It’s all about the customer

Karim, Sarah, thank you for that lovely introduction. It's a pleasure to be here. I have to confess, this is the first time that I've actually talked about strategy. I've done a lot of strategy in my career and it's an honor to be here. And it's also a little bit of a challenge because instead of doing my usual strategy presentation for a Disney or a Starbucks or something like that, I'm actually here to talk about what I've done and lessons I've learned and the practice of strategy along the way. 

You know, if you wanted to find out about Starbucks or Disney, you can read some great case histories online. And I probably bore you if I did that. And I may even get a call from a lawyer since I no longer work at either of those companies. 

So it's probably best if I talk more generally about the practices strategy and what that has meant to me. I think the real important thing that any company makes or breaks is top line growth. Now, there are a lot of other things that matter, and I'm not going to dismiss the importance of margin. And the profits don't take revenue to the bank, we take profit to the bank. We all know that.

But in order to have a successful company, sustained long term revenue growth is absolutely critical. And of course, the operating leverage, what you want to call it, basically makes the profit at the end of the day, makes the profit growth and allows you to take money and reinvest in the growth of the business for the long run. And if you don't have that top line growth, things get really, really tough and often really tough, really fast. 

So at the end of the day, the revenue growth of a company tends to be the most important thing. And that's true not just for small startups and people who are on the curve on the way up, but also larger companies who want to sustain what they have because the opposite of growing is declining. And that usually happens because of a problem on the top line as well, too. 

So sustained top line growth is absolutely critical to a company's success. And while you may have to be distracted in the short term by it, you know, hopefully not the crisis du jour, but other things like managing the margin of controlling costs and things like that, we all do the strategies. It comes with the territory. The most important thing you can focus on is how you sustain top line growth in the long run. 

And that leads us to this little bit of wisdom, it's the customer, forgive the stupid that's just a punctuation mark. The truth of the matter is revenue growth doesn't come from spreadsheets or even from long range plans. It comes from customers. And customers can mean all sorts of things. It can mean, you know, consumers. It can mean businesses who happen to be your customers can be things like advertisers if you're in the business of selling ads. But whoever it is that pays the bills, the source of revenue, that's the most important thing that anybody can focus on. 

Now, there are a few companies out there that don't have to worry about it as much. They tend to be monopolies. And if you're a monopoly, the only thing you have to worry about is some other more customer focused industry coming along and sideswiping you. As you could see what happened to taxicabs thanks to Uber. So customers are the critical thing for top line growth. That's pretty simple, straightforward; you don't need to be a genius to figure that out. But sometimes it's the obvious stuff you need to pay attention to. 

So if a customer is what drives top line growth, top line growth is the most important thing in the company and you're the most important person in the company, then guess what you have to figure out. How what it is that is going to drive that top line growth via the customer and we're going to try to do right now is share some of my perspective and my advice based upon what I've done over the years, both Starbucks and Disney that starts with this don't relegate customer knowledge to the marketing or the marketing research department. I can also say that because I was CMO at Starbucks for a while, too, and I'm not denigrating marketing, but the function of customer knowledge as a subservient function to marketing is an old, outdated legacy way of approaching business. 

And many companies are rethinking that. Let me talk about that for a little bit. You know, historically, we have to think about, you know, what it is that marketing has been. And if you go back four generations, marketing has really been the source of top line growth historically. So companies look to advertising and to other marketing activities is the thing that's going to bring the customer, because that's how you get the customer there. 

And because of that association with revenue and revenue with the customer, which is obviously just talked about, then the most important thing for a company to do is have the marketing department focused on the customer. And historically, what's ended up happening is the marketing departments of many, many companies have been the ones who have been responsible for the customer.

So out of that market, research, market research typically reported into marketing. One point, I think Procter and Gamble spent one to two percent of its total revenues, not marketing, but on market research. And that was because such a huge number was actually spent on marketing and being smart about how you spent that and the messaging and so on and so forth made that investment in marketing research really, really important. 

So you learned about the customer and you focused your energies and you're learning about the customer and marketing. But unfortunately, customer knowledge is something that is valuable to a lot more people besides marketing, and by relegating it to the marketing department where a lot of companies that end up doing is losing sight of the fact that that same customer insight, knowledge was needed for everything from product development to customer service and so on and so forth. And those things sometimes were ignored. 

