The Decade of the CMO with Ashu Garg, General Partner at Foundation Capital

Dec 20, 2017

AURELIE: My name is Aurelie Guerrieri and I’m the founder of Akila One, a Growth Consultancy helping mobile companies scale. I’m the author of The Mobile Native’s Guide to Marketing, and the creator of the podcast series, Growth Hacking is Dead, Long Live Growth Marketing. Today, as part of this series, I speak with Ashu Garg, General Partner at Foundation Capital. Ashu, thanks for being with us!

ASHU: Thank you for having me!

AURELIE: In a few words, can you tell us how you got your start into ad tech, and how you became one of the top martech investors?

ASHU: Well, you know, I was very lucky in that I started my career with a combination of an engineering and a marketing background. I’m an engineer by trade, and my first job out of college was with Unilever, in brand marketing. With that start, I’ve always been in and around the world of marketing. Over the last 15 years or so, as marketing has become more digital, it was a natural transition for me. I ran a field marketing organization at Microsoft for many years and really drove the transition to a more digital go-to market, and then went on to run the online advertising business at Microsoft back in 2006. So, those were really my operating jobs that led into my passion for ad tech. I then ended up joining Foundation Capital in 2008, and in the last 9 years or so, I’ve invested in Freewheel, Aggregate Knowledge, TubeMogul, Spotzot, Localytics, Custora and a handful of other marketing technology companies.

AURELIE: So clearly a big martech fan, but beyond that, you’re also a believer that marketing is graduating from being a support function to being core to revenue generation. You’ve called this era the decade of the CMO – this is also something I’ve experienced, and one of the reasons why mobile marketing is so strategic for executives today. Can you outline your thesis for listeners here?

ASHU: I think the fundamental starting point for the change is really a change in the way consumers interact with enterprises. In a world with social media, the notion that you have a separate channel of communication for sales, and another one for marketing, and another one for customer service, that world is dead. Consumers today think of working with enterprises on a level playing field, and they wanna have a conversation, no matter what the stage of their relationship. In a world like that, marketing actually plays a very strong role, because marketing, of all the different executives in a company, really does think about the customer experience holistically, which isn’t true for salespeople or customer support people or other functions within an organization. And that really is the crux; the change in expectation around customer experience that is driving marketing to the forefront.

AURELIE: The marketing is almost the glue or the fuel to the engine of the company now.

ASHU: Absolutely!

AURELIE: In your role at Foundation Capital, you meet with a lot of founders, you meet with a lot of CEOs, but you also meet with a lot of CMOs. In your opinion, what are the attributes of a successful CMO?

ASHU: You know, the role of the CMO is changing, and has changed materially over the last decade. At the highest level, I think what’s changed is the shift from focus on being the mad men, as people talk about it, to being sort of a “math man” – or a woman. And it’s not either/or! You have to have both that left and right brain in the same individual. So, that’s the highest level shift. If you drill in more, and say, ‘look, what do I look for, where I recruit a CMO?’ There’s really five attributes I look for, and the relative importance varies depending on the nature of the company and most important, the stage of the business.

But the first capability is really around demand generation. CEOs look to their CMO to educate the market about why customers need the service, and to eventually drive a qualified pipeline to the sales team. So the demand generation is I think an important capability for a CMO today. Secondly, given the technology and given what we talked about in terms of customer experience, CMOs have to own the cross-function engagement, and so they have to have strong field and channel operations capabilities to be able to work with their salespeople, with customer support, and work across the organization.

The third is a real strength around systems and operations. Marketing today is a very technical capability, and CMOs need to be able to develop the technology platforms required to manage data, to benchmark performance, to drive insights into customer relationships and so on.

The fourth, and this isn’t a new one, this has been around for a long time: CMOs still own corporate marketing. They’ve got to build a brand, they’ve got to deal with analyst relations, they have to handle PR, they’ve got to handle a crisis, and so on.

The last, and this is particularly important for B2B companies is product marketing. CEOs look to their CMO to be able to tell the story for the product and the company in a manner that it relates to what customers are looking for, and how it fits into their business system or their needs.

So those are the five things I look for: demand generation, field and channel operations, system operations, corporate marketing, and product marketing.

