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CHRIS WILLIAMS: Karen, please tell us about your background.
KAREN LOWE: Like so many people, my first job when I was 16 was in retail, and I worked my way through college in various retail jobs. After business school, I spent the lion’s share of my career — 20 years — at PricewaterhouseCoopers, specializing in transformational organizational change, primarily working with retail and consumer products companies. I joined IBM 10 years ago.
What is your role at IBM?
For the past seven years, I’ve been general manager for IBM’s Global Retail Industry. I’m responsible for our retail industry clients across all of IBM’s products and services, which is roughly a $5 billion business. My responsibilities include leading IBM’s innovation investment strategy for the Global Retail Industry. The biggest part of my role is leadership development — I have an exceptionally bright leadership team that I learn from every day.
Given the tenure that you’ve had in retail, let’s discuss today’s competitive marketplace. What steps are top CMOs taking to position their companies for competitive advantage?
If you look at the competitive marketplace, especially in retail, it’s never been more uncertain, given the accelerating pace of change. Much of this change is being driven by mobile technology and the use of social media, and consumer expectations have never been higher. The reason that’s significant is that in every industry, but particularly in retail, the traditional sources of competitive advantage have either eroded, no longer exist, or are being redefined by consumers. For example, in retail, there used to be this traditional notion of convenience as a strategic advantage, which meant having a physical store on every corner or close to consumers’ homes. Today, many consumers define that notion of convenience differently. Convenience today may be the ability to order a product on their mobile phone and having it delivered to their doorstep the same day. Consumers have essentially deconstructed the traditional shopping process. They want to start and stop, picking up where they left off, across any device or channel wherever and whenever. They’re also redefining sources of competitive advantage. That has created entirely new industries and business models while destroying other industries and business models. Retailers today have to completely rethink their strategies and their sources of competitive advantage.
When you start thinking about how to help top CEOs and CMOs gain back that competitive advantage, that is where the overflow of data comes in. Big data is a hot topic right now. One of the most important issues facing businesses today is that the volume and quantity of data has gone up exponentially. Our ability to capture it digitally has improved, not just in retail but also in health care, financial services, and logistics, but at the same time, the velocity or rate of information flow into the consumer organization is pretty much a digital storm thanks to social media. That speed affects the capacity for most companies to make any sense of the data, and the gap is only widening. Today, retailers actually only make sense of about 4 to 7 percent of the data that’s flowing into their organization. We’re not harnessing or connecting the data that’s coming in. CMOs can help their organizations by getting their arms around leveraging big data and advanced analytics.
We hear a lot about the term ‘omni-channel’ in retail. Is that associated with the deluge of data and the importance of data analytics and, if so, how do you help retailers address the challenges presented by omni-channels?
When I talk to retail CEOs, a lot of them are so ‘over’ talking about multichannel vs. omni-channel issue, because customers want to start and stop wherever and whenever, so the channel is really irrelevant. Retailers have to be able to recognize customers when and where they show up, and leverage all of that information cutting across all of their interactions with the brands. When you think of the data that a consumer leaves behind, look at it like a trail of breadcrumbs; they are clues or little puzzle pieces. We’ve got to synthesize all of those ‘puzzle pieces’ that comes into our organization, not just from a customer perspective but also from a CMO perspective in terms of post-sales support, service, and inventory. We have all this great data about the customer and, if you can put it together and synthesize it, that will be significant. It’s not just the integration challenge that multichannel/omni-channel poses for retailers, it’s the fact that the amount of data in all channels is rising exponentially.
Is it a challenge for retailers to sift through all that data to find the nuggets that would lead to predictive analytics? If so, what are you seeing among your clients as best practices?
Retailers definitely find it a challenge to get their arms around consumer data. The cost of collecting data is rising, yet they have no actionable insight into that data. Part of the reason for that is that even if you have a great omni-channel system and you’re collecting customer information, you may not be leveraging that information within the marketing organization. A lot of other information can be optimized throughout a retailer’s end-to-end enterprise that can give you more information about the customer. External information, such as the weather or social media data, also plays a role.
