When Unilever bought Dollar Shave Club for $1 billion in July, it was a big win for the online razor seller just four years after launching. It also gave Unilever a way to directly challenge Proctor & Gamble-owned Gillette’s dominance of the shaving market.
According to The Wall Street Journal, P&G executives privately acknowledged being caught off guard by the success of Dollar Shave Club, not anticipating how the startup might disrupt its business.
It reflects a familiar scenario in recent years. An established brand, company, or entire industry finds itself under pressure from a digital startup offering a comparable product or service at a lower price with less hassle. The success of these insurgents is such that they’ve already become household names themselves: Uber, Airbnb, and Warby Parker, to name a few.
For incumbent brands, the challenge is not to get caught flat-footed like Gillette, or worse--completely capsized--like Blockbuster in the wake of Netflix. But in taking strategic steps to avoid being disrupted, what role should a CMO play?
After all, “combating disruption” isn’t likely part of any CMOs formal job description. And companies of a certain size may have dedicated strategy groups to assess potential competitive threats and recommend how to respond.
Nevertheless, management and business experts suggest CMOs can play an active part in helping established companies detect emerging threats and deal with disruption before it’s too late. The key to that role is their understanding of the customer base and consumer trends, as well as identifying core brand strengths and promoting “self-disruption.”
“From the CMOs perspective, they have their ear to the ground,” said Sheryl Pattek, CMO executive partner at Forrester Research. “They form the nexus between market changes, customer buying behavior, understanding their company’s business strategy, and where those things come together.”
That means CMOs can provide early warning about shifts in customer habits or market dynamics that may require a competitive response. “Where a CMO adds real value is through the voice of the customer,” noted Clay Stobaugh, EVP and CMO of John Wiley & Sons. “But you need the data to articulate that voice.”
That data includes detailed information on customer interaction and buying patterns. Armed with that intelligence, a CMO has the credibility to discuss changing consumer habits with other members of the executive team and the possible implications.
The customer-centric approach championed by Stobaugh has helped keep the 209-year-old company from becoming a print publishing relic. Two-thirds of its revenue now comes from its digital products and services because of a push over the past five years to meet growing and future demand for digital platforms from B2C and B2B customers.
Nearly half of the firms surveyed by Forrester last year said they believe digital has already disrupted their industry, and just over half said they expect to see more disruption this year.
Even so, the problem is that established companies are often reluctant to pursue radical change at the risk of their existing business. This is the so-called “innovator’s dilemma”—a term coined by Clayton Christensen to describe how successful companies fail to meet customers unstated or future needs because they’re so focused on maintaining their core business.
“Companies who have been doing well are particularly vulnerable because there’s a very quick tendency to downplay the competitor. You have to go through the realization someone else came up with a good idea and you didn’t,” said Tim Calkins, a professor of marketing at Northwestern University’s Kellogg School of Management and author of “Defending Your Brand.”
Instead of having to react suddenly, experts argue companies should foster a process of continual self-disruption—and that CMOs should be part of that process. Forrester’s Pattek acknowledged that not all CMOs have technology or business innovation expressly as part of their area of responsibility.
But in a July report, titled “The Evolved CMO in 2016,” she suggested CMOs should build strong relationships with CIOs, heads of product, and R&D to partner on innovation that takes customers into account. “In order to affect change, [CMOs] have to be adept at building relationships with their peers,” she said.
At Wiley, Stobaugh helped expand his operational influence by establishing a center of excellence, dubbed the Marketing Revenue Center, and internal certification programs in areas such as SEO, email marketing, sales automation, and customer experience advocacy. “There’s always a role for the performance-driven CMO,” Stobaugh said.
Play To Your Strengths
Still, for many large companies in traditional industries, making radical changes when faced with a new competitive threat isn’t so simple. “When you’re managing an aircraft carrier at full throttle, it can be hard to stop the boat,” said David Srere, co-CEO of brand consultancy Siegel+Gale.
For that reason, he advises clients to focus and build on their key strengths. CMOs and their teams can play a strong role in identifying and communicating them. “The worst thing an established company can do in the face of a disruptive brand is to try to imitate it or outpace it,” he said. “They’ve already looked at your business and identified the weaknesses.”
Sonia Marciano, a professor at NYU’s Stern School of Business, echoed that viewpoint. To withstand disruption, she said that a company’s best bet is to “own” a particular market segment. In Wall Street parlance, that means having an economic moat—maintaining competitive advantages to protect long-term profitability and market share.
As an example, she cited Subaru’s effective monopoly of the market for moderately priced crossover vehicles. The company created feel-good advertising aimed at the young-skewing, high-income (and pet-owning) demographic that tends to buy its Forester and XV Crosstrek vehicles. That added an emotional component to the practical considerations for owning a Subaru, heightening the brand’s appeal.
Dean Evans, CMO of Subaru America until 2014, is credited with overseeing the TV ad campaign that emphasized Subaru’s support of charitable causes and pitched its cars as dog-friendly. The campaign underscored how advertising can be used to reflect particular customer values and help distinguish a brand from its rivals.
With the surge in on-demand startups, which often compete on price and convenience, mature brands have to look especially hard at what sets them apart. Marriott International, for example, has to focus on what services or features will keep core customers from booking with Airbnb instead.
“It has to be top-of-mind to the CMO of Marriott what the sacred cows are for their most vital customer segment,” Marciano said. “It seems like it should be obvious, but when I ask brands about this, they don’t answer quickly and clearly enough.”
Siegel+Gale’s Srere sums it up in a simple message for clients: “Understand what your company really stands for, what it does better than anybody else, and why anyone should care.”
Marciano even takes the counterintuitive view that disruptive competitors can actually benefit incumbents by peeling away less profitable customers. “Disruption can be a nonvital set of consumers that you’re losing,” she said. “But you have to know who you can’t lose.”
And the CMO should be positioned as well as anyone to answer that question because of their grip on customer data. “Companies focused on protecting existing revenue streams and business models may lose sight of where the customer is going,” Forrester’s Pattek noted. “That’s the role CMOs can fill on the executive committee.”