AURELIE: That’s almost also a way to tell the story, more broadly, of the company. In the Decade of the CMO, you write that you believe CMOs make great CEO candidates. Can you share an example of a CMO who successfully transitioned? You mentioned those five criteria that seem to be very core to what a CEO needs as well, but I’d like to see, in your opinion, what enabled the progression from a CMO to a CEO in an example.

ASHU: So let me talk about why I believe this transition is happening, and I can talk through a couple of examples, but as you know with examples, for every example, there’s a counter-example, so let me qualify that a little bit.

AURELIE: That’s true!

ASHU: But the fundamental shift, Aurelie, is this shift of marketing being a support function to really being the glue function that cuts across the customer experience. In addition to that, if you look at a lot of the research that’s out there, I can quote different research reports, but the common theme across them is, CEOs, more and more, in today’s time, are being asked to step on the growth paddle, and to figure out how to disrupt themselves. In the context of ‘How do I prevent my business from getting “Uberized”?’ That’s the mandate for every CEO in the world today! We think about those two expectations, this notion of, ‘how do I drive growth?’ and ‘how do I not get “Uberized”?’ And to do that in a world where this customer experience is both holistic but also very complex. I think CMOs more than anyone else have the natural traits to rise to the challenge. Not every CMO is going to do that – I think you have to combine the left brain and the right brain, you have to have enough quantitative skills and a financial acumen to deal with the demands of being a CEO. But that’s the journey that I see happening.

I’ve met a bunch of executives over the years that have demonstrated these attributes. I’ll pick a friend of mine, who I happen to know very personally, Stacy Epstein. Stacy is a serial marketer. She’s been a very successful CMO across a variety of B2B companies, most recently, ServiceMax. Just about a year ago, she took on the role of being CEO of a startup called ‘Zinc.’ It was a startup, it was going through a lot of transitions, one that required a significant reboot of the management team, and Stacy has really stepped up to the plate and done a great job, and you see her building on her strengths as someone who’s been CMO of ServiceMax, Success Factors, and other great companies. But also, you see a changed person. She’s truly a high quality CEO today, not just a great CMO.

But that’s an example from my personal network. There’s lots of other CMOs who have, over the years, become CEOs. If you look at Steve Easterbrook, who used to run marketing for McDonald’s, became CEO there a couple of years ago. Denise Morrison became CEO of Campbell’s Soup, and in fact, Mercedes Benz I think promoted their marketing in the USA to CEO of the US.

So I do see a common theme here, but of course, it requires CMOs to build additional skills in addition to the normal CMO path.

AURELIE: Something to look forward to for a lot of our listeners! In the meantime, what key issues do marketers and chief marketers in general need to think about today to get their future strategy right?

ASHU: You know, the specific issues do vary from company to company and industry to industry, but there are a few broad themes that, on the customer side, I think are really important for marketers to understand, as they think about longer term strategy.

The first is, I think the nature of change in the media voices. The line I always use is, ‘we’ve gone from having a few media voices 20 years ago to infinite media choices for consumers.’ You can watch video content on Netflix, or Hulu, or Amazon, or YouTube, and a hundred other niche video sites today. As against the handful of TV channels I had when I was growing up!

The second media change in consumer behavior is this notion of ‘a shift from dictation to conversation’, and that’s really being driven by social media. Consumers don’t want to be talked to; they wanna have a conversation with brands and marketers.

The third is this mix of left-brain and right-brain, and that’s true in terms of marketers, but it’s also true in terms of the way consumers want to interact with marketers, and marketing. 20 years ago, we all believed that marketing and advertising was mostly about emotional appeal. One of my favorite ads was the Guinness ad slogan: “Guinness is good for you!” It was all about the fun and enjoyment associated with the Guinness brand.

AURELIE: It’s simple and powerful!

ASHU: Exactly!

The same brand today, actually, does research studies that validate that claim by talking about how Guinness reduces blood clotting and actually is good for heart disease. I mean, it’s kind of hilarious, whether that’s true or not, that it does improve your heart condition. The fact that the brand would do so, I think, is a testament to the shift in consumer behavior and consumer expectations. One of my partners, Meg Sloan, uses the expression: ‘Marketing is now like a bacon-wrapped date.’ Bacon is the inspiration, and the date inside is the evidence.