Now, a lot of that's changed right now. And you hear CEO after CEO talk about the fact that they own the customer experience and the customer experience is something the entire company shares. And we are customer oriented and there are a lot of people actually talking about it and some people are actually claiming they do it well. But if you really look at all the companies out there and if they all did as well as they say they do or as they would like to do, they'd all be a lot more successful. And I think it comes down to this: customer knowledge is really, really important and something that you really need to get focused on at an enterprise level. And part of that comes down to the way that knowledge has evolved. So what I'm going to say right now is that knowing your customer requires you and everybody else in the organization the best minds. That's you. And that's every senior executive who makes a decision to be focused on knowing the customer. 

But it's something else as well, too. And this is really important, data. It used to be market research is what you did to understand the customer or you maybe talk to the salespeople who talk to the front line customer and gathered sort of tribal knowledge of what a customer is all about. 

But now with technology and the sort of digital residue that exists all over an organization, there's so much more knowledge of a customer. It's possible if you have the right data and I've never heard a company say we have no data. Usually what companies company says we have so much data and we can't possibly use it or we don't know what's there or it's not connected to any of those things. 

And putting the data together and putting together a robust data analytics program on top of the data is probably the most important thing any company can do to start getting really, really good at customers. 

And this is something that has to be much bigger than just the marketing group. I mean, it can involve marketing and probably should. In fact, oftentimes you can justify the investments that you need to make and collect data by what you're going to save in marketing, because you can be a lot smarter about how you go to market. 

But at the end of the day, what you really have to do is have the best, most robust data analytics program you can that connects every bit of knowledge you have in the company. There's customer data, there's contextual data. You know, data involves things like the weather, stuff like that. If you're in a retail business, perhaps there's, you know, click through and digital data of various stripes. There's product data, there's operations data, which often involves what the customer did. And all can be pulled together into one great big sandbox of knowledge. 

And if you do it right and you have this incredible engine of learning with the right analytics layer on top of it, and then you figure out how to get that information into the hands of every single decision maker who touches the customer in the company, you become this customer centric company. And I think that's one of the roles that a strategist can play. 

And it's certainly something that I did at both Disney and then later on at Starbucks to actually set up and build world class analytics departments that then become the center of customer knowledge, market research, anecdotal information on the sales force, critical things. But they need to be combined and subsumed into a greater view of all that data, which ultimately needs to connect through to financial information. 

Every customer action should have financials attached to it. That's how a good strategist can make great decisions about what to invest in, not invest in, and ultimately to understand the customer and how you grow out of the whole thing. So that's the most important thing I think a strategist can do is to really understand the customer. 

Now, separate but related is the question of brand. Now, there was a day when Brand became known as like, well, that's your logo and your name isn't, that's your brand. Or worse yet, it's the ad campaign that you may run on the Super Bowl and that makes me cringe when people talk about brand that way, because what we should all know is that brand is something much larger than branding, which is the logo and everything else. That's all important. That's graphic design.

But Brand, if I may digress for a moment, is what exists in the hearts and minds of customers when they see your logo name and all that kind of stuff. It's what do you stand for? What's the meaning that you have in that marketplace? 

And when you think about brands and how brands are formed, it's a little bit like a relationship. It takes a long time to develop. The recent stuff matters more, but something he did last week or last month or even 30 years ago still counts. It's the cumulative knowledge of everything that you do. And it's not based on marketing, it's not based on what you say. It's based upon what you do. 

And I think this is why Brand is these days not a marketing function anymore. A brand is really a total customer. Experience, enterprise wide function, and in fact, marketing may be the least important piece in a brand because it's about what you say as opposed to what you do. 

Anybody who's been to a Starbucks knows that Starbucks ads are what cause you to have an opinion of Starbucks. It's what happens when you drink the product or walk into the store that causes you to have that understanding of Starbucks and is very, very important. It's true for just about any brand out there to think about brand from a total customer experience perspective, every action needs to let. 

