driven marketing, including customer relationship management (CRM). Increasingly, marketing organizations are creating a centralized team to generate playbooks, guidelines and leading practices, while letting the brands or business units test and implement.

 

Some organizations have gone even further, creating offshore global business services (GBS) for marketing. This applies to companies with enough scale and multiple geographies to justify the move and realize the cost savings. Again, selecting the services to assign to GBS must be done thoughtfully. Most companies usually start with data and analytics or simple creative services. The key to success is to design the right processes, self-service tools and service-level agreements (SLAs) to fully embed offshore teams within the workflows of the onshore teams.

 

In addition to tasks, CMOs must also weigh the level of decentralization with respect to decision-making. It’s important for marketing leaders to understand where they’re concentrating their decision-making power.

 

Based on a MarCaps study of winning and losing marketing organizations, best practice is to allow for a decentralized approach to program and product decisions but to maintain greater control over budget. A higher percentage of losing market organization (LMO) leaders reported controlling and centralizing a larger share of decisions, which led to bottlenecks and hindered agility. Leaders of winning marketing organizations (WMOs) empower others in the marketing organization to make decisions.⁴

 

What capabilities should we build internally vs. outsource?

 

Relationships with agencies have been changing over the past few years. Advertisers generally expect more value from the agencies they work with. In the MarCaps study, organizations reported they will be more likely to outsource functions next year.⁵ Outsourcing is more prevalent among smaller companies (fewer than 5,000 employees) to compensate for gaps in talent and skills.⁵ Some companies have a considerable need for resources in digital media planning and creative services. Often, this is due to the growth of their e-commerce operations or the desire to achieve personalization at scale. In such cases, engaging the right partners for the right expertise is critical.

 

However, despite this clear need for outside resources, there is a growing trend for large companies to internalize some activities, with 48% insourcing more, compared with 31% outsourcing more.⁵ The most common outsourced activities include media buying, campaign execution and creative services. While content and capacity cost savings can be driving factors, when reaching a certain scale, operating effectiveness and innovation are the main drivers behind internalization.⁵ In a fast-moving environment, marketers need greater control and better coordination between teams to plan and execute campaigns. Internalizing services can remove the need to potentially retrain agency resources, who tend to experience high turnover.


Summary

When it comes to designing a marketing operating model, there is, unfortunately, no “one size fits all” approach. Many factors should be considered. By applying the principles below, CMOs can increase their chances of designing an operating model that will help their organizations to compete and win in the market:

  • Anchor the marketing function clearly in alignment with the organization’s ambition and strategic goals.
  • Define strategic and operational outcomes from the start to drive success.
  • Evaluate your processes and implement ways of working that challenge orthodoxy.
  • Build a balanced model that prioritizes activities to build and scale while also optimizing capabilities foundational to success.
  • Assess and amplify your organization’s talent and then fortify gaps.

Special thanks to Senior Manager Alex G. Bayz, Manager Helene Bedard and Consultant Sarah M. Rosso, Ernst & Young LLP, for their contributions to this article.

About this article

Authors

  • Sylvain Maquet
    EY US TMT Consulting Principal
  • Steven Bailey
    EY Americas Commercial Excellence Leader, Consulting, Ernst & Young LLP
  • Shubu Mitra
    Co-founder and Chief Operating Officer (COO), MarCaps, LLC, United States of America

Contributors

Related topics
Consulting

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