Lee discussed industry trends and his company's positioning - especially as it relates the CMO.
Click below or scroll for more:
- Unica: Then And Now
- The Problem Unica (IBM) Solves
- Where Advertising Fits
- Is IBM A Systems Integrator?
- Milestones Ahead
YUCHUN LEE: There's a parallel between the start of our trajectory in the marketing space and IBM's, in that we all came from the angle of analytics. Unica was founded on data mining technologies. In the early days of the company, we were tackling problems beyond marketing, including those in manufacturing process control, financial engineering, derivative trading and so forth.
But, very soon we realized that analytics and the ability to data mine and predict customer behavior is a huge competitive advantage for businesses. We thought that as a small company, we would focus on the area of analytics for marketing. If you think about IBM's initiative around “Smarter commerce,” it’s centered on the customer's data and the ability to analyze, leverage and optimize businesses around that data. It's the same footprint. Obviously we've used the CMO's role in this future of customer-centricity as so important that IBM has put emphasis on making sure we can offer an end‑to‑end solution to the chief marketing officer.
"Big data" was definitely not a phrase. I thought you were going to ask me about the phrase: "CMO." Back then, even the word CMO was new. What we have seen, over time, is that the evolution in marketing covers more than pure advertisement or direct marketing into one that integrates all the different media channels. Big data is something that recently got tagged onto continuations of the growth in data - volume, complexity, and hence the technology that is needed to process it.
Big data, specifically, spoke to the ability to leverage a different set of analytics ‑ even a different set of technology infrastructures, like cloud‑based solutions to deal with these challenges. We had a big survey of 1,700 CMOs and the number one challenge they have is that they can't deal with the complexity of what they see coming. The number one factor within that complexity is big data.
Maybe let me broaden the lens a little bit to “smarter commerce,” which covers buying, selling, marketing and servicing customers. Within that footprint, the Enterprise Marketing Management Group - the group I run - covers Coremetrics, Unica and, more recently, DemandTec, as technologies that are relevant to marketing. Our footprint does two things. One is it provides our customers with a "system of engagement." This is a systematic set of technologies that help you deliver the most relevant message to a client. In order for you to deliver a relevant message, you've got to have the ability to deliver them across time and channel, which means you've got to have a centralized way of making those decisions, and you need analytics to know what decision to make. You need data to analyze, and then you need instrumentation in the enterprise to provide the data. It's from instrumentation to data to analytics to decision-making to cross‑channel execution - that entire stack is what we call the system of engagement. Unica's solution, along with Coremetrics, is to provide that set of capabilities.
Then, with DemandTec, our most recent acquisition, we see the convergence of merchandising and marketing in the retail space, and how it will profoundly impact how CPGs and retail do their business. We see that part of the world converging as well, and that's where DemandTec helps us work through this, in trade optimization as well as price optimization.
What were some of the problems that the marketer is having that provided triggers to buying DemandTec?
First of all, most sectors, when you go online, they all look like retailers. Everybody's got a shopping cart. Everybody's got an e‑commerce platform. The retail paradigm is something that's familiar to consumers. You look at the retail paradigm and there are a lot of SKUs out there. The first question is, what is the price for these SKUs? A lot of organizations today are still setting prices sub-optimally, and unnecessarily so. The technology from DemandTec allows you, basically, to set the price.
If you think about the marketers' span of control, pricing is one of the four P's of marketing. We see, for example, pricing in the retail space used to be controlled by the head of merchandising and the buyers, if you will. We see it starting to change. When you think about customer-centricity, the merchandising group hasn't traditionally been that customer‑centric. The more they look backwards into their supply channel, the more they look at their vendors and suppliers, and they play with the trade promotional dollar in how they communicate with customers.
We see that changing - being more aligned with the customers and being more converged with everything else the marketer's doing. If you project forward to the future of marketing and the future of that commerce piece, it's about that convergence between merchandising and marketing as a function. It will spin optimizing over pricing, trade, promotion, and all the communications, whether you are anonymous or known, where I'm giving you one‑to‑one communication. We think that whole thing will be reconciled. Right now, it's sort of left hand/right hand. It doesn't even make sense.