As consumers, we’re all leaving these breadcrumbs. We’re implicitly and explicitly sharing information about ourselves, what we value as consumers, how we want to interact. The challenge is how do retailers pick up on those clues along with the insight that they already have and then act in a way that makes it relevant. That impacts not just how retailers interact with customers but also how the rest of the c-suite acts. For example, think of a bakery’s use of data. Who would have thought that funnel cakes would sell out when it rains or that Panini sandwiches would be a big seller on hot days. Yet, that kind of predictive analysis in a bakery can transform the business, not just in terms of understanding and satisfying customer demand but also in terms of learning about how to avoid perishable waste. We can leverage consumer information throughout the enterprise as well as information that comes from external sources.
How have you seen marketing and the role of the CMO evolve within the retail industry?
Marketing has changed in a few different ways. Marketing has always been about knowing the brand and understanding the customer as an individual. Today, it’s far more personalized. It’s about understanding and using social media and other data to run the right analytics at the right time to the right customer to generate new ideas on how best to serve that individual.
The second way that CMO roles are radically changing is that, while we’ve always been responsible for brand reputation, now we need to design a culture and brand so that they are authentically one. What I mean by that is that with all this transparency, both internally and externally, it’s become critical for CMOs to embrace a more expanded role.
The third way is that while marketers have always been responsible for defining what to market and how to market it, today’s CMOs are responsible for creating a system of engagement that maximizes the value creation at every touch point, wherever and whenever customers show up.
Is it fair to say that whereas traditionally marketing was about the discipline of the four P’s, today it’s more about customer segments and aligning to customer requirements?
It’s even gone past that. After a decade of talking about the importance of customization in marketing, it’s finally here. It’s about engaging the customer as a whole human being with interests, attitudes, and circumstances that influence their preferences and needs. It’s accumulating all of that data, not just from how customers engage with your brand, but how they engage with the rest of the world. That’s the big “ah ha” moment for CMOs. The other piece is around collaboration. A CMO needs to be successful, and one of the most important attributes in this new era for any c-level executive is collaboration.
Why is it so important for the CMO to collaborate across the c-suite?
The CMO’s role today has shifted in terms of being more relevant in two ways. First, the CMO is leading the charge on customer analytics. Retail has made a huge difference because, quite frankly, the CMO’s role was not seen as relevant as other c-suite jobs. In many cases, they didn’t even report directly to the CEO. It is now critically important for CMOs to collaborate with the other CMO, the chief merchandising officer — we call it ‘CMO squared.’ The two CMOs need to collaborate because the operational information that the chief marketing officer has can dramatically improve results for the chief merchandising officer. They can use social media information about consumers to better allocate merchandise. The potential to optimize merchandising is significant, but it requires sharing information across organizational silos, which often exposes trust and collaboration issues. Second, the CMO needs to collaborate with the chief HR officer to design a culture and brand so that they’re authentically one.
How does collaboration with HR and building an internal brand manifest itself externally into the marketplace?
With the digital revolution came transparency. Retailers have transparency into consumer patterns of behavior. We’re picking that up and making some predictive analytics; we’re changing the way in which we promote products to be relevant and more personalized. Conversely, there’s increased consumer transparency into a retailer’s actual behavior and performance. Social media only amplifies those movements when brand promises fall short or exceed expectations. With increased transparency, customers are recognizing that this brand perception and its authenticity is influenced not just by the products and services we sell, but also by what the company does, what it values, who it partners with, how it treats its employees, and how it communicates what its corporate character is. When I say corporate character, I’m not referring to the reputation that CMOs project but what is actually revealed by the decisions and actions of a company’s employees and leaders.
CMOs are recognizing increasingly that they have a major role to play in helping to ensure that the workforce embraces and exemplifies that corporate character, which is critical in this age of transparency. CMOs are spending more time on who their company is, not just on what it sells. For example, our CMO at IBM has been extremely involved in helping us jointly, through the use of collaboration tools, leverage the entire IBM organization to define our values and what differentiates us and then leverage that internally.
Some retailers have done this exceedingly well, and it shows through their business results. An example in retail might be Amazon, which started as a customer obsession but really focused and built on that. You still need processes and rules and ways to check and balance behavior, but in an environment when things change so quickly, you need a culture and values to help drive decision making. People have to be able to make decisions for situations that they couldn’t have anticipated before; there is no rulebook on how to deal with certain issues. What can guide that? The company’s culture. The real art and science of this is defining the culture and brand consistently so they’re authentic and then leveraging those parts of your culture to execute it. There’s a real science to that.