AURELIE: Interesting. I like your Guinness example better, I think it’s really fun to think that a marketer was prescient, or that they built the corresponding data, and researched to justify their marketing slogan, so it’s actually a really fun one.

I’m particularly excited about mobile commerce, and coming back to the near-term, marketers today are getting ready for the next holiday seasons. There’s been a slew of data coming out of Prime Day, coming out of Mary Meeker’s latest opus. Now that you’ve digested all of that, what are some of your tactical and some of your strategic recommendations for marketers, as they enter the 2017 holiday season?

ASHU: Aurelie, that’s a great question to me, and I think there is no doubt today that mobile devices, smartphones, have become the norm. All the research suggests that people now spend more than half of their time, their internet time, so to speak, or even their media consumption time, on a mobile device. If you look at the ads associated with mobile devices versus other forms of advertising, mobile is now well over 50%. And the trend line is only moving favor of mobile, especially if you see the explosion of the internet in the developing world.

At the same time, there’s the counter-trend, where the number of net new apps that consumers are downloading is close to 0. And so, how do you, as a marketer, as a brand, capture mindshare and real estate in this world? On one hand, lots of time being spent, with very little time being spent on niche apps. If you’re not at the top of the list, for some reason, it’s very hard to get. So that’s the challenge.

In that view, I really have three pieces of advice for marketers. The first is, you have to go where consumers are. The phrase I tend to use is, ‘most customers now, instead of having one purchase funnel, have infinite paths to purchase.’ There are infinite paths that each individual can follow, and you have to find a way to insert yourself into the various paths. That might be Quora because that’s where your target customers are spending time. That might be Facebook. That might be Snapchat, or in fact might be all of them, because different segments of your customer base are those individual’s channels.

I think finding a way to engage consumers in whatever context or environment they choose to live in, and to do it at every step of their shopping journey, is really important for marketers. So that’s one.

The second thing marketers have to do is really think about, ‘how do I have an omni-channel strategy?’ In some ways, it’s an old word. I mean, we were talking about omni-channel five years ago, and it’s come full circle, it’s now sort of the buzz word again. But you have to deal with the fact that people will start engaging on a website, get onto the mobile web, maybe dive in through a deep link through a mobile app, and then come back to you through a mobile messenger. So, you’ve got to engage in the same journey across all of these channels, and think about an omni-channel strategy.

Third, and not the least, I do think marketers have to find a way, for their core customers, to get on a short list of apps that they download. You can make the case that over time, apps will become less important, and I’m not gonna try and sort of predict the future there, but today, if you wanna have a deep, enduring relationship with your customers, those core customers need to engage with you on their app. On their phone, with your app. I think marketers have to think hard about what is the value exchange that they’re offering. What is it that they’re gonna provide consumers that makes it worth their while to give you a slot on their mobile phone?

AURELIE: Some very tall orders there, being one of the top 30, top 35 apps used every day by consumers and figuring out this omni-channel challenge, particularly for retail companies, but very worthwhile ones. So, shifting gears again, I really wanna get your opinion on this, because you were an early believer in the Indian mobile market, and I remember you and I talking about it years ago, and your predictions for the pace of smartphone adoptions ended up being right. However, in this podcast series, Bertrand Schmitt, the CEO of App Annie, did a wonderful job outlining the key structural/economical/cultural challenges that remain. Based on your hands-on experience, what is your advice to succeed in the Indian market today?

ASHU: You know, the Indian market is a very unique one. It’s one where there are many of the same attributes of a Western market like the US: customers that are increasingly well educated, increasingly have global aspirations, increasingly look to global brands as providers of value. At the same time, it’s a very, very fragmented market, with a very low per capita GDP and an even lower per capita disposable income level. So you have these two extremes bundled into one market. In a market like that, my advice is, first of all, you’ve gotta decide if India is really core to your strategy or not. It’s not a market where you can afford to be half-pregnant. Like, you’re either in, or you’re out! I think it’s OK not to be in. I think it’s perfectly fine for brands to say, ‘look, India is not for me today, I’m gonna hold off for five years.’ I think that’s a completely appropriate thing to do. But if you’re gonna do it, you need to be all in.