Now, here's the interesting thing about Brand as well, too. And this is where that neat little intersection of strategy takes place. You have to give credit to Disney. Long before I arrived there in the previous century, Disney had separated brand out and made it a strategy function as opposed to a marketing function, didn't sit in business units and it said at the enterprise level and it sat with strategy.

And the reason was because Brand is not a marketing campaign. Brand is the totality of actions. And the issue, especially in larger companies, but even in smaller ones, is that unless you have a single person making every single decision about what affects the customer through the prism of brand, and we know some founders like that or some founders who would like to think they are that person. But in most companies, they're just not practical.

You have distributed decision making and you have lots and lots of people affecting a brand. And the problem is you can have a lot of different actions be at cross purposes with one another. It's very easy for 10, 100, 1000 or more different people to do different things in the name of the brand with the logo attached to it. That then starts to create this incredible noise that nobody understands. 

And we all know brands like that that have kind of lost their meaning because everybody is doing everything with them. Then the other issue with brands sometimes is, you know, 10 good acts, one bad one, just like in a relationship. You remember the bad one, you don't remember the ten good things. So somebody's stepping out of line and doing something that's at cross purposes that really doesn't line up with what that brand stands for can cause irreparable brand damage. 

So brand management becomes this incredibly important strategic function. I'm not talking about marketing. Of course, I'm talking about decision making of things the company does and doesn't do that affect what the customer thinks of that company, not in the short term, but in the long run, over time. What are all those different actions and how do they add up? So brand management is an incredibly important strategic function. You got to have a long range brand plan. What you're going to do to build that brand value. You have to have the way to sort of keep the guidelines and the momentum in place, and then you have to have the right branding attached to it. 

And while not all of those are classic strategy functions at both Disney and Starbucks, they became central to the success of strategy at both those companies because the long range plan was, in fact the brand plan. And if you don't own and as a strategist, I don't think the strategy is incredibly important to have that understanding. 

So if you go through and you think about what does a strategist really do, what does the strategist do? Starts with the customer understanding and customer knowledge and making sure everybody's making the decisions off of it. And the second thing is aligning company around a very clear brand mission, brand promise and brand plan. 

So the next thing, when you start thinking about what a strategist needs to do is to think about what you know, that interaction with finance and a lot of people and strategy go back and forth financing a lot of common skill sets. And there's a danger in a strategist being just a finance person. 

And I think, you know, there's conflict over time, especially around long range plans. Now it's clear that annual operating plans of most companies get managed by finance teams, its quarterly results. It's what you have to do to deliver and so on and so forth. And ultimately, it's the CFO who's on the hook for making sure that the money is where the money should be. It has to sit with finance. 

And then there's that fuzzy area of the long range plan, because obviously it has to be grounded in today's numbers for tomorrow's purposes. And it's also the CFO out there talking to investors about what's going to happen and where things are going to go and so on and so forth. 

The problem is a long range plan can be that brand plan I talked about, and it can also be very much the consumer insight and the customer proposition and what's going to appeal, because at the end of the day, if you make up a financial plan for the sake of a spreadsheet that links to an aspiration that you're going to raise capital, offer something up in there, I'm sure. You can have a very dangerous thing happen, which is the the sort of aspiration turns into the assumption. 

Instead, what you need to do is make sure that anything that goes into that long range plan is based on customer reality and brand reality. Thinking through questions like, you know, who is it going to appeal to? How many of those customers are there? What is the sort of premium that the brand will command in the marketplace versus other choices? What are the brand attributes? What are the things that we need to invest in to enhance the appeal of that brand? What are the market segments of customers who will be attracted to choice X, Y or Z and the development of a company thinking through three of those things very clearly down to a customer level and then multiply by the number of customers in basic math is how you come up with a good long range plan that isn't just an aspiration. 

Now it's got a tick and tie to what the aspirations are and the investments, and that's where the robust discussions come. But the role ultimately is a partnership between finance and strategy, and it needs to be written that way through the prism of brand and customer in order to have it make the most sense in the long run. 

Because once again, we're focused on that top line, the revenue that comes from the customer or bottom line issues, too. I don't discount this, but at the end of the day, that topline revenue number matters enormously. 