You mentioned a number of transitions that have taken place in the retail industry, whether they’re driven by the customer value proposition, technology, or company culture. That’s going to require different or new skill sets for the retail CMO’s team. What are the challenges in either acquiring those skills sets or developing them in-house?
In my experience, and this seems to resonate with CEOs that I consult with around the world, the challenge in this new environment is that by the time you define the skills that you need, they’re either very scarce in the marketplace or unobtainable to hire. This is where throwing out the rulebook or at least getting it in better balance makes sense. By the time you design courses, they become obsolete because technology is moving so fast. You have to replace the rulebooks with shared beliefs. The better course of action is to build future-proof employees. The way you do that is by looking for certain attributes. It’s so difficult to predict a merchant’s capabilities, so look for attributes like being quick to adapt, an ability to be collaborative, communicative, and creative, and a willingness to be flexible. While you can’t teach employees to be future proof, you can screen for people with these attributes.
The second thing that you can do in your organization is try to foster an environment where those traits develop more naturally by creating unconventional teams and allowing employees to work with diverse groups. Look at experiential learning and encourage employees to develop a diverse network within the company using its internal social networks. Knowledge networks are going to be the place where individuals can add value. It’s about how you impart knowledge. It’s not about how much knowledge you obtain yourself but how much you’re able to share. These networks of knowledge are going to becoming a critical source of competitive advantage. A workforce that consists of a highly networked group of knowledge workers is going to be key to anticipating the future.
With knowledge networks comes the notion of sharing knowledge over social networks and the value of social media. What is the best way to use social media within an organization as a means to interact directly with customers?
The social network is like the new production line in an organization. I think it was Drucker who coined the term ‘knowledge worker,’ someone who does the non-routine work, makes sense of information, and really creates what we refer to now as intellectual capital for the organization. Today, there’s been an increase in volume, speed, and variety of data. We didn’t have a lot of tools back then. Now we have advanced analytics. We’ve got billions of mobile devices that are rapidly becoming the world’s primary interface to the Internet. Knowledge workers have 24/7 access to information inside and outside the organization as well as access to each other. So the value is shifting from information to knowledge. Knowledge workers are the new means of production and the social network is the new production line, whether that’s inside or outside the organization.
As I mentioned before, in a social enterprise, your value is established not by how much knowledge you amass, but by how much you impart to others. That’s where we see retailers and large services organizations like IBM begin to leverage networks inside the organization to be able to deliver speed. Speed becomes a source of competitive advantage. Sharing that knowledge in the knowledge network quickly allows you to satisfy customer needs, and technology is the enabler.
Historically, retailers spent less a percentage of revenue on technology than many other industries. Have you seen that change given the importance of the transformations you‘ve described?
Yes, that’s really important. In the past few years, we’ve become incredibly relevant to retail because margins are small in most retail segments. Historically, retailers have not leveraged and underinvested in technology. They’re now investing a lot in basic infrastructure in both the front office and back office from a technology standpoint. They’re making significant investments strategically in customer analytics but also in e-commerce.
Flexibility is really what they’re investing in today. It’s a race, not just here in the U.S. but around the world in terms of that investment. In some growth markets, they almost have the advantage of having not invested at all in old infrastructure. Now they have an ability to almost leapfrog some of the more mature markets and large retailers that have historically been dominate.
Post-sales service was the domain of customer service. But given consumers’ ability to go online in their social networks and raise concerns about products or service, are you seeing the ownership of the customership move more toward marketing and away from customer service? Or are new agreements being formed between marketing and customer service as to how to handle online issues?
That’s a great question. This is where the idea comes in that no one person owns the customer or the information about the customer. We’re going to see a lot of evolution in the c-suite in retailer organizations. You really want to know everything about a customer when they call in with a complaint about a product, and you need to share that information because you need to understand what happened. What is the problem and how do you create a feedback loop and use that information to design a better end-to-end experience for the customer? That’s not something that’s owned by anyone. I see the CMO as having this unique opportunity to be that champion, to be that executive in the c-suite who embraces technology to create actionable insights and collaborate with the chief supply chain officer.