And from there... where do Unica and Coremetrics fit in?
To some extent, you're looking at a whole set of solutions that will be a pre‑integrated suite to help marketers operate their business on top of the system of engagement that we talked about. The easiest way to think about these three pieces is to say, in the last five years there's a convergence between digital marketing and traditional marketing. Then, in the next two years, you're going to see convergence between merchandising and marketing so there's a one‑to‑one map to these acquisitions. Unica and Coremetrics represent this convergence that we're seeing between digital and traditional marketing. The combined piece, when you add that to DemandTec, represents the convergence we see coming, between merchandising and marketing.
We think advertising is a form of - using a Forester's term - paid media. That would include both offline traditional and online advertisement. We see that part of having a system - like the system of engagement that we talked about - is the ability to capture the system on record, to which you spend money in your effort to make your product aware to the market, as well as one‑to‑one communication with the customer. Paid media, advertisingis one of those. Combine that with earned media, which is the social piece of communication. And combine that with owned media, which is all the email, direct mail, bill payment system, call center, etc. ‑ the channels that the marketer or business owns. Together, it is what marketing is all about. When we look at advertising and how they tie into paid, earned and owned media, how do we attribute the effectiveness of it? We're very close, as an organization, to being able to solve that Holy Grail down the road, whereas everybody else today is guessing how they allocate resources.
IBM’s Jon Iwata made clear recently that one of the big challenges you all are trying to address is structured data versus unstructured data. Can you expand on that a bit and why this is such a big deal?
A lot of the "big data" that has all the complexity and, frankly, all the opportunities, sits in unstructured data, especially the chattering that you hear from earned media around social networks. In connection with other reference material and structured data, this is where you can find nuggets of information.
If you look at how Watson does its job, it's basically stitching together structured and unstructured data, then overlaying on top of it. The way we view the web and how we set up the tagging, collect behavior and combine that with earned media, is an example of where we are marrying the power of structured and unstructured data together to help a marketer understand the customer. Therefore, we are able to deliver relevant messages.
I want to go into the services layer of all of this, and this idea of systems integration that IBM has always done in different ways. There are other companies in the CMO space such as Accenture, who are focusing on this. Do you think of systems integration as an unspoken product line, to the offerings within “Smarter commerce”?
Our vision of system integration changes a bit, based on the approach that we have with the market. As I mentioned, marketers, in order to solve their problem, to build the system engagement without a vendor like IBM to pull together a set of technologies and pre‑integrate them, they're going to have to integrate it themselves. Sometimes they do it themselves or they hire system integrators to do that. Whereas, our approach here is to pre‑integrate some of these pieces as much as we can, but that doesn't mean system integrators are not needed. In fact, it's the opposite.
To some extent, part of the implementation challenge for our customers are not related to technology integration, but to change management - even organizational structure and marketing strategy.
It's about those changes that are risky. The plumbing part is necessary, costly - and that's a piece we're trying to take out of the equation. A systems integrator should be worrying about strategic and change management, and less about plumbing. We have a much better solution if we can do that.
So, you think of yourselves as, in part, a systems integrator?
I view IBM, as a whole, being able to offer everything, from software to system integration. I view our group as purely a software organization that works with any and all global and regional system integrators. That open ecosystem is necessary to have the maximum value to our client because some of our clients have their own favorite systems integrators, and we want to be able to still provide a solution to those clients. We’re fine if our customer decides to buy parts of a solution from our competitors. We think what's important is that they reduce the number of vendors from 40 or 50 down to a handful, as opposed to trying to do everything themselves. The way we design our solution is such that you don’t have to buy everything from IBM.
I view our charter as the end‑to‑end provider for the chief marketing officer, to be a year or two ahead of the trend in terms of what people need as part of that system of engagement. It's our objective to make sure that IBM, 12 to 18 months from now, is top of mind among CMOs when it comes to being their technology partner in the future.
Their job is changing so much. Then need technical help. I would say a year ago, people probably didn't even think about IBM in this space, but we're changing that going forward. A year from how, I hope when CMOs think about what technology partner they should latch onto for executing their strategies going-forward, they will think about IBM.
By John Ebbert