So another little issue, this is more of a don't than a do, and it's one that I've seen it in a number of different companies. And, you know, I worked at one company where the strategy department was also the corporate development partner in a Starbucks. We change that. We made a little bit differently. And the one thing that is interesting about strategy is normally you don't have executional responsibilities. 

And the big exception tends to be a lot of places, strategy department, actually, the people who do the big commercial deals or especially M&A activity. So all of a sudden what you've done is you've taken the department that's much more of a staff department and given them operational, quote unquote, responsibility, one very specific area. And it's human nature after the consiglieri to sometimes want to step out of that role and be the godfather a little bit.

 And as a result, doing deals becomes a little bit about addiction. And a lot of companies end up doing deals that maybe they shouldn't. I think there's data out there that says in general, M&A activity is decretive rather than accretive. And if that's true. I would love to see a breakdown of it. Never been able to quite find this information. But my suspicion is that when strategy and corporate development are married together, you probably air on the side of doing deals you shouldn't do. And the way to remedy this, of course, is what I did when I came into Starbucks.

I did a lot of things differently when I had carte blanche to set up a strategy department the way that I thought it should be done. And one of the things I didn't want was corporate development, not because it's not my specialty and it's not, but because it's a skill set that should be brought in when needed when strategy dictates that you need to do M&A work and as a result, you can be much more clear-headed about organic versus inorganic tradeoffs. 

And you can focus on what really matters to the growth of the company, which is focus on customer and brand. Those things are what drive results more than anything else. And if the energy of a strategy group is placed in the right area and not distracted by wanting to get a deal done, you'll often come up with better, more effective long-range strategies. 

It's an opinion and I would love to see somebody with the right data backing upon it. All right. So I have had a long time talking here about how brilliant and successful and how impactful, you know, strategy has been at these companies that I've worked at, you know, incredible companies with at scale near double-digit revenue growth for many, many years. Pretty incredible Starbucks and Disney. 

There's a little bit of humility involved here, too, because there are a lot of things that I wished I had known then. What I know now and I just want to share a little of that with you along the way to give you a sense of, you know, what's kept me up at night and where things could have gone better. 

I'm going to start with the piece on data again. It's really important. Man, did I underestimate how heavy a lift that was at both of the companies I worked at in terms of time, in terms of dollars, in terms of difficulty, in terms of change management. It's easy to imagine all the outcomes and what you can use data for. You see all these data sets sitting around the company and they pulled them together. We just do this, this and this. And then you start to understand all this great math and, you know, the Bayesian method computers make possible now. 

Yes, all of that. And then there's how the hell do you get it done? And the truth of the matter is consultants and technology companies will tell you it's very easy. And if you're a legacy company anyway, if you didn't grow it organically with one data system behind everything from the get-go, chances are you have massive challenges in organizing and putting that data together. 

And people use these fun little phrases like, oh, we just need to stitch the data together. So that's an awful lot of knitting and the scale and magnitude of that is always underestimated. Now, I do think that in building business cases for the marketing dollars is often a nice place to look. 

And in fact, at both Disney and Starbucks, the business cases that were made to justify a fair amount of investment involved being a lot smarter about how you spent those marketing dollars and it paid off. And obviously, the benefit doesn't just accrue to marketing, it accrues to the entire company because the data you now have can inform operations and inform store development and for any number of different functions across the company. But having all that data in one place, organized and importantly democratized so that everybody can use it and the change management that goes with that to bring people along incredibly important. 

And it's a task that I frankly underestimated going in. And if I had it to do over again, I put even more resources against it because it was the smartest thing that I ever did as a strategist at both Disney and Starbucks. 

So a second thing is, and I think that this is important humility learning for me, if you will, strategy alone won't bring success. It takes all those people can execute. You know, sometimes strategists get accused of what academics get accused of, which is living in the ivory tower. And you could very well of heard this where you are. And there's probably a grain of truth in there somewhere as well.

The truth is, you don't always give credit to the practitioners and the people who actually have to execute and understand it intellectually. But the nitty-gritty of what it takes to execute with excellence is something that exists much more in the operating world than it does in the strategy world where let somebody else handle the details. 

