Author: George Day
A few years ago one of the most vexing questions for marketing executives was whether big corporations were going to have to do what Bharti Airtel had done.
In 2004, Bharti Airtel, the Indian telecomm company, had outsourced its vast network and IT operations—a move that Ranjay Gulati saw as indicating “more progressive and forward-looking” thinking than was evident in many Western corporations. He argued that the traditional closed, hierarchical, and efficiency-oriented model was living on borrowed time.
Airtel’s move left many executives stunned. Through its outsourcing agreements, Airtel had shrunk to its core. Virtually everything except customer management and building the brand was left to partners. Airtel’s move quickly transformed the mobile-phone market in India as other telecomms followed suit.
This change was reverberating through the corporate community in 2008 when the American Marketing Association undertook a scenario-learning study to try to help marketers see what the future might bring. The learning comes from considering several plausible alternative futures. In light of what seemed to be the compelling logic of shrinking to the core, one of the big questions was: What’s going to happen to the traditional corporate organization? Looking ahead to 2015, marketers were wondering whether there would still be a role for hierarchy in marketing. We could easily envision a landscape of lean, open, networked firms that managed their customers and their brands themselves but outsourced everything else to partners. An unsettling prospect, to say the least.
So now that 2015 is almost here, has that come to pass?
The hierarchy is still in place. It has proved to be remarkably resilient.
Now, by “hierarchy” I don’t mean a stifling bureaucracy. I’m talking about a self-contained structure of multiple skills and responsibilities organized within clear lines of authority, one that allows the organization to do a lot of marketing tasks on its own. Hierarchies have long been under attack because of their supposed inability to adjust quickly to new developments in markets and consumer interests, because of their supposed high cost, and because silos slow the flow of ideas and information. All these problems are compounded when there are many layers.
But hierarchies have their advantages.
For one thing, they keep critical functions in house, out of competitors’ view. If you can do your analytics within your own walls, you don’t have to expose your talents, capabilities, algorithms, and resource-allocation decisions to prying eyes.
For another, it can be difficult to find good external partners. True, there are many companies offering services such as data analytics, help with creating viral campaigns, social-media mining, and search-engine optimization. But the number of really good firms in these fields is limited, and many of them have already been snapped up by the biggest companies.
Then there’s the perennial difficulty of managing partnerships. The rate of disappointment in alliances and joint ventures is around 50%, partly because partners’ objectives inevitably diverge as circumstances change.
Hierarchies’ longevity, however, is due to more than these factors. In today’s forward-thinking companies, hierarchies are proving to be highly versatile. Rather than being destroyed by digital technology, they’re strengthened by it. Technologies have allowed the marketing organization to become more efficient and effective.
For example, the boundaries with other functional disciplines are blurring. Instead of siloed specialists there are cross-functional teams that are coordinated with shared information. Most food companies have a single team managing mega-accounts like Walmart or Whole Foods, made up of professionals who were previously in sales, marketing, IT, or supply-chain management.
Within marketing the silos are collapsing. These more integrated organizations look more like a hub with spokes than the familiar horizontal-boxes-and-arrows model. The CMO may now be called the chief engagement officer or chief customer officer to signal a shift in priorities. Roles akin to product manager, customer insights manager, PR manager, and advertising director are the spokes and rim of the wheel around the CMO, who is the hub and coordinator.
This emerging model of marketing organization is also flatter and more open. We’re finding an amalgam of agencies and other partners that give access to expertise in areas like social media and customer analytics that is hard to find.
So those who speculated about the end of the hierarchy were premature. They didn’t take into account the hierarchy’s ability to adapt with the aid of information technology. It is a flatter, more relaxed hierarchy—but still a hierarchy!