5.6 How do we create value?
While researching these pages I came across an article on the history of computers. Early mainframes lacked any form of operating system and every day users would arrive at the computer with program and data that they would load in and run. I’m going to quote a paragraph of it below as it is a perfect metaphor for this section.
“As machines [computers] became more powerful the time to run programs diminished, and the time to hand off the equipment to the next user became large by comparison. Accounting for and paying for machine usage moved on from checking the wall clock to automatic logging by the computer. Run queues evolved from a literal queue of people at the door, to a heap of media on a jobs-waiting table, or batches of punched cards stacked one on top of the other in the reader, until the machine itself was able to select and sequence which magnetic tape drives processed which tapes. Where program developers had originally had access to run their own jobs on the machine, they were supplanted by dedicated machine operators who looked after the machine and were less and less concerned with implementing tasks manually. When commercially available computer centers were faced with the implications of data lost through tampering or operational errors, equipment vendors were put under pressure to enhance the runtime libraries to prevent misuse of system resources. Automated monitoring was needed not just for CPU usage but for counting pages printed, cards punched, cards read, disk storage used and for signaling when operator intervention was required by jobs such as changing magnetic tapes and paper forms. Security features were added to operating systems to record audit trails of which programs were accessing which files and to prevent access to a production payroll file by an engineering program.”
An operating system for a mainframe computer is the equivalent of an operating model for an organisation. It is a functional framework to connect internal organisational work to an external value for customers – for marketing, it is a model of the marketing value chain. The operating model is the equivalent of the process to line up punch cards, the measurement process to record time being spent, governance of the monitoring process, the security of the technology stack and the checks and balance to make sure nothing has crashed. It is how productive work gets done. In a mainframe’s case how computing time gets utilised, in an organisation’s case how customer value is created.
All commercially-driven enterprises including for-profit organisations, non-profits, membership clubs and sole traders have an operating model for connecting customer value to a financial arrangement that will sustain future operations. Marketing is no different in this aspect, it just may not look at itself so often in this light.
The most common elements of an operating model are the triptych of People, Process and Technology. Because they are typically complex, operating models use building blocks like these to break the underlying components of a model down into more tangible deliverables. When Toyota looked at the types of waste they could remove to improve their operating model they set out to build better cars but ended up changing how the world looked at process design. By optimising to remove waste from overproduction, waste from time waiting before the next task can start, waste of transportation, waste of processing, waste of excess WIP inventory, waste of movement, waste of making defective products and waste of underutilized workers they created an entirely new methodology for delivering value to customers in the form of cars.
Operational transformation can come in many shapes and sizes but will almost always be driven by a need to reduce waste (increase productivity), control risk or improve experience. Sometimes the need may be small and tactical, other times it may be more transformative. While people, process and technology may be the levers of change, they are not the goals in and of themselves. Investing in a new piece of technology can appear to be the easiest way to fix a problem but are can frequently introduce stress and waste – at least in the short term – if not properly aligned to the right objectives and enablement. Short-term changes without true understanding how they align to and support your wider vision for the marketing organisation will always create further dysfunction and inefficiency. To operate effectively, marketing organisations need to structure for excellence at the intersections of people, process and technology.
| Value driver | Value levers | Description |
|---|---|---|
| Organisation design | People + Process | Aligning people and process to have clear lines of reporting creates service-oriented value and structured cross-functional partnership. It supports the removal of inconsistency and stress, spanning multiple tradition team structures to meet customer goals. |
| Operating cadence | People + Technology | An operating cadence for a team determines how, who and what data is reviewed. It informs decisions on where waste can be removed and where stress ca be reduced by adjusting work. |
| Measurement scorecard | Technology + Process | Measurement is the lifeblood of value creation. Understanding both the value that was created for customers and the internal cost of creating that value allows you to pinpoint waste and inconsistency. A foundation of implementing any new process or technology needs to be to increase the measurability of both. |
Organisational design
“The enemy of accountability is ambiguity” said Patrick Lencioni in The Five Dysfunctions of a Team: A Leadership Fable. Who reports to who, who works with who and who does what. Ambiguity on what is being done, who is doing it and how it is being done can almost always be traced back to the organisational structure of team. Unfortunately, since reporting lines are a visible change that leaders can drive reorganisations can be a popular ‘improvement’ for creating immediate impact. But though few would deny the positive benefits of some change, few would not justify the benefits of some stability. Constant change prevents people from keeping pace with how, who and when they should work together, promoting a likelihood of silos being created rather than pulled down.
Many philosophies on the right way to design a marketing team exist. Details matter in making these decisions and Marketing does not exist within a silo inside an organisation. The structure of Sales teams, the constraints on team size, the support and priorities of executive leadership, the geographies the organisation operates in and the go-to-market approach will all influence how marketing should be structured. There are some fundamental principles that leaders should consider when defining their marketing org, though.
Reporting lines are the most obvious and visible aspect of org design. The size of a team is connected to its ability to deliver value to the organisation and the customer. Technology also has a huge influence on value delivered and with automation tools the outputs of teams can be scaled far beyond what humans alone could deliver. Team size and reporting lines are still a big element in output, however, and a large team enabled with the right technology is probably still able to drive more deliverables than a small team with the same technology.
Budget is an enabler of freedom or a restrictor of scope. Removing budget from a team and giving it to another team without making any changes to reporting lines will force people to work together differently. Shifting a geo budget to a central team can incentivise the geo team to collaborate much more closely with global functions to get what they want. Owning a budget is a responsibility: teams that own budget are responsible for investing in ways that maximise business value and if senior leadership define better investment strategies they can use these budget changes to enforce it. Budget design should be approached similarly to reporting lines in organisational design.
Finally, there is measurement. Or more precisely, who you set as responsible for KPIs. This is essentially a mechanism for defining decision making. The KPIs you set for teams allow them to influence the actions and decisions of others. Measurement can force collaboration, grant authority and inform budgeting. When teams understand that they are responsible for enabling others to be successful it changes their behaviour. It forces them collaborate more on decision making and be accountable to each other for performance.
Behind many org design decisions is the balance of centralisation for scale versus decentralisation for precision. Centralised teams concentrate governance and subject-matter expertise in a core of the organizational hierarchy. Strategy, planning, goal setting, budgeting and talent deployment are decided by a smaller number of experienced marketing leaders. Decentralised organisations share decision-making authority across wider groups, regions or business units. Decentralisation can be more preferable when there is a greater need for regional support or for rapid response to regional needs. Hybrids of centralised and decentralised approaches determine on a team-by-team basis where authority should sit and aim to balance economies of scale with regional differentiation and precision. And, of course, the right approach for today isn’t necessarily the right approach for tomorrow. Initially standardising on a fully centralised model may simply be a path towards a longer-term hybrid model, but establishing governance makes the greater measurability of a centralised model a preferred stepping stone. A hybrid model is likely the best long-term approach for many organisations.