Let’s assume that you are all in. So, let’s start with that assumption for a minute. I think you’ve gotta say, how do I deal with this paradox? I’ve got to offer a global product and service, which consumers will benchmark. Consumers will test how my product and service in India varies from what I’m offering overseas. And at the same time, how do I do it at a price point that is meaningful to an Indian consumer? That paradox is one that very few brands have solved. When I see companies going to India, and they’re offering a product or service that is perceived to be a cheap hand-me-down, and the Indian consumer has by and large rejected those brands over the years. On the other hand, you can come in, if you’re priced at a premium (often these brands are priced at a premium to Western markets to justify the cost of local infrastructure) there are no takers for those prices. So finding that balance in terms of pricing is the second thing.

Lastly, I would say, India’s a market that’s moving very, very quickly in terms of its adoption of digital payments, its adoption of new technologies. The India payment stack is a huge opportunity for folks who take advantage of it. You’ve got to find a way to take advantage of the changes that are happening in India and use them to get wind behind your back. You’ve gotta localize your go-to market strategy to reflect the local environment. Those would be my three pieces of advice.

AURELIE: Have you seen a company do that well?

ASHU: The best example that comes to mind for me is Facebook. I mean, they have had some fits and starts: they tried to provide free internet access in India, and that effort didn’t go well; so they’ve had some setbacks. But to their credit, they made a decision a few years ago that they were all-in, in terms of launching Facebook in India, and as they realized that India was a messaging-first environment, they bought What’s App. And I know firsthand that Facebook’s decision to buy What’s App, through a large extent, was driven by the adoption of What’s App in India. So that was all-in, and it was a big deal!

Second, look at the product! I mean, they really found a product that on one hand was global quality, but truly appealed to the Indian consumer. It solved a problem for Indians, which was, most people had very limited data access. The cost of data in those days was pretty high. They had relatively low end smartphones, and cost of text messaging was high in India. And the What’s App value prop was squarely addressed at those three things.

In some ways, it went out relative to Facebook messenger, which existed before What’s App. And other messaging products that were much more sophisticated apps, but didn’t work as well with low-end smartphones. So I think that’s the second thing.

I think the third thing that Facebook has done well is really localize their go-to market. They have made efforts to find a way to work with local telcos, they’ve invested a lot of time and energy to working with local regulators. If you look at their ad campaigns in India, they’re truly local. They have built a local presence for themselves and for What’s App. If you would ask Indians, the average Indian, I suspect half of them wouldn’t know that What’s App is an American company.

AURELIE: Ha! Fascinating, fascinating. Thank you for breaking that down. It’s fascinating!

ASHU: Thank you, thank you for having me! This has been a lot of fun!

AURELIE: Thank you! Oh, one last question before you go, Ashu: If you had a magic wand, and could change one thing in growth marketing, what would that be? It’s the question I ask of everyone, and I wanna make sure you get the chance to answer that.

ASHU: So this is less about changing than complementing, and it builds inside of your comment about, it’s no longer about growth hacking but growth marketing. I truly believe in the quantitative side of marketing, as an engineer and a quant jock my self, the analytical rigor, the notion of A/B testing everything, the notion of this being a science, really appeals to me. I think it’s really important as a growth marketer not to forget that at the end of the day, consumers buy products that they love. The best advertisements inform and entertain, they make us laugh, they make us cry, they connect with us personally.

For me, when I see an amazing ad, it either brings a smile to my face, or tears to my eyes. In marketing, you’ve got to be able to do that! No quant, and no analytics (and this is a guy who spent his life steeped in numbers) can replace the human connection. You have to deliver value that appeals to consumers, and you have to deliver it in a form of communication that connects with them on an emotional level. If you can do that, I think you can build the next generation Procter & Gamble or Unilever, or the next generation Apple.

AURELIE: Very inspirational! Thank you, Ashu! Really lovely to have you on this podcast, and thank you for sharing your insights across the industry.

ASHU: Thank you for having me, Aurelie! Thank you.


Enjoy this interview?  Please share!  Don’t forget to follow Aurelie @ItsAurelieG and Ashu @ashugarg @FoundationCap on Twitter.