It involves a little art and a little science, but the CMO of the future needs to be far more analytical and collaborative with the entire leadership team. The CMO needs to be responsible for, sponsor, and lead the engagement with the customer. But CMOs can’t own all the customer information and not share it, because they need information from their colleagues as well. You cannot have silos.
An increasing number of companies are hiring chief digital officers. Are you seeing that at your clients and, if so, how are they delineating that responsibility vis-à-vis the CMO, the CTO, and the CIO?
I have mixed feelings about the introduction of different c-suite roles. I think that the pendulum will swing back and some of these roles will go away. The intent is spot-on, but the execution maybe not so much. For example, let’s look at digital. When you think about bringing on a chief of e-commerce, it’s a channel and part of an experience as opposed to really organizing more holistically around the customer. How can we focus on digital in a broader sense? I believe that a CMO and CIO who are highly collaborative can tackle that. But it requires the right characteristics and ability to collaborate, not just the right knowledge and background. I don’t see this as a long-term trend.
That makes sense. It’s a short-term stopgap until there’s organizational capability around that discipline that goes through the entire company. Are there any other concepts that CMOs in the retail industry should pay attention to or be aware of?
For CMOs, today’s environment offers a huge opportunity. It’s a time of disruption but it’s an amazing opportunity for CMOs to step up and lead the rest of the organization, not just through collaboration but also through introducing far more science around analytics. It’s an exciting time. I know it’s challenging for most because things are changing, but there are tremendous opportunities for today’s CMOs.
Karen Lowe is General Manager, Global Retail Industry, at IBM. As GM, she is responsible for the strategic direction and worldwide leadership of the retail industry across IBM’s products and services. Her primary responsibilities are to grow IBM’s market share in the retail industry, achieving planned revenue and profit; lead IBM’s overall cross-brand strategy and investment in the industry; and deliver innovative solutions to retailer business issues.
Previously, Karen served as IBM’s Vice President of Sales, Distribution Sector, U.S. Central Region. In this role, she had sales responsibility for all of IBM’s products and services across consumer products, retail, and travel/transportation accounts within the U.S. Central Region/Midwest.
Prior to joining IBM, Karen was a Partner with PricewaterhouseCoopers Consulting (PwCC) with 20 years of operations and consulting experience in the areas of organizational change management, human capital operations, supply chain/logistics, and packaged systems selection/implementation. At PwCC, she held several leadership positions, including leading PwCC’s human capital solutions practice for the Products Industry. Karen also served as the Global Relationship Partner for a large multinational retailer and, as a consulting partner, implemented a full range of process, organization, technology, and performance management changes in large, complex companies.
Karen earned a bachelor’s degree from the University of Illinois and an MBA in Operations and Manufacturing Management from Washington University in St. Louis.
She serves on the Board of Directors for the Retail Industry Leaders Association (RILA) and the National Retail Federation (NRF) and is a member of IBM’s Women’s Council.
Chris Williams is Chief Marketing Officer at Argyle Executive Forum, leading the strategic positioning of the company, driving marketing execution, and advancing the company’s strong focus on B2B executive thought leadership communities.
Chris has more than 30 years of experience in sales, marketing, and business development for information technology and professional services companies. Prior to his current position, Chris held executive leadership roles for technology solutions and consulting companies, including Avaya, Capgemini NA, Expand Networks, and Fujitsu Consulting, where as a member of the executive management teams, he was responsible for developing the global strategy and increasing revenue streams across each company. He has also served in a variety of technology sales, marketing, and business development roles for hardware, software, and professional services firms, including Sun Microsystems and Cambridge Technology Partners, and was a co-founder of Netigy, a professional services firm focused on e-business infrastructure consulting in Silicon Valley.
An industry and thought leader, Chris sits on the Board of Advisors for the Information Technology Services Marketing Association (ITSMA) and has been a contributing author on topics such as sales force automation and consulting services trends to publications, including CRM Magazine and ebizChronicle.com. He has also presented twice at the World Innovation Forum.
Chris, who grew up in Europe, attended Babson College in Wellesley, Mass., where he earned an MBA in International Business and Finance as well as a bachelor’s degree in marketing.