Well, that's not a very, very productive way of looking at things. And it's always critically important to understand at the most granular level the things that can trip you up. Now, you know, I see a lot of projects that have come out of strategy fail for this reason because it's a nice idea and there's nothing wrong with the idea. But things were not anticipated because of a lack of understanding of execution. 

I was fortunate at Starbucks in particular, where after day one on the job was a board meeting. But putting that dispensation aside, the next thing I had to do is go work in a store, talk about awakening to actually put the green apron on and figure out how to make all those drinks and run the pus and do all those things that are so difficult that it gives you absolute new respect for anybody who has one of those jobs. And the training was not nearly long enough to make me any good at being a barista. 

But what it did do is it taught me the importance and the respect for the details in the operating. And you could think about anything that happened in the stores and what happens at scale. And you multiply that by thousands of stores or hundreds of thousands of people. That practical understanding is an invaluable and having that not just to execute a strategy, but to formulate formation of a strategy is incredibly important because if it's not baked in from the beginning, that understanding of execution, limits on things and having that voice at the table is incredibly important. 

Which kind of leads me to the next point, something I learned along the way. I am a big fan of prestigious schools and great education and all that. It does wonders to help with clarity of thinking and high standards and knowledge in general. However, if that's all that's in the room, watch out, because in addition to everything I just talked about with execution is people who have that kind of pedigreed background can be a little insular sometimes. And in this world where customer is king and strategy being insular is not necessarily helpful. It's really good when you can have a diversity of people at the table, a diversity of perspectives. And I'm not just talking about the usual definitions of difference. I mean diversity in every sense of the word so that you can then have the best disruptive thinking about the customer possible. The data won't tell you things on its own. Theoretically, it will, but it really doesn't. You need people to be able to look in the data to be able to find out what really matters to the customer and then pursue the hypotheses in the answers to make your company even better at being a customer leader. 

The last of my lessons here is, you know what I didn't really appreciate when I joined the world of Disney from the world of advertising many moons ago, is that strategy is really an internal communications department. And that, of course, requires communication skills. And we all have them, but we probably need to use them in new and different ways that we never imagined many years ago. 

I thought that once I left the advertising business, I could lead all that stuff behind. How wrong? Because what I didn't understand completely was how important it was for the strategy department to be the voice of the customer. And if you want to be the voice of the customer, it's not a PowerPoint deck. It's something that has to live and breathe throughout the company and brand itself. That's not a PowerPoint deck either. You have to be able to get out there, train, speak, communicate, bring it to life, and you have to bring it to life across a wide variety of different internal constituencies. Those communication skills really, really matter. 

And last but not least, if you have a brand plan or a strat plan, you can write one and it can sit on a shelf. I once had a whole bunch of Strat plans and a shelf collapsed and my assistant came in and said, When was the last time you looked at them? And I was in charge of strategy. I had met. I didn't. That's probably not the best way of communicating. You may have to do it for the sake of clarity, but how do you make it a living, breathing document that is not a document that works across the company? Incredibly important. 

And I probably underinvested in what it takes to do that. And it was something over time they learned to do more and more of and to bring all of those things customer knowledge, brand strategic plans to life, incredibly important to be able to be the person side by side with the rest of the management team who is pushing through the entire enterprise knowledge brand and customer. 

So coming back to this, the one lesson that I never had to learn that sort of came to me naturally and I thank goodness for that because it contributed to the success of Starbucks and Disney. And even my own career was putting the customer at the center of every important decision because if you can do that, you'll get the topline results you want and that customer focus, that customer orientation is a way to be a leader of the company. It's a way for the conciliatory to be a bit of The Godfather, I suppose. 

So I'm going to leave you with a couple of thoughts at the end here. Yeah, you probably shouldn't tell anybody you're leading the company, right? Not a very politic thing to do. You don't want to overstay, you don't want to step on toes. God knows the CEO may not like it if you say that. So pretty good advice, but that's not the real reason why I'm telling you not to tell you when you're doing that, because if you do your job correctly. It's the customer who's actually leading your company, you are simply representing the customer and everything you do, and if you're doing that correctly, that is how your company wins. So thank you for hearing me out. Thank you for joining me today and enjoy the rest of the festival. And anybody who would like to can look me up on LinkedIn. Take care. Goodbye from Los Angeles.